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Financial Literacy for PhD Students: Learning to Budget Your Money

The last thing you want to worry about as a PhD student is making ends meet. This guide will help you make the most of your financial resources while living on a stipend. This guide offers strategies for budgeting, saving, and building financial literacy so that you can make your money work for you while earning your PhD.

Written By

Blake Huggins

Meet the Expert

Rob Bolden

Last updated

May 02, 2023

As consumer debt hits record highs, PhD students face increasing uncertainty. Even the most competitive stipends often don’t reflect inflation or even cover the cost of livingA majority of PhD students reported trouble managing their finances, and 45% suggested higher costs might force them to re-assess their career paths. 

These trends aren’t exactly encouraging, but current PhD students already know this. You can see – and feel – the growing gap between your income and everyday expenses. You understand the impact this disparity can have and may be unsure how to proceed. This guide explores this struggle by offering actionable solutions to five common financial problems PhD student face. It looks at best practices for budgeting and saving, discusses how to manage debt, and includes tips from an experienced financial advisor. Keep reading to learn how you can keep your finances under control and make the most of your limited resources as a graduate student.

Problem #1 – Your PhD Salary is Limited & Cost of Living is High

PhD salaries tend to be meager, and, depending on the school you’re attending, you may be faced with an especially high cost of living margin. As costs continue to rise, how can you make it all work? How do you know where to allocate your resources, and where do you begin? You need a clear picture of your finances and a solid plan of action. Budgeting helps with this and gives you the clarity and peace of mind you need to weather the challenges. 

Solution: Learn to Live on a Budget

Developing a sound budget is a valuable and illuminating exercise. It not only gives you a clear sense of your income and expenses, but it also helps clarify how you can live within your means as a graduate student. Use the easy steps below to get started. Review the sample budget as you begin to build your own, but remember that specific amounts vary widely.

Step 1: Estimate your monthly income. 

Take an inventory of how much money you make throughout the month. For PhD students, this process can be a little tricky. Include any extra financial aid like a stipend that goes beyond tuition/fees and any additional income. 

Source of IncomeMonthly Amount
Other income (wages, etc.) $1,200
Total Income$3,700

Step 2: Calculate your fixed monthly expenses. 

Make a list of everything you regularly spend money on each month. Don’t include expenses that vary. Focus instead on consistent and steady expenses, things like your rent/mortgage, phone payments, insurance bills, and any fixed utilities. 

Fixed ExpenseMonthly Amount
Housing (Rent/Mortgage) $1,500
Car Payment$150
Auto Insurance$100
Utilities $100
Health Insurance $200
Credit Card Payments$100
Total Fixed Expenses$2,150

Step 3: Estimate variable monthly expenses. 

Now make a list of variable expenses (i.e., things you must pay for but that fluctuate month to month). This includes food and groceries, utilities, entertainment, transportation, and anything else that might come up along the way. 

Variable ExpenseMonthly Amount (Estimated)
Groceries $300
Personal Care$75
Clothing, misc. $100
Total Variable Expenses$575

Step 4: Create a separate category for savings. 

If you set aside a certain amount for a savings or investment plan, estimate that here. If you’re unsure, average your most recent contributions and go from there. If you don’t yet have a regular savings plan, consider adopting one and estimating your monthly contribution. 

Savings TypeMonthly Amount
Emergency Fund$200
Retirement Plan$200
Total Savings$400

Step 5: Calculate the difference and allocate accordingly. 

Subtract your monthly expenses from your income. Include your fixed and variable expenses here, along with your savings. Determine what you need to adjust and where you have more wiggle room. If you have a surplus, decide where to allocate it. 

Total Monthly Income$3,700
Total Monthly Expenses (fixed, variable, and savings)$3,125
Total Monthly Surplus $575

Problem #2 – You Don’t Feel Prepared for Financial Emergencies

No one can fully anticipate unexpected financial emergencies. Surprise medical bills, last-minute travel, and sudden losses of income can hurt anyone’s budget. An emergency savings fund helps you prepare for the unforeseeable. Considering seeding one soon and strive to maintain it by including regular contributions in your budgeting. 

Solution: Start an Emergency Savings Fund

Emergency savings funds cover your budgeted expenses for a few months. This safety net helps you navigate potential obstacles. Even if you’re unable to cross the two-to-three-month threshold, building an emergency fund early gives you a cash reserve to rely on when challenges arise. 

The first step is to set this up in a way that discourages you from unnecessarily dipping into the fund. What good is your emergency savings fund if it’s constantly depleted? Position yourself for success by automating your savings contributions so you can reach the goals you’ve set for yourself. 

High-yield savings accounts offer a great option for those looking to get started. With these accounts, you benefit from much higher interest rates than a traditional savings account. This allows you to accrue more savings over time. In addition, most banks and financial institutions offer easy and convenient savings options where specified contributions are made on your behalf at a pace that works for you. 

Problem #3 – You Have Personal Debt 

Personal debt includes more than the student loans you may have, but as a PhD student, it’s worth noting that you’re likely eligible for debt deferral. Use this provision to your advantage. Depending on your situation, it could allow you to allocate funds to other forms of debt, or it could put you in a good position to make additional payments. The point is that if you have personal debt, don’t neglect it even while you’re in school. Face it head-on by developing a plan for tackling it.

Solution: Pay Down Debt as Much as Possible

Paying down debt while in grad school may seem impossible. You live on a modest, fixed income with significant demands placed on your time and mental bandwidth. The key is to keep things consistent and manageable. Making regular payments may be challenging, but with a workable budget, you can easily calculate when and where to apply your limited resources.

Any amount you can pay helps. If you have a modest budget surplus at the end of the month, consider applying some or all of it to high-impact loans, credit cards, or other forms of debt. If you don’t have a surplus, reassess your budget and see how you can integrate debt management. Do what you can and build a solid habit of regularly addressing your debt, so it doesn’t get out of control. 

You might be tempted to rely on credit to help here, but use credit wisely. Creating more long-term debt to help mitigate something in the short-term only causes things to snowball. Make smart decisions. Avoid impulse buys and carrying balances. Instead, use your credit to help with big expenses and keep your payments up to date. Pay down the balance as quickly as you can. In addition to helping manage your debt, this practice helps you build more credit over time. 

Problem #4 – Saving for Retirement Seems Impossible

Many of your colleagues with industry jobs probably already have a 401(k) or similar retirement plans through their employers. As a PhD student you lack those resources, so saving for retirement may seem unthinkable. How can you manage yet another budget line-item on your stipend and financial aid alone? Developing an emergency fund should be your top priority but building your retirement savings is a great next step. You may not have an employer who can match your contributions just yet, but that doesn’t mean you can’t begin building your nest egg. 

Solution: Start Saving ASAP

Treat your doctoral program like a job. Save as much as you can whenever you can. Decide on a regular contribution amount that feels comfortable and commit to it. No amount of money is too small, and starting early is the key. Open a retirement savings account and automate your recurring contributions. Here are some options: 

  • IRAs (Traditional or Roth): Individual Retirement Accounts allow you to save for retirement on your own. Contributions to traditional IRAs are tax-deductible, but withdrawals in retirement are not. Roth IRAs switch this, making withdrawals tax-deductible while contributions are taxable. 
  • High-Yield Savings Account:savings account with a higher interest rate than traditional savings, these accounts allow funds to increase at a faster rate over time. 
  • Fund Investing: Using a diversified portfolio of mutual funds or exchange-traded funds (ETFs) to generate savings, fund investing pools resources alongside other investors. 
  • Stocks: Stocks represent a “share” of a company publicly traded through an index like Nasdaq, Dow Jones, or S&P 500. Investors purchase shares at a given price in hopes of increasing their investment’s value as the company thrives. 
  • Crypto: Digital currency that enables exchange through computer networks using advanced blockchain and encryption technologies, cryptocurrencies like Bitcoin are much more volatile than traditional investment options but offer high possible returns. 
  • Bonds: A type of debt security issued by governments and companies to investors to be repaid with interest on a maturity date, bonds offer a less-risky alternative to stocks or crypto but with lower possible returns. 

Problem #5: You Feel Totally Lost When It Comes to Finances

The finance world is replete with technical terms and concepts. It can seem overwhelming, even for PhD students who deal with complex information daily. The jargon can seem impenetrable, so where do you begin? Familiarizing yourself with some basic definitions is a great start. Nobody expects you to become an expert, especially if finance isn’t your field, but learning some key terms can help you make sense of the landscape. 

Solution: Get to Know These Basic Financial Terms

  • Annual Fee: The yearly fee some financial institutions charge customers for using their services. Some may not charge an annual fee. 
  • Annual Percentage Rate (APR): The annual cost that you must pay to borrow money or access a line of credit. This figure includes fees and interest. 
  • Compound Interest: A way of calculating how your investments or debts may grow, including initial interest on a principal amount plus interest that accrued over time.
  • Consolidation: The process of combining multiple debts into a single loan or payment, often resulting in lower overall interest and more advantageous repayment terms. 
  • Credit: Your ability to borrow money or access services. Banks, lenders, and other entities often “check” your credit to forecast potential liability. 
  • Credit Bureau: An organization like Transunion, Equifax, or Experian, a credit bureau collects information needed to provide individual credit ratings based on debt, financial history, and ability to repay.
  • FICO Score/Credit Score: The numerical value that indicates your credit health and financial risk. Credit scores range from 300 to 850 and fluctuate constantly. The higher your score, the better your credit. 
  • Interest:The cost of borrowing money or carrying debt, interest includes the amount you must pay back to your lender on top of the initial principal. 
  • Investment: Any endeavor you undertake with the aim of increasing value or generating income, investments include traditional savings accounts as well as stocks, bonds, retirement plans, etc. 
  • Liquid Savings: Not all assets or investments can be easily converted into cash. Liquidity refers to those that can without losing value (e.g., money in your checking or savings, etc.). Non-liquid assets might include land or real estate investments.
  • Loan: Any sum of money borrowed, loans are disbursed with the mutual understanding that borrowers will repay the principal amount, plus interest, following a payment schedule. 
  • Minimum Payment: This is the lowest possible amount you can pay on a loan or credit card bill. The exact amount depends on your financial activity and outstanding balance. Experts recommend paying more than the minimum, so you pay down your debt faster. 
  • Taxes: Money collected by governments to help fund public services and programs. Private individuals pay taxes and so do businesses. Exact amounts depend on your income and investments. 

Creative Ways to Save Money as a PhD Student

There are several creative ways to think outside the box and maximize your savings when dealing with limited financial resources. Consider these tips and see if you can integrate some of them alongside traditional methods for budgeting and financial management. 

Take Advantage of Tax Deductions for Students

You don’t need to be an undergraduate student to take advantage of these benefits; they apply to graduate students and PhD candidates as well. Tuition and fees, student loan interest, and other education-related expenses all may qualify. Specifics on this vary each year, so be sure you check the latest updates from the IRS.

Use Free Journal and Scientific Databases 

Your university library likely provides access to several databases, but you can avoid paying extra money by taking advantage of free resources. Databases like ERICScienceDirectDOAJEBSCOScienceOpen, and PubMed Central all offer free access to peer-reviewed research. These open-access tools can help further your research without putting a strain on your finances. 

Buy a Home – If Your School is in a High-Rent Area 

This could really work to your benefit, especially if you’re struggling to make rent and plan on living in the same area for a bit. You can even seek out housemates to help bring down the expenses even more. Plus, if you’ve never owned a home before you, can take advantage of first-time homebuyer benefits from the Federal Housing Administration.

Learn to Cook & Pack Your Own Lunch

Dollars spent on a salad or sandwich here and there may not seem like much, but they can add up if you’re not careful. Consider learning to cook instead. This not only gives you a new activity to take your mind off your studies, but it can also save money, especially if you plan your meals out and prep in advance. 

Walk, Carpool, or Bike 

You can reduce regular expenses on gas and parking by exploring alternative transportation options. If you live in a city with reliable public transit, taking the subway or a local bus can help eliminate car-related expenses. Other options include walking or biking if you live nearby. You could also carpool with friends. 

Take Advantage of Student Discounts

Student discounts are everywhere. You just need to know where to look. These discounts encompass electronics and software, travel, food and clothing, home goods, and more. Tools like DealAid can help you track down applicable student discounts based on your needs and interests. 

Buy Second Hand Whenever Possible to Furnish your Housing

Thrifting and buying used or second-hand furniture not only saves money, but it’s also a more sustainable and environmentally friendly practice. Seek out local thrift stores in addition to nationwide chains like SaversGoodwill, and Salvation Army. You can also peruse estate sale listings in your area as well. 

Stick to No-or Low-Cost Forms of Entertainment 

You can also take advantage of free or low-cost entertainment. For example, gathering with friends instead of going out could allow you to deepen your close relationships. Other options include attending free campus or community events and visiting museums. 

Financial Resources for PhD Students

There are quite a few financial wellness resources that go beyond the ones we’ve listed above. These tools can help you monitor your credit health, make a budget, identify advantageous savings and investment efforts that meet your needs, and much more. Consider the list below as you work to develop sound financial habits. 

  • Bankrate: This site offers several useful calculators and explainers, especially ones helpful if you’re looking to compare interest rates and high-yield savings accounts.
  • Budgeting Tools: Apps and web-based platforms like MintTillerPocketGuard, and You Need a Budget offer intuitive resources to help you develop a budget that keeps you within your means. 
  • Campus Financial Aid Offices: Depending on your school and program, this office could be a vital resource. Many financial aid offices, like those at DukeCal State-Long Beach, and the University of Chicago, offer resources for PhD students. 
  • Consumer Financial Protection Bureau: This government agency focuses on consumer education, including how to navigate crises, big transitions, and common financial emergencies.
  • Credit Karma: This free service provides consumers with an easy, no-strings-attached way to monitor their credit health over time.
  • Frugalwoods: Maintained by a New England couple, this blog focuses on strategies and advice for personal frugality and financial independence. 
  • Money Under 30: This resource hub provides free financial advice to young adults looking to make informed decisions about savings, credit, and investing. 
  • National Credit Union Administration: Local credit unions have advantages (e.g., low-interest rates and fees) that could be more beneficial than nationwide banks. This site keeps an updated local directory. 
  • NerdWallet: This site helps people make smart financial decisions. It includes financial wellness and credit guides along with interest calculators and other tools. 
  • Personal Finance for PhDs: A multi-faceted resource that includes a blog, podcast, and tax center, this site offers tailored financial advice to PhD students. 
  • Practical Frugality: This blog is home to a variety of wide-ranging resources that focus on frugality, financial management, and DIY tips. 
  • Public Library: In addition to housing information on financial literacy and wellness, the public library also grants access to media (e.g., music, movies, TV, etc.) at no cost. Find your local library here
  • Savings and Micro-investing Resources: Acorns and Stash make it easy for you to save spare change and automate your savings habits. RobinHood offers a similar service focused on micro-investing. 
  • The Balance: Led by a team of investing experts, this site makes personal finance easier to understand and navigate. It gathers relevant news and publishes product reviews alongside how-to guides. 
  • The Internal Revenue Service: The IRS does more than process your annual tax return each year. It also offers taxpayer resources for budgeting and calculating tax deductions.

Interview with a Financial Advisor

Rob Bolden began working in the financial services industry soon after ending his football career. He spent six years gaining experience and licensing as a financial advisor for an insurance-focused broker-dealer before branching off into the fee-only space. Outside the office, Rob is either exercising, spending time with family and friends, or burying his head in a book.

What are some effective budgeting strategies that can help me make the most of my limited stipend or salary as a PhD student?

As a PhD student, it can be challenging to manage school, a social life, and everyday expenses. Learning how much you are making (income) vs spending (expenses) gives you a firm foundation to determine what is (or is not) a good decision for your financial situation. 

Many will use a simple Excel spreadsheet and track their numbers each month. For others, downloading apps could be a good start to track your budget more digitally/interactively. After implementing a budget, prioritizing expenses is next so that you can spend only on what’s needed. Saving for emergencies and using any/all discounts (such as grants or scholarships) are all important options also.

How can I build an emergency fund while living on a small stipend or salary?

Building up cash savings is essential no matter where you are in your financial/professional journey. Before spending any of your extra money (money after paying your fixed expenses) on non-needed items, take whatever is left each month and set aside a cash reserve. 

I advise having at least three to six months more than your monthly expenses set aside – just in case an unexpected event happens. This may seem difficult at first but start small, automate your savings, and be disciplined until the goal is accomplished! You could consider part-time work for extra income if time allows.

How can I balance saving for the future with paying off debt as a doctoral student?

Paying down debt and saving for the future in tandem can be challenging. Both are essential to your long-term financial success, however. The “balance” begins when you first know and understand what you want so your values can align with your actions (spending). 

For example, if you’re the type of person who despises debt and having $100,000 seems like a nightmare, you’ll likely plan to have those loans paid off as soon as possible. Maybe you prioritize getting your emergency fund and additional savings taken care of first. Then, knowing that within “X” years, I’ll be making “X” amount of money, you can develop a plan to pay them off. That way, you’ve got a head start on saving while also paying down your debt. 

Savings vs. paying off debt can come down to the numbers, but individual preferences and desires tend to weigh heavier in these cases. How you feel about them both should determine your individual approach.

What are some common financial mistakes that PhD students make and how can I avoid them?

Students often fall into the false belief that they do not need to steward what they have today based on an expectation that “things will work themselves out” in the future. This results in relying on credit cards, living beyond your means, and not saving for emergencies or retirement. By implementing some of the strategies I’ve already mentioned, you should be able to avoid this trap and be confident in attaining a successful financial future.

What are some resources or programs available to PhD students that can help them manage their finances?

Mint is a great tool for budgeting and spending tracking. I’ve used this one personally and have enjoyed it. If you’d like to have every dollar accounted for in your budget and be more specific about things, the EveryDollar budget app is also a good one.

What are some long-term financial goals that PhD students should aim for, and how can they work towards achieving them while still in school?

One of the main things I would push graduate students to strive for is to not get into any more debt than they need to. Spending frivolously or impulsively can lead to spending outside your budget. This can then lead to additional high-interest credit card debt and spiral into something that you may not have foreseen when you were getting started. Stay out of unneeded debt, live beneath your means, and save as much as you can. These three things set your foundation to be able to steward your future increased salary well.

What would be your final word of financial advice that you would give any PhD Student wanting to get their finances in order?

My advice is to simply be patient. Just like most things, completing the course is a process, so don’t rush it. The “process” is usually much more appreciated when completed in comparison to the “result.” That’s because you know and understand, more than anyone, what it took and how much the challenges shaped you during that time.