Money Matters

Handling your finances

Seven years ago, Kristin Gagnier and her husband, Ryan, spent their first Valentine's Day dining on porterhouse steaks and ahi tuna at Grill 23, one of Boston's most renowned restaurants. The bill: $300.

"We were working for the first time and not saving anything," recalls Gagnier, a cognitive psychology grad student at the University of Delaware. These days, the Gagniers' money is more likely to go toward groceries and day care for their 11-month-old daughter, Lila, than to fine dining, but they still manage to eat well. This past Valentine's Day, Gagnier bought groceries at Costco and re-created that meal at home. The bill: $30.

"Obviously, no comparison to what we spent in Boston, but it was really lovely and we had a great time," she says.

While grad school evokes visions of eating at Subway and do-it-yourself haircuts, students can live well on stipends and student loans. It just takes planning, discipline and creativity. Here are some ideas to get you started.

  1. Follow the money. One of the best ways to rein in spending is simply to track it, says Brad Klontz, PsyD, a clinical psychologist and financial psychology expert. Denial and avoidance, he says, are the enemies of financial health. When we spend unconsciously, we are at significant risk of mismanaging our finances. Free websites such as, as well as commercial software like Quicken and MSN Money, can download, categorize and analyze your debit, check and credit card transactions and help you monitor spending. Psychology students might even find it fun to take a critical look at the data behind their own financial behavior, Klontz says. "Sometimes that's all it takes to drastically reduce spending."

  2. Pay yourself first. Many students say they are studying to help people, not to make money. But that's not license to be dumb about finances, says Klontz. After all, you won't be able to help anyone if you can't feed yourself. Once you've tracked your expenses for a month, break everything into categories such as mortgage/rent, utilities, child care, food, fun, etc., and determine what percentage of your total income you're spending in each area. Now is also the time to develop a habit of saving — ideally, socking away 5 percent to 10 percent for unexpected or less frequent costs, such as auto repairs or buying books at the beginning of a new semester, and for your retirement.

  3. Reframe your situation. Once you have identified the percentage of your money that goes to fixed expenses, have fun with what's left over. Rather than focusing on what you can't buy, create a spending plan, Klontz says. "If you get up every day and tell yourself you can't have a cheeseburger, all you're going to be thinking about all day is that cheeseburger," he says. Deciding how you'd like to use your extra money — to vacation with family or buy a new outfit — makes it easier to sacrifice a few dinners out.

  4. Apply for awards. Many graduate students overlook fellowships, scholarships and grant opportunities, says Rosaura Orengo-Aguayo, a clinical psychology student at the University of Iowa and the recipient of a 2009 National Science Foundation Graduate Research Fellowship. Seek out grants by visiting your department office, where you can typically find school-specific grant and award opportunities. Also visit APA's awards index and NSF funding, as well as your state psychological association website, for lists of scholarships, grants and other awards available to psychology students. Gain a competitive edge by looking up past recipients of any award you apply for, Orengo-Aguayo says. Then shoot them an e-mail and ask for tips — they may even send you their winning application. "It can take a lot of time and effort, but it really pays off," Orengo-Aguayo says.

    Be smart with the money you receive from these awards, says Le Ondra Clark, a psychology student at the University of Wisconsin–Madison. Clark says she socked away a portion of the money she received from several fellowships in a certificate of deposit. Be sure to read the fine print, as some fellowships and scholarships have spending requirements, but if putting some into savings is an option, go for it.

    "That way, it was collecting interest and I wasn't tempted to use it on something I didn't need," Clark says. Instead, it helped pay for her move from Madison to Los Angeles for an internship.

  5. Stick to cash. One of the best ways to avoid overspending is to ditch the debit card. Research shows using cash helps us spend more carefully. A study by researchers at the Massachusetts Institute of Technology found that people were willing to pay up to twice as much for baseball tickets, for example, when paying with plastic, compared with cash.

    "When you're actually laying down the bills at Walmart, you have a visceral reaction to it and you're more likely to ask yourself if it's something you really need," says Klontz.

    Jason Northrup, a school psychology student at the University at Albany, State University of New York, says he stops at the bank at the beginning of each week to take out a designated amount of money to spend on nonessential items, such as lunch with a colleague, coffee or happy hour drinks.

    "By not relying on a debit or credit card for these types of purchases, it's much easier to budget," Northrup says.

  6. Borrow smart. According to the most recent APA Doctorate Employment Survey compiled by APA's Center for Workforce Studies, a doctoral degree in a psychology health service provider subfield comes with an average of $63,078 in debt for PhDs and $101,606 for PsyDs. Take on as little student loan debt as possible by carefully estimating your expenses.

  7. Do it yourself. All those minor everyday expenses do add up. So bring coffee from home, paint your own nails and host a potluck instead of going out to eat with friends. Simply brown-bagging your lunch rather than grabbing something out can save you up to $200 a month.

  8. Shop smart. Always look for opportunities to save. Take advantage of student discounts on public transit, museums or at the movies, Orengo-Aguayo says. Others suggest picking up a book by Suze Orman or other money wizards on practical ways to save. Shop for furniture at Goodwill or on Craigslist, and consider refinancing your car if you can get a lower interest rate. Also, be sure to save all of your receipts, Clark says. "You can write off books, travel costs and conference registrations on your taxes as educational expenses," she says.

  9. Address your unconscious money issues. According to Klontz, the unconscious beliefs psychologists often hold about money — that money is somehow bad, the pursuit of wealth is evil or that those who are wealthy got that way by taking advantage of others, for example — can wreak havoc on a psychologist's financial health. As a result, mental health professionals may avoid contract negotiations and shun help from financial planning experts.

    To get a handle on potential money hang-ups, pick up one of the many books on the topic, including Klontz's "Mind Over Money: Overcoming the Money Disorders that Threaten our Financial Health" (Broadway Business, 2009), or see a therapist. It's also important to learn more about the business of psychology while in graduate school. Becoming avid business practitioners will allow psychologists to afford more charitable giving from the mental health field and provide more pro bono services, he says.

    "We need to teach students that the better they do financially, the more powerful impact they can have in the world."

  10. Be upfront with your friends. One of the toughest parts of living on a tight budget is not being able to do some of the things that your friends who aren't in graduate school can do — eating out, attending pricey concerts, buying a home. This can often make students feel ashamed and lead to troublesome spending habits, such as putting an expensive dinner on your credit card when you really can't afford it.

    Rather than living beyond your means to keep up with your pals, have an open and honest conversation with them about your income and expenses to give them an idea about what you can afford, Klontz says. Use humor to lighten the situation, and encourage them to continue to eat out wherever they like, but not to take your decline to an outing to mean you don't want to spend time with them. Take initiative by inviting those friends on affordable outings, such as a barbecue in the park.

  11. Consult a financial planner. Going over your finances with an expert can help you determine your future goals and whether consolidating your loans is a good idea. The Garrett Planning Network offers a list of hourly financial planners who don't require long-term commitments. Many universities also offer free financial counseling services — often through the business school or accounting department — to help students develop budgets or get out of debt, says Rachel Casas, past chair of APAGS.

    "It can take some investigating to find," she says, "but it's something a lot of students would really benefit from taking advantage of."

Amy Novotney is a writer in Chicago.

Fun without funds

Social activities are often a student's biggest unnecessary expense. Take a needed break on the cheap by:

  • Organizing a weekly potluck with friends. Take turns hosting, and pick quirky themes such as "breakfast for dinner" or "red foods only."

  • Attending speaking events or other activities hosted by your department — many of which include free food.

  • Inviting a friend to go hiking or jogging.

  • Hosting a movie night at your home, complete with popcorn and Milk Duds.

  • Going to free concerts, movie screenings, plays and other events on campus.

  • Taking advantage of promotions such as Restaurant Week, an event in more than 50 cities where eateries offer three-course meals at a discounted, fixed price.

—A. Novotney