When hiring PhD students, I often get asked about money by fresh graduates who are trying to work out “how much is enough?”
But first, some background for the uninitiated. People studying for PhDs in the UK are treated as students, not employees. Furthermore, most science and engineering PhD students are paid a stipend large enough to approximately cover their living expenses. Being a bursary, this is not taxable, and PhD students also get a range of other benefits reserved for the unemployed and/or deserving, such as a waiver of the local property tax, the council tax. The exact amount of the bursary has varied over time – in 1997 when I started my PhD the national minimum set by the physical sciences funding council EPSRC was about £7,100 (in 2011 GBP), whereas today its £13,590. However, this is a minimum and students in London are usually given about an additional £1200, and students in shortage engineering subjects and/or collaborating with companies are often given a top-up of up to maybe another £4000 (this is the most I have heard of).
So, the bursary paid probably varies between about £13,500 and about £18,000. Now, if you were paying 6% of your salary into a pension, this would be the equivalent of a pre-tax salary of about £16,000 – £23,000. UK average incomes are about £25,000 and average graduate initial salaries are about that sort of number. So, doing a PhD isn’t going to make you rich, but its not a million miles away from a normal graduate salary. For the sort of PhD students I hire they are probably taking a 20% pay cut from what they would get in industry, plus they have to deal with living in London rather than a provincial city like, say, Derby or Nottingham.
Now, the key thing about money is to remember that being a single person living on something similar to UK average earnings shouldn’t be that hard. In fact, whatever our income, we can probably spend it, and more. So the key point about money is this: spend less than you make.
If you spend less than you make, lots of wonderful things happen. For a start, you stop paying your bank interest just to buy food on the day before pay day, because you have a cash balance. You stop having to worry about unexpected bills like the car breaking down, because you have a cash balance. Your friend needs a loan? No problem. Have it as a gift. You want to buy that shiny wonderful thing that promises a better life? Whip out the debit card, because you’ve got the money. If you live within your means, money doesn’t have any power over your life any more.
The way to do this isn’t to be a complete skinflint, its just to be intentional about the choices you make. In the end, you can’t spend more than you make forever. So, given that our desires are probably much greater than our means, spending now means not spending later – spending on credit just means we can avoid acknowledging that fact until the bank forces us to at some point down the road.
How do we be intentional? Its called budgeting. Now, making a budget is easy. The difficult part is making it work. Notice, I didn’t say “sticking to it” – this isn’t an exercise in hair-shirt self-flagellation. You’re not going to stick to it; reality never works out like our plans. The point is to review how things actually turned out – what cost more, what cost less, the things you forgot to include – and revise the budget. Then, you can start to cull the things you don’t need, the things we all spend money on that, it turns out, we wouldn’t spend money on if we went back and did everything over. So the point of the spending review is to learn, reflect and revise.
Now, sorry to say this, but that’s going involve some dull stuff, like downloading bank statements and categorising where the money went. But, do it every 2 weeks or so for 20 minutes and within a couple of months a picture will start to emerge that gives you the information to improve your plan. My big tip here would be – don’t sweat the small stuff. If its less than 5% of your weekly spending, its a drop in the ocean. If you’re spending £15,000 a year, thats 1.5 million pennies. Excel doesn’t even have that many rows in a sheet. So the expression about looking after the pennies might be true, but the thousands of pounds won’t look after themselves – inflation has robbed this pithy little bit of wisdom of some of its power.
Right, so thats the preliminaries. Now the main event? Is £15,000 enough to live on in London? Well, lets call it £300 per week (pw) in round numbers.
If you share a 3-bed flat with two others in zone two, you most likely pay about £120-130 per week. Bills are probably about £3000 a year, or £20 pw. So you have about £150 pw to live on.
Food: Food probably costs anywhere from £30 pw to £60 pw, depending on where you shop, how much you drink and how many restaurants you go to.
Transport: You won’t be driving to work in London! A travelcard from zone 2 costs £24 pw. But you could cycle, or pay more rent to live somewhere walkable, or pay less rent and more in travel. Then, do you want to car in order to get out of town? Could be £2,000 a year in tax, insurance, MOT, maintenance and gas. So thats another £40 pw, before considering capital costs. So transport could be anywhere from about £20 pw to £65 pw, depending on what you do. Me? I cycle, I use streetcar to get out of town (www.streetcar.co.uk) and I take a lot of trains, so in total I spend about £25 pw. But to get to work, I bike.
After that, everything is optional: clothes, holidays, computers, sky tv, gig tickets, nights in the bar. So of our £150 pw we had after rent and bills, we’re down to probably £35 – £95 pw. I would say you’ll have about £70 pw unless you have a strange attachment to having a car.
How would I spend that? I’d spend £2000 a year on holiday, £1000 on clothes and leisure and I’d give away £500. Giving away money is good. It reminds it that it doesn’t own us.
Now, your sums my vary from mine. If you can’t make it work, remember that you can extend your income a bit by demonstrating and invigilating, maybe by £1000 a year. You can try and negotiate more pay with your advisor, if he’s got the money. Maybe he does some consulting and could use your help. In essence: you can pay with the income side of the ledger too.
But, academic research doesn’t, as a rule, pay that well. Financially, the main upside is that you can keep going until you get to retirement age – there aren’t a lot of bankers in their 50s. So, if you want to be really well paid, this isn’t the vocation for you.
On the other hand, if you’re curious to find stuff out for yourself, to find new stuff, to ask and answer questions nobody knows the answers to yet, forget about the money, its only a prison anyway. Come and be a researcher! Have fun in your 20s while you still can and do a PhD. Its only for a couple of years, if the money turns out to be important then the PhD meas you’ll catch up in salary terms pretty quick once you go into industry, finance or professional services.