Matters to a Degree

There is some truth to the myth of the starving and broke graduate student. When I was in grad school, I'd attend almost any meeting with free food. As I improvised yet another dinner of cheese and crackers, I was sometimes jealous of my college classmates who went into business, engineering or other careers that allowed them to make decent money right after graduation.

Since then, money has become an even bigger problem for psychology graduate students. As this issue's cover story points out, student debt is on the rise and will likely become even more burdensome, due to new government policies on graduate student loans.

These harsh realities aren't fun to think about, but being savvy with your money is particularly important when you have little to begin with. Is it really possible to minimize your debt while also investing in your future? Yes. Here are just a few ways:

Track your spending

As any behaviorist knows, it's important to know your habits before you can change them. A variety of free apps, such as Mint.com, can help you track and categorize your spending through all your bank accounts and credit cards. Some even allow you to compare your spending habits with state and national averages.

Make a budget

Based on your spending, create a monthly budget. Then, stick to it — and reward yourself for meeting your goals with television breaks or other free treats.

Think small

Minor but consistent changes can be even more effective than severe austerity measures. For instance, make coffee at home instead of buying a cappuccino on your way to work each day and you'll save about $20 a week, $80 a month and more than $1,000 a year. Other habits to consider: Pack lunch instead of eating out, cut down on your cellphone minutes, grocery shop with a list and cancel your cable TV.

Think big

If you live by yourself, consider getting a roommate — it can save you hundreds of dollars a month. You might also want to get a low-stress, part-time job, perhaps at a library or a coffee shop, or doing assessments for a clinic.

Borrow less and pay the interest

Using your budget as a guide, borrow as little money in federal loans as possible, and use any extra money you have at the end of the month to pay down the interest on your loans. If you pay your interest while in school, then you can reduce your payments when you graduate.

Invest the money you save

It's hard to think about retirement when you're in your 20s and not earning much, but this is exactly the time to start. Remember, you have two important commodities on your side: time and compound interest. If you invest $1,000 in a mutual fund when you're 22, that money will grow into $31,920 when you're ready to retire at 67 (assuming 8 percent interest annually). If you don't start saving for retirement until you are 32, that same $1,000 investment will only be worth $14,785. Invest this money in a Roth IRA and it will grow tax-free.

Save for retirement

If you're eligible, make automatic contributions to a 401(k) retirement account through your employer — especially if your employer offers a contribution match. By taking advantage of this, you can double your retirement investment. If you don't, you're effectively saying "no thanks" to free money. Also consider opening a Roth IRA, which allows your money to grow tax-free until you withdraw it.

These are tips that I wish I had followed in graduate school. I graduated with $38,000 in debt, which was paid off after I received funding for two years of service in the National Health Service Corps Loan Repayment Program. But I didn't put away any money for retirement, and now I'm trying to make up for a late start.

So, keep taking advantage of free food, but remember that making a budget and investing some money will go even further toward your long-term financial health.

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