First month’s rent up front plus a security deposit. A parking permit. Textbooks. Furnishing your new place. In the first few weeks of grad school you’re hit by one expense after another. On top of that, your department expects you to start orientation (followed by classes and research) five to six weeks before getting your first paycheck! How are you supposed to swing this?
The best position to be in at the time you enter grad school is with a minimum of one or two thousand dollars in savings – about as much as you will be paid at the end of your first month. If you have that kind of padding, you’re going to get through that long period before your first paycheck just fine, especially if you add in some of the other strategies discussed in this post. Just be conservative in your spending until you get your budget stabilized.
However, for the rest of us who came straight out of undergrad with just some graduation money in our pockets or who were working low-paying jobs before starting grad school, that first month may be quite tight financially speaking! Use this post as a guide to getting through that first month without too many bumps and bruises.
Your first priority needs to be food and a roof over your head. Depending on the housing climate in your city, rent, security deposits, and even broker’s fees may be your highest expense for the month and the highest they’ll be for your tenure in that home. Definitely ask for any discounts that may be available for students, but be sure you have the funds to pay for all these expenses. Thankfully you will often be billed for utilities only after you use them, so in your first month that won’t be as high an expense as will be typical.
When you move in, buy a few staple groceries, but don’t go crazy stocking your pantry until you have been paid. (You probably won’t have time to cook elaborate meals at first, anyway.) The start of the school year provides free food opportunities galore, particularly for first-years. If you are really strapped for cash, don’t pass up any of these offers! There will be lots of social engagements as well with your new classmates, but keep your spending on restaurant food and drinks in check. If you feel comfortable, you might even try going out without eating/drinking.
2) Delay buying/paying for everything possible.
When you are desperate for that first paycheck, it doesn’t make sense to pay any one-time bills before their due dates. At my university, the Bursar bill, which includes parking permits and activity fees and such, isn’t due until the mid-fall, and it always takes nearly the full time for the departments to post the scholarships they are responsible for. Use any grace periods that might be extended to you.
Even though it may seem like the high season for Craigslist sales, you should also delay buying furniture and other home equipment until you have a better idea of what you can afford. It won’t kill you to go without a dining room table or sleep on an air mattress for a month! You can take a bit of time to save up for the big-ticket items, but put off even buying the small stuff for your kitchen or bathroom until you have more cash on hand.
It doesn’t have to be very precise, but a sketch of a budget will help you a lot through your first month because you’ll be able to anticipate bills and keep an eye on your checking account balance. If you have a lot of blanks in your sketched budget, try filling in values from your local living wage calculator until you have your own data. Keep in mind that it will take a few months for your expenses to stabilize so that you can finalize your budget. Track your spending (a program like Mint makes it a cinch) so you have some data to work with once you are ready to optimize your budget.
What is your income going to be?
Guess what? Your net monthly income is not what was stated in your offer letter! If you use your stipend for living expenses (i.e. non-qualified expenses), you will have to pay income tax on it. The best way to handle that situation is to set up tax withholding with your department’s payroll, even if you are on the non-compensatory payroll (receiving a 1099-MISC at tax time instead of a W-2). That way you will have an idea of how much your net pay will be (though you may not know exactly until your first paycheck comes) and you won’t have to worry about putting money aside for paying quarterly estimated taxes. You can also figure out if you will be paying social security payroll tax (you probably won’t) because that 8%-ish could really influence your discretionary spending.
At the same time that you’re setting up your tax withholding, you’ll likely have an opportunity to set up your paycheck to be direct deposited. That will give you the quickest access to the paycheck you’re waiting on! However, in case you can’t get direct deposit set up right away, it would be helpful to have an account with a locally operating bank to prevent delays in being able to use your money. (An internet bank would be perfect for this purpose, particularly now that Ally and Capitol One 360 have smartphone check deposit.)
What are your fixed expenses?
List out all your fixed monthly payments to take out of your net income – rent, savings, debt (consider deferring student loans if possible), insurance, giving, phone, and internet. Add ‘em up! These expenses comprise most of your base spending every month and are difficult to change, especially when you’ve just committed to a lease. There are certainly ways to reduce each of them but it won’t be as easy as simple belt-tightening.
What are your variable and discretionary expenses?
After you subtract your fixed payments from your net income, the remainder is what you can spend on all your discretionary and variable expenses, such as groceries and eating out, utilities, gas, entertainment, and travel. You can use previous budgets if you have them to get an idea of what you’ll be spending in these areas, but you’ll need to adjust for cost of living differences. These are the areas you’ll want to minimize in that first month before you are paid. For example, this is the best time to check out the alternatives to commuting to work by car offered by your university and city so you can save on gas or even avoid owning a car. For example, my university gives out free bus passes for all the city’s bus lines and offers van rides home to students who live close by.
If you already have a credit card, it will be very tempting to just throw your living expenses onto it and not think about how much you spent until the bill is actually due in a month or two. While this may be necessary for buying food if you have absolutely no savings, I recommend that you restrain yourself from using credit. It will be very difficult to keep from getting a month behind or carrying a balance if you put more than a couple hundred dollars on credit. Keeping mind that you have no money so you shouldn’t be spending like you do!
If you are being offered credit for the first time, don’t think of it as free money! If you choose to use credit cards, endeavor to treat it like a debit card by only charging purchases that you already have the cash to pay for.
5) Refill your savings.
Your personal savings has likely taken a hit during this first month of grad school. Make refilling your savings a top priority in the months to come so you can easily weather emergencies and unexpected or irregular expenses.
Even if you have substantial savings upon entering grad school, I hope you will employ a few of these tips to help keep your spending down until you have an accurate budget. For those whose savings disappeared into up-front housing expenses, take heart! You can get through the month relatively unscathed, and the time will fly by. You’ll be so busy with orientation, classes, getting your feet wet in lab, and making new friends that you won’t have time to overspend!
What are your best tips for first-year students? How do you financially survive a move or time in between jobs?