79: Financial Literacy in Grad School

Dra. Yvette Martinez-Vu

Hi everyone. Today I have another bonus episode on financial literacy in grad school. It's gonna be a quick episode, so I won't have an opportunity to cover everything. There is a lot to say when it comes to the topic of financial literacy. A lot of times in my episodes, I'm only able to cover surface level information. And the point of it is not that once you listen to my episode, you're done. Hopefully it's a launching pad for you to then take it upon yourself to learn even more. Now, before I get started, I want to say that I am not a financial expert. I am not giving you financial advice, per se. I'm just sharing information in the hopes that you can then go on and learn more and make your own informed decisions.

Dra. Yvette Martinez-Vu

Let's start with some basics about financial literacy in grad school. If you are a graduate student, odds are you're probably not making a lot of money. You are probably also struggling to make ends meet. That was true for me. That was true for a lot of my friends and colleagues who were also grad students. Of course, there is the exception to the rule. There are individuals who go to graduate school who have full time jobs, who go to graduate school and come from families that hold generational wealth. That's the exception.

Dra. Yvette Martinez-Vu

But as someone who's listening to my podcast, you are probably a first gen student of color, probably working class. So this likely applies to you. One thing that I want you to make sure that you do- if you're not doing right now- is to make sure you are always creating a budget and updating it every month. What is a budget? The basics of a budget is it's a spreadsheet where you calculate the numbers of the money that's coming in and the money that's going out. Now, when I create my own monthly budget, it is a spreadsheet on Excel. For me, I implement this method called the zero based budget method. What does that mean? That means that every single cent that goes into my checking account, or that gets paid to me, every cent is given a job. Every cent gets allocated to something- whether it's a certain amount of my paycheck goes to housing. A certain amount of my paycheck goes to food, to transportation, to health, to my debt payments, to my savings, etc. Even if there is leftover, that leftover is allocated something. Usually it's allocated to savings. But it can be something else. It could be fun. It could be a splurge for that month, whatever it is. It's all based on your priorities.

Dra. Yvette Martinez-Vu

The point of it is that you familiarize yourself with your numbers, with your money and your money out. And hopefully, you are living below your means instead of living above your means. Living above your means means that you are spending more than you're making. That's bad, because it is going to lead you to going into more debt. It might mean you having to take on credit card debt or something else, because you're in the negative. Or you're maybe missing payments, missing bills. That's not good. So you want to always try to live below your means if you can.

Dra. Yvette Martinez-Vu

There are different individuals who cover the topic of financial literacy and financial wealth building, who have certain ratios that they recommend of where your money should go toward. Some people firmly believe that you shouldn't spend more than 50% of your money coming in on housing. But those of us that live in California, we'll just laugh at their face, because we know that that's not realistic if you live in California. I don't want to give you specific recommendations in terms of percentages that you should spend. What I do want to say is that you want to familiarize yourself with your income and you want to spend less than what you make, because you don't want to be in the negative.

Dra. Yvette Martinez-Vu

Now, the other thing that's good about creating a budget spreadsheet is a lot of people, they get overwhelmed or intimidated by numbers. You get so caught up with living paycheck to paycheck that you maybe don't ever have the opportunity to think about your financial money goals. If you had the opportunity to save for something, what would you save for? I know the first thing that comes to mind is you should save for an emergency. Having an emergency savings is really important, and very few people actually are able to do that. Now, what do other people say about the emergency savings?

Dra. Yvette Martinez-Vu

There's different frames of thought, but some people will say you should have at least three months worth of your monthly necessities- and not just your regular budgets. Your bare bones budget, what you need- basically shelter and food, your health and your safety is covered. Three months minimum of that, so that if something were to happen to you, you could survive for three months. And in that three months, figure out a way to make ends meet, to go back to being afloat again. Other people say six months. Some people who are more risk averse will even say 12 months. And some folks will say actually, it depends on what you do for a living, or it depends on the type of job that you have. If you're in a field where you can get a job right away, maybe you only need three months of savings. If you're in a field where it's going to take you a long time to get another job, maybe 12 months of savings.

Dra. Yvette Martinez-Vu

I say, just to start off, start off with the minimum. Start off with three months. It's gonna seem like a lot, especially if you've never saved before. If you start to look at your monthly expenses, maybe it's $2,000. Then you're like okay, $2000 times three. Oh, my goodness, how am I supposed to save $6,000 in my bank? I've never had that much in my bank account. And all these things come up. It's just about learning to reframe it. Even if it takes you a long time to get to that three months, having that goal of every month, I'm going to set aside $100 and that's going to go towards my emergency savings. All of that will help. If an emergency does come up, and you have to use it, and then you go back to square one. Well, that was the whole point of the emergency savings, right? So that you can use it and not be in the negative when an emergency happens.

Dra. Yvette Martinez-Vu

Start off with an emergency savings. Then, if you are able to create your emergency fund, think about other things. Have you ever wanted to save to go on a nice vacation or travel? I know that was always such a luxury for me that the only time I ever got to travel as a graduate student was through academic conferences, because I was able to get grants to cover the fees to travel through the conferences. For me that was such a luxury- saving to travel for fun, not just for an academic purpose. What else are your personal priorities? Would you want to save for gifting? Maybe you want to start saving now to be able to give gifts during the holidays. Or maybe what other priorities could be? Maybe you're saving, because you know at one point you're gonna want to buy a home. Maybe you're saving because you know you may want to buy a car. Or maybe you're saving because you know that you are going to be trying to invest or trying to save for retirement.

Dra. Yvette Martinez-Vu

There are different reasons to save outside of just the emergency fund. But again, it's important to track your spending. This is the part that can hold people back from doing this. Maybe you've gotten to that point. You've created the spreadsheet, and then you never look at it again. Or it becomes really a tedious process of updating it. If that's the case, you might want to look into some apps that could help you with this. I'll be completely open and transparent. I use an app to help me track my money. The app that I use is called you need a budget. No, they're not sponsoring me. I'm not getting paid to say it. I'm just a big fan of it. It does require paying an annual fee. But for me, it's worth that fee because I use it all the time. I look at it at least once a week every week. It integrates with your checking accounts, with your credit cards. Everything is on there. You can see where your money is going in and out. Some people use mint. There are plenty of other apps. You can kind of do your own research and figure out what you want to use. I'm just sharing what I use so that you have an example.

Dra. Yvette Martinez-Vu

Now talking about checking and saving accounts. You'll want to get more comfortable with setting up multiple accounts. This may not be something that you're familiar with. I know I grew up with immigrant parents and family members who were very resistant to creating any kind of bank account whatsoever. They didn't want the government to know anything about the money that they made, and were very averse to creating bank accounts, checking accounts, opening up credit cards, all of that stuff. So it was very foreign to me, the thought of having more than just one checking and one savings.

Dra. Yvette Martinez-Vu

Why is it is it helpful to have multiple accounts? Because then it makes it easier for you to allocate different funding for different things. For instance, you could have an emergency savings account, and then you could have your separate savings account for your vacation. You could have your regular checking account, and then you can have your bills checking- the one where you just put the money to pay the bills, to make sure that no matter what you have a roof on top of your head, all your bills are paid for. You see what I mean? It can be helpful to have multiple accounts, and then to automate your bills so that you know that your bills are gonna get paid for each month.

Dra. Yvette Martinez-Vu

Now, I also want to talk a little bit about credit- building credit, learning about credit scores, all of that. Again, I know so many students who have never taken out a credit card, and are afraid of that because they're not familiar with the process. They don't know anything about credit scores. What's a good score? What's a bad score? What is my credit score? Do I have one? For that, if you haven't had the opportunity to open up a credit card, I would recommend that you look into that. That way you can start to build credit. Credit scores can range anywhere from 300 to 850. Those are the scores.

Dra. Yvette Martinez-Vu

Why is having a credit score important? It is because it will allow you to be able to do things like buy a car or buy a home. Sometimes it's used for you to get a lease for an apartment. And anything over 750 is considered an excellent score. But there's a range from fair to good, to very good, to excellent. It takes time to build your credit. In fact, there are multiple things that affect your credit history. One thing is how old you've had your account. How long have you had a credit card? How long have you had a student loan? How long have you had a mortgage, if you were to buy a home? How long have you had a car payment? So the age- the longer you've had credit history- the better off you are. The type of accounts. So having a mix of different types of debt and paying it off every month, looks better than just having one type. So if you just had a credit card versus having a credit card and a car payment, for instance, that will help you with your credit score.

Dra. Yvette Martinez-Vu

Your total debt and your credit usage- that's called your utilization. That percentage of the amount of- let's say your credit card has a $5,000 limit and you only spend 100 bucks a month or whatever on the credit card. Whatever 100 divided by the 5000, that percentage is your utilization. The lower the utilization, the better off you are. But you also don't want to just not use your credit card. One thing that I tell myself and other friends around me, when they tell me, how did you get over 800 credit score? I don't even know where I'm at now. I'm not quite at 850. I might be in the 820s.

Dra. Yvette Martinez-Vu

How did you get there? I say well, I don't even use my credit cards that much. But one of them, you just put one thing on it. One bill- it can be a tiny bill of like $2, $10, Netflix, Hulu, and then pay it off every month. Pay it off before the due date every month. It doesn't matter how much you spend, so long as you're- every month- paying off your credit card. You'll be good and your credit score is gonna jump. So all that stuff- your repayment histories, and making sure you're paying things off on time will make up your credit history and credit score. Anytime you have an inquiry, like if you were to get a new credit card, and then that creditor, they run your credit check just to check your credit score. Each time someone runs your credit check, that can affect your score and lower it slightly.

Dra. Yvette Martinez-Vu

Of course if you have a record of a bankruptcy, or something going on collections, or there's been this money that you have been unable to pay- all of that is also going to negatively impact your credit score. It's good to know what a credit score is, how to establish credit. One of the easiest ways to get started is through a credit card. But also a lot of you are students and may have student loans. That's another thing that is helping you to build credit. Once you're no longer a student and you start to pay off the student loans, that's also going to positively impact your score. For credit cards, just be very careful when you're doing your research. Check out their interest rates, their annual percentage rate, the APR. And what else? Treat it like a debit card. By that I mean, only use your credit card if you have the money to pay it off. Just like you would only use your checking account if you have money in it, you also only want to use your credit card if you have the money to pay it off- and pay it off in full on time every month. Then you should be okay.

Dra. Yvette Martinez-Vu

Now another thing I want to mention has to do with taxes, because one thing that a lot of grad students are doing or may be interested in doing just to survive is having more than one job to make ends meet. If that's the case, if you earn more than $12,000, you will need to pay taxes on it. And some of you choose to file your own taxes. Some of you have someone file taxes for you. Taxes are always due on April 15th every year. So just keep an eye out on that. Don't let the fear of taxes - that happened to me- don't let the fear of taxes get in the way of you finding ways to make more money. You see what I mean? Just take note that if you have a paycheck, then you're likely going to get a W2 form at the end of the year. For certain scholarships, fellowships, you may get a 1098 form. That's what you're also going to be using to report your income.

Dra. Yvette Martinez-Vu

This is something that I don't think I was familiar with when I got my first full time job. But when you get your full time job, there's a certain amount that's taken out of your paycheck to go towards taxes- state and federal taxes. And depending on whether you deduct more or less, that will then determine how much money you will either owe, or get back as a refund when you file your taxes. I've always opted to get the most deducted, because I've always liked the idea of getting a refund check during tax season. It makes me look forward to doing my taxes. But again, it's up to you. I also know some individuals who opt to deduct less. That way, they get more money to spend every month. Then they're willing to save up, so that way they can pay whatever the difference is that they owe during tax season. So that's completely up to you.

Dra. Yvette Martinez-Vu

Now I'm getting close to wrapping up. And I want to say two things. One about mindset and another about kind of grad school related recommendations. So about the mindset thing- there is a lot of fear. There is a lot of feelings of shame. There's a lot of discomfort. You may feel not very smart. You may think, oh, I'm not a numbers person. You may associate money and making money and having money as a negative thing. You may experience guilt when you start to make more money. That is also part of the process.

Dra. Yvette Martinez-Vu

I am not a financial therapist. But there is so much that goes on that's linked with the way that you behave with and around the money that you make, and all the things that have happened to us in childhood. I mean, if you think about how your parents managed money or did not. How do they handle their money? A lot of that may be passed down to you. So if your parents didn't know about financial literacy, you probably don't know about it either. If your parents are always afraid, or always thinking in terms of scarcity, like I can't make enough. I don't have enough. We're not going to be okay. Those might be the internal thoughts that you're having, of always thinking about the worst case scenario.

Dra. Yvette Martinez-Vu

It's going to take time. It's not going to be a quick and easy thing. It's going to be, if anything, probably a lifelong learning process. I don't feel like I'm done with my learning process with financial literacy either. So just try to learn to be okay with sitting in that discomfort each time you face your money and your budget and your savings goals etc. That's what I want to say just for now.

Dra. Yvette Martinez-Vu

Now about the grad school recommendations. If you have the capacity to do this, apply to all the scholarships, all the fellowships, all the grants that you're eligible for. Get a part time job. Some people get two. I had three part time jobs- not that I encourage that, but just whatever you can handle. Some people get part time jobs on campus. They'll become grad mentors. They'll become student advisors, etc. Other people get jobs outside of the campus as tutors, through ride sharing, delivering groceries, teaching English online, selling items on Etsy, flipping secondhand shop items and selling them on eBay. There's so many ways to try to increase your income a little bit to help you out.

Dra. Yvette Martinez-Vu

Then like I said, this is a lifelong learning process. Learn as much as you can about financial literacy. One book that I recommend is the Get Good with Money book by Tiffany Aliche. It's available as a hardcover and as an audiobook. All the basics of everything you would ever need to learn about money are in there. If you like to listen to podcasts- obviously you do because you're listening to me now- money confidential. Yes, money confidential is a great podcast to teach you the basics.

Dra. Yvette Martinez-Vu

Then another thing is just make sure you download the apps for all the financial institutions that you use- for your checking, saving accounts- to track your money. Keep a spreadsheet. In that spreadsheet, don't just put your budget. Also put your debt- yes, confront that. Figure out, how much do you owe overall in all kinds of debt? And put in your saving goals, your retirement goals. All those things are going to help you with managing your budget and in turn, are going to help you with getting closer to reaching your overall life goals. I hope you found that helpful, and I'll talk to you next time.