This post is a rerun from December 2008, which was itself a re-posting from an article I wrote for the Young Mathematicians’ Network. If you’re headed to the Joint Mathematics Meetings this month to interview for academic positions, or if you’re one of the lucky ones who have already lined up a job for next year, or if you just want some ideas for New Year’s resolutions about money management, maybe this will fit the bill. Enjoy, and Happy New Year.
Right now, if you are on the job market, you are thinking of two, maybe three things. The top attention-getter, if you’re in graduate school, is getting your thesis done. Next down the list, you’re probably wondering what all those search committees are thinking, particularly what they are thinking of you and where they put you in the pack of applicants for their positions. And third, you might be thinking about the Joint Meetings next month, where you’ll likely get your first dose of interviewing.
But what many job applicants, particularly those still in graduate school, don’t think about at this time of year is how things are going to unfold after the interviews have been done and the job offers extended and accepted. Very soon, you’ll be done with your thesis and signed on to start a new position in the fall. And the gap between finishing school and starting a new academic job has to be paid for.
A failure to plan for this gap can create a huge financial mess, as you can tell if you look at my story. I accepted a job in April 1997 and defended my dissertation in May of that year, but not once did I plan for the interim period between finishing school and starting my job. When the summer following my defense came, I had virtually no income and absolutely no savings. So when I made my move from Tennessee to Indiana, I had to put everything — groceries, apartment deposits, and so on — on credit cards at 15% to 18% interest. My indebtedness went even deeper when I discovered the simple fact that my first paycheck wasn’t due to arrive until the middle of September. So I had to live for two months on my own with no money, living like a graduate student, racking up high-interest debt, after telling myself I’d finally be able to afford nicer things once I had a job. I absolutely failed to enjoy the new, comparatively luxurious income that I had earned by getting my job, because I had to spend the plurality of it paying off the debt I incurred while moving to that very same job! It took me the better part of four years after starting my job to pay off the debt I incurred from May through September.
We mathematicians are so good at quantitative ideas and yet many of us miss the boat when it comes to real-life personal finance. Here are ten pieces of advice about money and finances that I wish I had gotten prior to my last year in graduate school.
Things to do BEFORE interviews
1. Use a good online salary/cost of living calculator to get an estimate of monthly living expenses in all the areas you might live. You can Google and find a whole lot of these. Find out what the average starting salary is for the position to which you applied, and start plugging and chugging to find out what that compares to in different places.
2. Starting NOW: Save up for two months of living expenses based on the average monthly cost of living in your potential new locations. Those two months are August and September. This is very tough, because moving to a new location involves lots of one-time startup expenses that can mount up very quickly: deposits for a new apartment, fees to turn on utilities, tags for your car, and so on. Add to that the fact that many employers issue paychecks only once a month in the middle or sometimes (like my current college) at the end of the month. That means that the big, fat paycheck you’re looking forward to is not going to come your way until potentially 6-8 weeks after you actually begin working, and you will have a lot of expenses in the meanwhile to deal with. You have to have a cash reserve that is sufficient to handle these expenses and get you through to your first paycheck.
3. Starting NOW: Procure summer employment and benefits. In light of #2, it’s especially important to try and get some income sources for the time following your completion of school and (hopefully) your thesis defense and prior to your move. Fortunately, summer employment is usually easy to find if you are willing to get outside your comfort zone. There’s a good chance that your current university can hire you on as an adjunct to teach a four- or eight-week summer course. Adjuncting is a gig that usually pays fairly well, doesn’t involve as much grading during the summer as a regular-term course, and keeps your classroom skills fresh. Community colleges are also a good source of these kinds of jobs. If you don’t want to teach, there are always seasonal jobs in retail; or you could tutor; or you could babysit; or whatever. The point is that most graduate school assistantships run out at the end of the academic year, and you will need an income stream once this happens in order to save up for living expenses in August and September. The time to get busy finding such a stream is now, particularly for teaching jobs, as most colleges plan their teaching schedules out 4-6 months in advance. And don’t forget benefits, either, like health insurance; if you carried health insurance as a part of your graduate student assistantship, and you’re no longer a graduate student, then you should look into getting a COBRA or finding a summer position that has health insurance as a benefit.
4. Starting NOW: Pay down or pay off credit card debts and make a pact with yourself to use credit cards only if you know you won’t carry a balance. If you can pay off your credit card and personal loan debts now, then you can use the money you are pumping out to the credit card companies and salt it away instead for your living expenses later in the year. And since the use of credit cards and personal loans is easy to justify when you have to scrape income together to get by, you have to be serious with yourself about using them sparingly, if at all — or else you’ll end up with debt that takes years to pay off, like I did.
Things to do DURING and AFTER interviews
Once you start having phone interviews and/or Joint Meetings interviews, and then go on to on-campus interviews and eventually job offers, it’s time to be more precise:
5. When you are able to make a short list of schools under consideration, do detailed research on the cost of living in each area and revise your calculation from #1. You’ll have between two and ten schools that are holding your interest and which are reciprocating that interest by now. Look at each school in turn and find out: average monthly rent on apartments, average cost per square foot for houses, property tax rates, car and health insurance rates, and so on. You now have to consider the prospect of actually living in one of these places. And the cost of doing so is at least as important of a factor in considering job offers as anything else. If a school in central Indiana (one of the most affordable places to live in the USA) offers you a salary of $50K per year, that’s much different than getting an offer from a school in San Francisco or New York City of the same amount or even $20-30K per year more than that. You can find out information on most of these things online at your salary/COL calculator, local real estate web sites (which let you search for apartments and homes in the area), and Chamber of Commerce sites.
6. When doing on-campus interviews, take time to explore the area to check out housing prices and neighborhoods, rent for apartments near campus, going to grocery stores, etc. While you can do much of your cost-of-living research online, there’s no substitute for pounding the pavement and putting yourself in the actual location in which you might be living. That college’s web site might make it look like an idyllic, forested setting, but maybe that’s just good photography — and the reality is that the college’s town is run-down and crime-ridden. On my first job interview, the college actually loaned me a college vehicle and paid for the gas so I could spend an afternoon on my own driving around to see the place, and that was a major factor in my taking that position.
7. When an offer comes, negotiate for relocation expenses. The cost of actually moving your stuff from your current location to the new location is a significant expense that can be a huge one, if you have more to move than just yourself and a small amount of stuff. Many colleges automatically give some sort of relocation allowance and are happy to do so, but you want to do the research beforehand to estimate just how much it’s going to cost you to actually move (How big of a truck will you need? How much mileage and gas? Will it take one day or multiple days? Do you need movers to handle your stuff?) and then make this a point of negotiation during the offer. If you are attractive enough of a candidate to get an offer at all, most colleges would have no problem spending a little more on a one-time basis to help you move there. (And if they are not willing to help you on that, turn the offer down — who wants to work at a stingy college?) This is a summer expense that you can totally avoid if you have hard data to support your estimate and halfway-decent negotiating skills.
8. Consider living in an inexpensive apartment or rental house for one year after moving, rather than buying a house. There are a lot of reasons in general to prefer owning a home over renting. But when you are moving to a new location, renting for a year will free up income (since rent is typically less than a mortgage payment) and will allow you to do four important things:
(a) Research the housing market in your area, figure out where the good and bad neighborhoods are, and figure out just how much you can really afford per month on a mortgage payment.
(b) Set aside money towards a down payment on the house that you really want (if you really want one). The magic number is often 20% of the house’s value, which will allow you to avoid mortgage insurance costs later.
(c) Build up an emergency fund of at least $1000 that will give you a cushion if something unexpected comes along.
(d) Continue to pay off debts.
Also, since it might be expensive just to travel to a place to look for housing, getting an apartment first doesn’t involve so much guesswork (apartments are pretty uniform in quality whereas houses can look great online but turn out to be terrible in person), and setting up your apartment can be done online or over the phone without having to travel.
9. Make a pact with yourself that you will not splurge on nice stuff until you actually have an income from your new job. This is very tough, because you’ve been living for 4+ years on a pauper’s income and eating Ramen noodles for two meals a day, so you really, REALLY want to go out and buy an iPhone or a new car. But you have to tell yourself that just having a job doesn’t mean you have money — not yet. I think a good waiting period on new stuff would be one semester after you start. By then, you’ll have an idea of just how far that paycheck will stretch each month and you can avoid getting in over your head. Some items, I agree, you have to buy right away — like furniture for your apartment. But you can often get multiple-years same-as-cash deals on things like this and defer payments until after the first semester is over.
10. Continue to educate yourself on personal finance matters. I highly recommend, and have largely stolen from in this article, the work of Dave Ramsey as a good source of learning about financing. He will challenge you to change the way you think about consumerism and debt, and if you listen, you will get on a sound financial footing for the rest of your life. His best book is Total Money Makeover, and his Financial Peace University classes are offered all the time in churches and community centers, usually for free or a small fee. He also has a radio show, web site, and podcast on money matters.
The point here is that you not only want to get a job you love, you also want to give yourself the ability to enjoy it to the fullest by not having to worry about money or how to pay off all the debt you gathered while finishing up.
Do you have other ideas or advice for getting financially ready to transition from grad school to the working world? Leave a comment!