GRADUATE & CONTINUING EDUCATION
| SUPPLEMENT
GRAD SCHOOL FINANCE ADAM KOTSKO • How To Manage Finances When
On The Long Haul Through Grad School 2. Favor liquidity: Given my access to credit, the only hard constraint was the availability of cash (meaning money in my checking account). If given a choice between going further into debt or making a cash payment that would quickly put me at risk of not being able to meet another cash obligation, I always chose going further into debt.
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hen I was in grad school, I faced near-constant financial problems. My income was barely adequate, and the variety of streams it came from meant that my access to the money I’d already earned was often delayed in unpredictable ways. My one advantage was a good credit rating. I had gotten my first credit card as an undergrad, and I used it sparingly and paid it in full nearly every month. After a semester abroad, I was carrying a balance, and I took out a small bank loan to pay it off. So I had drawn on a significant amount of credit and used it responsibly. I understand that not everyone starts from this point, so my strategies may be inapplicable for many people.
3. Preserve the credit rating: This meant always paying every bill by whatever means necessary. If I missed a single payment, that could lead to a decline in my credit-worthiness, leading to higher minimum payments and a decline in liquidity that could further endanger my ability to meet my ongoing obligations.
My goal was to keep my spending within the limits of my income and subsidized student loans. Like most grad students, I maintained a pretty austere lifestyle, but nonetheless there were times when I was forced to engage in deficit spending. My strategy for coping with the difficulties of financial management during these periods was based on three simple principles:
To make this strategy work, I maintained at least three credit cards at all times. My intention was to have one credit card as my “rolling account,” which I would pay off every month. Most of the time, this actually happened. The other two gave me room to bounce money back and forth. I absolutely refused to ever have a debit card for a variety of reasons. First, if the credit card company was willing to give me a free loan every month for my dayto-day purchases, why not take it? Second, if I did wind up carrying a balance, the consequences were likely to be less expensive than if I overdrew my checking account (fees and penalties were at their pre-crisis peak). Finally, if someone stole my debit card, that gave them access to my actual money — and even if I’d get that back, any serious disruption to my liquidity could have very negative consequences.
1. Think short-term: Long-term questions like how I was going to pay everything off were moot. The important thing was how I was going to keep meeting my immediate obligations until the next influx of cash came.
At times, I would not be able to pay the full amount of my “rolling account,” and so I would do a balance transfer. This actually helped my short-term liquidity because the balance transfer satisfied the need to pay that account for that
particular month. I always timed my balance transfers to take advantage of the ability to “skip” a payment out
circumstances of grad school is not to minimize your debt load, but to maintain your ability to keep rolling
“...contemporary academe puts even the most fortunate grad students and young job-seekers in an impossible financial situation. We shouldn’t make it worse by adding further constraints due to our prejudices about credit card debt or our false belief that our academic calling makes us unemployable anywhere else.”
of my checking account. Balance transfers do normally carry a fee, but the priority under the emergency
over your debt on favorable terms. Making sure to keep rolling over
HUNTER COLLEGE, located in the heart of Manhattan, is the largest college in the City University of New York (CUNY) system. Founded in 1870, it is also one of the oldest public colleges in the country and famous for the diversity of its student body, which is as diverse as New York City itself. Most Hunter students are the first in their families to attend college and many go on to top professional and graduate programs, winning Fulbright scholarships, Mellon fellowships, National Institutes of Health grants, and other rare and competitive honors. The 1,700 full- and part-time members of Hunter’s faculty are unparalleled. They receive prestigious national grants, contribute to the world’s leading academic journals, and play major roles in cutting-edge research. They are fighting cancer, formulating public policy, expanding our culture, enhancing technology, and more.
cityandstateny.com | DECEMBER 16, 2013
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