Have you ever received a pay
raise, only to find your financial situation doesn’t improve? You may be
experiencing lifestyle inflation. Beth Cozzolino is proof that if you
start making more, you don’t have to start spending more.
She finished getting her PhD in Sociology and Demography at UT and is now working as a quantitative user experience researcher with Indeed. Before completing her doctoral degree, she came up with a plan for her finances.
“I was going to make the transition from being poor (as a student) to actually having money and I didn’t want to blow it all,” said Beth.
How to Avoid Lifestyle Inflation with PhD Beth Cozzolino
She was used to not making a lot of money and living off a small stipend as a PhD student. “I never buy anything full price. I’ve always been like that. Why would I pay $50 for a dress? I can get a dress just as cute as for $10-$20,” said Beth.
While earning her PhD, many of her friends had been working for six years and building their 401(K) plans. Beth felt like she was late to the game. “I wanted to make sure I could hit the ground running and not have to retire six years later,” she said. Before landing her first job, she enrolled in Best Money Class Ever to learn about money.
“I thought the class was super helpful and I’d definitely recommend it,” she said.
With her job offer she ran through the numbers and benefits. “I wanted to get my budget in order for my first paycheck,” said Beth.
Now she’s automatically contributing to her retirement plan each month and has an aggressive plan to pay off her student loans. Her PhD program paid for her school costs. She plans on paying off her undergraduate student loans within three years by paying about $600 extra monthly. “I have a little bit of a nicer place, but I’m pretty much living the same lifestyle. I’m not inflating my spending in proportion to the increase in income,” said Beth.
Beth’s Advice for New Graduates
Personal finance can be mystifying, especially to graduate students. In school you don’t learn how much to save for a house or for retirement. She said that if you don’t know, then how can you ever meet the targets of buying a home and retiring one day? Where’s the manual for becoming an adult?
In class she filled in her own Statement of Cash Flow to see her cash inflows and outflows in a month. “It was a good exercise to see where all my money went during a month,” said Beth. She recommends tracking your expenses especially when you have a big life change like having a baby, moving, or getting married. It’s a chance to start over.
Her outlook is that even if you weren’t managing things well before, now you can have a new beginning.
Why Managing Money is Hard
It’s tempting to increase your lifestyle when you graduate or get a promotion. However, it isn’t just new cars, clothes, and gadgets that make managing money hard. “I graduated college in 2012 when the recession was technically over. A lot of my friends didn’t get a full-time job and had to move home,” said Beth.
Graduates have a delayed start and it’s harder for us to get to the point where our parents were. Beth stated that her parents had a house at the age she is now. The U.S. census reports that home ownership for 25-34 year-olds is down to 42% versus 52% of 25-34 year-olds in 1980.
“We have more debt and less income than our parents. This is not a good time to be our age in the historical sense. It makes sense that people are broke,” said Beth.
Why Beth’s on Mission to Pay Off Debt
While getting her PhD she didn’t have to pay off her undergrad loans. She would get a quarterly statement, but her thought was always, “this is a problem for another day, and now that day is here.”
She said she’s had her student debt for long enough and she simply doesn’t want to have it anymore. Here primary motivation to pay off students is to minimize how much she spends in interest. “My interest rate is really high- it is ridiculous. It is crazy,” said Beth.
Avoid Lifestyle Inflation, But Make Sure to Splurge a Little!
Beth’s story is simply amazing to live primarily the same as she did when she was a student. That takes discipline and willpower to avoid lifestyle inflation. Beth does however recognize the importance doing fun things and having splurges along the way. “You don’t want to be so dogmatic, that you are not allowed to have fun. That is not sustainable,” said Beth.
Being good with money doesn’t mean depriving yourself. When she accepted her job offer she went out to a nice restaurant to celebrate. She believes that having a good budget and plan with money is a long-term thing. If you go too hard, you can burnout.
Congrats to Beth for completing her PhD and having a plan with money. Check out her research on child support spending. Download her article Child Support Queens and Disappointing Dads: Gender and Child Support Compliance. It’s an interesting read.
You can avoid lifestyle inflation too!
P.S. Know of any new graduates or friends that just a got promotion? Share this with them so they can learn tips on how to avoid lifestyle inflation!