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In this episode of GradBlogger, we interview Dr. Emily Roberts about the top five financial tips for PhDs running an online business. We discuss how to write appealing captions that engage your audience. We also discuss hashtags and other tools that will boost your profile and your business.
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Introduction
Chris Cloney: 00:08
Welcome to Episode #17 of GradBlogger, where we’re helping academics build online businesses and change the world through blogging, podcasting, and video. This is a show dedicated to helping you create side hustles, online businesses, and personal brands and influence the change that you want to see in the world.
Today’s topic is personal finance tips for PhDs, specifically those who are running an online business. I want to welcome Dr. Emily Roberts from Personal Finance for PhDs. Emily, thanks for coming on today.
Emily Roberts: 00:44
Thank you so much for having me Chris, and I’m delighted for this opportunity to speak to your audience.
Chris Cloney: 00:48
In this episode, we’ll be talking about personal finance tips. It will be a different setup than the previous shows. We’re going to go through Dr. Roberts’ top five tips on personal finance for PhDs running their own business.
Emily has been a long-time friend and colleague in the self-employment Ph.D. space. We’re both members of the self-employed PhD Group for over two years now. That’s part of the Beyond the Professoriate community now. I got a behind the scenes look at her business as she progressed from her graduate work to doing a lot of speaking and training in universities, and what is now Personal Finance for PhDs, which is abbreviated PFforPhDs, So pfforPhDs.com, and her podcast work.
Chris Cloney: 01:35
We’ll walk through all that and then we’ll get into the top five tips that she recommends for PhDs starting their business. So a little bit on your background: you were a grad student, you graduated with a PhD in Biomedical Engineering, you moved into entrepreneurship and now you’re at Personal Finance for PhDs. But taking us back, what was that journey like for you?
How Did You Get Started in Your Online Business Journey?
Emily Roberts: 02:03
It started with a subject area that I had a personal interest in. That’s personal finance, and it started back when I graduated from college. I started my postbac fellowship, which I did for a year before starting my PhD. That was the first full-time job I’d ever had that was for longer than a summer.
I was receiving this paycheck for the first time and I didn’t know what to do with it. Of course, it wasn’t a large paycheck because it was a stipend paycheck. Being the oldest child, I’m very responsibility-oriented, so I decided to discover what was the best thing to do with this income that I was now earning. That was when I first started learning about personal finance and my interest in it just grew and grew and grew and was tightly intertwined with my journey as a graduate student.
Emily Roberts: 02:52
Again, I wasn’t earning that much money, I wanted to do the best possible job I could with it. Of course, my own finances evolved over the years that I was in graduate school and became more complicated and more interesting with time.
About midway through my PhD, I started blogging about personal finance. My blog was Evolving Personal Finance – evolvingpf.com – and that was my own personal musings on the topic of personal finance. As I was watching the stats for that website, along with the comments and questions I was receiving through email, I saw that the posts dedicated to finances for graduate students were the ones that were getting all this search traffic and all these comments. People were thanking me for sharing my research and my thoughts with them.
Emily Roberts: 03:50
They were asking me follow-up questions. That was my first clue that this was something that other people were interested in and needed to know about and that I was more interested than other people and willing to do the research and willing to write about it and willing to put that information out there.
So this did start as a blogging journey during graduate school. When I finished grad school, or when I defended, I was still living in Durham for a few months after I finished. So I decided to volunteer to put on a graduate student seminar about personal finance.
I was feeling burned out in my research at that time, and that was the most fun that I had had in years doing anything remotely professional. That’s what started me down this journey as a business owner because I was saying, okay, I’ve had this blog but now I want to do this speaking thing. I’ve been doing that in the years.
It’s been five years almost since then. I speak at universities and I also run an online component to my business. But the speaking came first and I’ve been building up the rest of my online business a little bit more slowly in the years since then.
Chris Cloney: 05:12
Yeah, I like that story and it’s interesting because there are definitely parallels with my story. I just started blogging. It wasn’t a business but eight months later, it struck me that there are elements that could be monetized and brought into being a business. For you, it’s speaking and for me, it is a bit of speaking as well, but having my son this year has quashed the amount of speaking that I’m doing.
For me, it is now putting out this educational material and connecting people in the industry. But just getting started and creating the blog is a great first step. For those who are interested in speaking, it could be signing up to do a seminar. Was the first seminar you did a free one or was it something you were paid for?
Emily Roberts: 05:57
No, it was strictly volunteer. It was through an organization, Personal Finance at Duke, that I had been volunteering with for the last couple of years. When they brought in speakers, I would help prepare them for the audience.
It was through observing that process and observing those speakers that I started thinking, “I could do this and I could do this even better than what I’ve been seeing.” Because again, I come from that community. I come out of academia, I have a PhD, so I’m very intimately knowledgeable about the struggles that graduate students and early career PhDs have.
Emily Roberts: 06:38
Since the very beginning of my business, I have focused on graduate students. You know that saying about teaching people who are six months to a year behind you? Now that I’m five years out from my PhD, I feel much more comfortable helping graduate students and of course early-career PhDs who are a couple of years into their first real jobs or so.
Chris Cloney: 06:59
Yeah, I love it. You found a group that resonated not just with your message but with you personally because you’re of similar backgrounds. Once you find that group, that’s where you can dive in.
You don’t need to know your audience right away. In your case, you put some material out there and the people who responded were people who had stipends and were like, “What do I do? It’s a limited amount of money. Where should I put it?” I think that ties right back into today.
Can you describe a bit what is Personal Finance for PhDs? In Episode #4, I talked about how to name your blog, podcast or video and used Personal Finance for Ph.Ds as an example of using a catchy acronym. But what is Personal Finance PhDs? What can people expect if they go there?
What is Personal Finance for PhDs?
Emily Roberts: 07:51
The business overall is me. I’m a solopreneur and I do a lot of speaking. You can find that on the site. But in terms of individuals and what they can find and what they can use, I have a blog there as well. I publish about once a week these days and I’ve recently made a switch from doing all articles. So a new article every single week. It’s much less personal than my first blog. My first blog was very personal. This website is much more informational: it dives deep into different topics and what you need to know.
Emily Roberts: 08:29
So they can find tons of articles there. But about a year ago I started a podcast, so for the last year I’ve been doing alternating one article and one podcast episode two times per month. Now, starting this summer, I’m doing only podcasts and maybe the occasional article, but a podcast episode every single week. I’m going to try that out for a while. Depending on what format you like, you can read articles, you can listen to the podcast, and you can watch videos from my podcast or other videos I’ve made in the past.
Emily Roberts: 08:58
So, those are all the ways you can consume free content on the website. If you sign up for my mailing list, you’ll get various excellent downloads that help you dive further into the information, depending on what you’re interested in. I also offer some courses, digital products, webinars- those kinds of things which are paid products but fairly low priced, keeping in mind my audience.
Chris Cloney: 09:22
Yeah, I love it. I’ve been a listener of the Personal Finance for PhDs podcast. I’ve been on the show too- by the time this comes out, I think my episode will be live as well. You can probably search the website and find me there. There are lots of great topics, things like should you rent or should you buy a house as a student? Things like side hustling, which we talk about here. Things like what should you do with your money when you start making it? A lot of the mental side of this personal finance journey is covered as well.
Emily Roberts: 09:48
Chris, you left off my two favorite topics, which are taxes and investing. Yeah. I end up talking about that stuff a lot. It’s not as relevant for you as a Canadian because it is so country-specific, but for those of you listening in the US, I know taxes are a huge pain point. That’s one of my major suites of effort now: every year during tax season, you can find so much tax material there. Then there’s investing as well, which is something I’m excited about for graduate students, postdocs, whoever. When you get to that point in your journey, I show you how to do it well and how to optimize it. So I talk about that a lot.
Chris Cloney: 10:22
Love it. So for this episode of the podcast, we’re talking about your top five tips for PhDs who are starting or looking to start running an online business. What should you be doing with your personal finances? What do you need to figure out around that? So jumping right in, what is tip number one?
Tip Number One: Have a Separate Business Bank Account
Emily Roberts: 10:49
So, tip number one is an oldie but goodie. I guarantee you’ve heard it before but you may not have followed through on it, and that is to have a business bank account that is separate from your personal checking account or whatever you typically use. This is the first thing that anyone will tell you about running a business: to open a separate account. I have to admit I did not follow through on this right from the beginning when I started making money from my first blog. But it is something that I eventually did and it’s totally helped.
Emily Roberts: 11:23
The reasoning behind it is to keep your income and expenses separate. One reason is for easier tracking purposes. Depending on whether you’re using software or you’re intensely manually tracking your business and personal expenses and so forth, having that separation of accounts makes it easier to do that.
So, you can just log into the one account or download all the transactions from it and know with confidence that those are all the transactions related to your business and that none of your personal transactions are mixed up in it. This tip is fundamental to the other four tips that I’ll be telling you. The other ones don’t make a ton of sense until you do this very first step.
Chris Cloney: 12:08
Yeah. I’ll add to that because I did my own bookkeeping and my own taxes. During the first year that I made money, I probably did my own bookkeeping for, I’d say about eight months. I had a personal account and a business account and it was complicated for me to keep my books straight. But once I hired it out, which is probably a good thing to do at some point in your business, that person had to go back through and pull out all the stuff that was integrated between the two accounts.
Chris Cloney: 12:43
What’s that process look like? I’m picturing the listener asking, “Okay, I need a bank account, but I’m nervous. I don’t want to go to the bank and tell them I’m an online digital entrepreneur and what the heck does that mean?” So what’s it look like to go open your own bank account for a business?
Emily Roberts: 13:04
The banks may ask you what you’re up to, but I don’t think they care too much unless they want to figure out if they should be extending you lines of credit or something, which as an online business owner is not typical. You either show up at a branch or go to a website and open an account, but just designating it as a business account.
Honestly, you don’t even need to say it’s a business account. The main thing is that it’s a separate account, but if you want to say it’s a business account, that’s great. Just open an additional account and maybe look for the perks of the services that are most important to you.
Emily Roberts: 13:54
Maybe it’s being able to deposit checks through your smartphone, or maybe it’s being able to interact with a person from time to time if you do need to call in to customer service or go into a branch. Whatever it is that’s important to you, make sure that they offer those services.
Don’t pay fees: at least in the US, I’ll say that. Don’t pay fees for something like, “Oh, you have a low balance, here’s the fee. Oh, you want to have an account with us every single month, here’s a fee.” Find a bank that will not be charging you any fees whatsoever, especially when you’re starting out. Maybe that account’s going to have low balances in it a lot. Maybe you can’t keep $1000 or more in it and you don’t need two for your business. So just make sure the bank is treating you well as a customer and giving you all the services that you need.
Chris Cloney: 14:48
I love it and couldn’t recommend it more. I was already pretty far down the track so I did a corporate bank account, but if you’re just getting started, I’d recommend opening a bank account before you make any money. Do it as an additional personal account and then your life’s probably a lot easier, and transferring it to a corporate account is pretty easy down the road too. The big thing is to have a separate account – not necessarily a business account.
Emily Roberts: 15:16
Exactly, and I’m providing all these tips with the idea that the audience member is setting this up as a sole proprietor. Once you get into having more business structure, maybe you’ve decided to incorporate, that’s a whole other level of complication and you’re likely to have some other experts on your team by then. You’ll likely have met with an accountant, maybe a lawyer. So, I’m talking to people who are just starting out and working as sole proprietors.
Chris Cloney: 15:42
That’s a great first tip. So, what’s tip number two?
Tip Number Two: Pay Yourself
Emily Roberts: 15:48
Okay. The second tip is to intentionally pay yourself. This goes hand in hand with our first tip of having a separate account. When you have all of your business and personal expenses and income mixed together in a single account, your income is going to pop up in your personal account and be mixed in with all your other money right away.
It’s much better to have two different accounts. Once you have income coming into your business account and it’s above your expenses and so forth, you can start to pay yourself. All I mean by ‘intentionally’ is to set up some schedule or some structure around paying yourself.
Emily Roberts: 16:29
Maybe it is going to be a regular paycheck. Maybe you’re going to pay yourself every month or every two weeks or whatever frequency you’re comfortable with. Maybe your business is at that point, or maybe you’re just going to say to yourself, “Okay, every time my account balance gets to X, I will pay myself Y.” But whatever it is, have a plan for when to pay yourself and what amount.
Chris Cloney: 16:55
Yeah, I like the set point limit. There’s a book that I’ve talked about on the podcast before: [Affiliate] The Richest Man in Babylon. I think the book’s from 1920 something and it says to pay yourself 10% of your earnings and throughout your lifetime you’ll be able to have that grow. That’s a lot easier to do if you have a separate account. So back to tip one and tip two: I like the set point. So every time you make $100, take $10 and pay yourself.
Chris Cloney: 17:30
It may take you a while. It would’ve taken me eight or nine months before I made enough money to pay myself my first 10 bucks. But that’s a great way to think about intentionally paying yourself through that process.
Emily Roberts: 17:46
Yeah. This very much depends on the nature of the work and how the income is coming in. With me as a speaker specifically at universities, I have a seasonality to my business. So, I work a lot in the fall and the spring. I do almost no speaking work over the summer and even during the winter break because it’s slow.
So, there are months when I have higher income coming in and months when I have low or no income coming in. So, I’ve done this a couple of different ways. I’ve decided, okay, every time my account balance gets to this high, I’ll pay myself a pretty good chunk of the speaking fees that I just earned.
I’ve also done it the other way of having a salary. Every single month, I’m going to pay myself the exact same amount and it’ll just be that my business account balance is higher in some seasons and lower in some seasons, but it’s able to smooth out what I’m receiving into my personal account. What’s going to make sense for you just depends on how frequently you’re being paid and what amounts.
Chris Cloney: 18:47
Oh, that’s perfect. So tip number one, tip number two, what’s the third tip?
Tip Number Three: Reinvest Some Earnings
Emily Roberts: 18:52
The third tip is to retain some earnings in your business account for reinvestment. In that last example, you just threw out, Chris, you said, “Okay, I’ve made $100, I’m going to pay myself 10.” Presumably, the other 90 is staying in the account for reinvestment.
Now, I would probably do the other way. I might say, okay, pay yourself 90 and keep 10. It depends on what the nature of the reinvestment is going to be. This is another reason to be separating your accounts. You don’t want to be thinking, “Oh, well, in my personal account, I’ve taken in $90, but there’s this extra $10 floating around that I have to keep for reinvestment.”
Emily Roberts: 19:30
No, it’s too complicated. Keep it in your business account only. The flip side of potentially transferring money to your personal account is intentionally keeping some money in your business account for reinvestment.
You might be thinking, “Well, as an online business owner, I’m not buying major equipment, what are the expenses here?” Of course, you may have some monthly expenses or annual expenses related to your business, such as some software subscriptions that you have. Maybe you pay like a licensing fee once per year. I know I do, but there may be other ways that you can choose to reinvest in your business.
Maybe you’ve decided to take a course or hire a coach to work on your own professional development skills. Or maybe you’ve decided to attend a conference where you’re going to do this great networking stuff. Maybe you want to hire a VA to offload some of your work, but maybe you need a little money up front to do that. Maybe you’re going to pay for expert advice or potentially purchase a new tool that is a one-time fee.
Regarding the expert advice, I did it myself last year for the first time. One of my main business areas is taxes- helping grad students and postdocs with their complicated taxes. After doing that for a couple of years, I was like, “Maybe I double check with a professional to confirm that all this information is correct.” So, I hired a CPA to do research for me, verify that everything I’ve put out there was right, and answer some of the more tricky questions that I wasn’t able to find a definite answer for.
Emily Roberts: 21:06
So, that was an investment for me: the significant fee to pay that CPA. But it paid off in many other ways. Because I had retained earnings within my business account, I was able to pay that without immediately seeing more money come in.
Chris Cloney: 21:26
Yeah. It’s probably pretty – trying to think of a better word than exciting, but that’s all it’s coming to mind. But to see it start to grow right in that separate account and you’re saying, “Oh, I could use that for something to help accelerate my business or help grow my business.”
I’ve taken a dozen or more courses, everything from your $30 course to paying a couple thousand for different courses. I’ve done the coaching and that’s all from retaining earnings. Now that I think about it, that 10% number is the sum that should be paid after your taxable earnings that don’t go to your house and your food and all that stuff. So that 10% would be pretty low for taking out of your business.
Chris Cloney: 22:14
Maybe a 50/50 split is better or maybe a 90/10 split like you’re saying. The key is to think about it that way. You have the separate account and you can do two things with the money: you can pay yourself or you can have these retained earnings and use them for reinvesting in your business. You get to make that choice. So that’s a powerful way to split it.
Emily Roberts: 22:34
Another way to do it is to decide on a percentage split. That’s similar to the profit first method, if some of your listeners are familiar with that, or if you’re not, pick up the book [Affiliate] Profit First. It’s about how to split your business earnings between operating expenses and profit for your business and payroll. It also talks about retained earnings versus actual profit and reinvestment.
So check out Profit First. The idea is to not let your operating expenses consume all of your business earnings, to maintain some profit for yourself. You could do a percentage split like what we’ve been talking about, or maybe it’s that triggering balance.
So, maybe you say to yourself, “Okay, I’m always going to keep $2,000 in my account for opportunities that come my way. Conference, tools, hiring out something, whatever it is. Anything above that can be your retained earnings that you keep in your account. You have some money available to you if you want to make a quick decision to invest it in your business or in yourself.
Chris Cloney: 23:48
If you make that investment, you’re going to accelerate your progress as a business owner. If you try to do everything yourself forever, you’re going to be limiting yourself.
My first hire for DustSafetyScience or mydustexplosionresearch.com was a VA who was helping me do online research, like Googling 20 keywords and sending me the results for blog post material. That was where I started with reinvesting in the business. As I mentioned, now we have operating budgets, investing budgets and budgets for the team. One of my team members wants to up their skills to make them faster and better at helping the company grow. So it’s a important topic and it’s something that grows with you as your business keeps growing. Starting off right at the beginning is probably a good way to go.
Emily Roberts: 24:45
Once again, it all comes down to setting up the separate business account. You can pay yourself intentionally, you can retain earnings intentionally and just make cleaner decisions when your money’s not all jumbled together and cluttered up. It’s easier to think your way through the decisions you need to make.
Chris Cloney: 25:03
I love it. I feel an infographic or something coming on at some point because these go into each other. You have tip number one: open a separate business bank account. Tip number two: intentionally pay yourself from that bank account. This can be a salary, some amount per month or it can be a percentage basis. Tip number three is to retain earnings into the business. It’s going to help you grow, help you invest, help you do the things that you need to do or even things you don’t want to do in your business to help that grow. What’s tip number four?
Tip Number Four: Prepare For Tax Time
Emily Roberts: 25:31
Fourth tip goes back to one of my favorite subjects. Prepare for tax time. I am going to be speaking from the US perspective but you can tell me how things work for you as well.
There are a few different tips within here. The first is to expect to pay tax on your income. Now of course, if your business expenses consume all of your business income, then there’s probably not going to be any or much of an effect on your taxes. But if you are paying yourself and taking money home and it’s a significant amount of money, you should expect to pay tax on that.
I’ve heard different rules of thumb, such as set aside 25% of the money you pay yourself for tax time. That’s okay as a starting point, I like a different one better: do the actual calculation. Here in the US, I think people should set aside 15.3% plus your marginal tax rate.
Let me explain that. 15.3% is the employment tax rate. When you have a regular job, you and your employer are both paying a FICA tax: that’s Social Security and Medicare. But when you are self-employed, you have to pay both sides of it. The total is 15.3% and if you’re a graduate student in the US, you’re not paying FICA tax right now.That may not be a familiar tax to you unless you’ve had a job at another point in your life.
Emily Roberts: 27:09
Some postdocs pay FICA, some don’t. Just FYI: that self-employment tax is a big bite. Then you also have to pay income tax. That’s why I mentioned your marginal income tax rate. It might be 12% if you’re a graduate student or maybe it’s 22% or 24% of your income is a bit higher, but whatever it is, the dollars that you add to your personal finances from your business are going on top of whatever your primary income is. (If you have a primary income, this is assuming you’re starting this on the side.)
That’s why I mentioned setting aside your marginal tax rate. Now this is a little bit of an overestimate, as you may be able to pay a little bit less in tax. There’s a 20% business deduction available to most businesses in the US so maybe a little bit of an overestimate, but better to overestimate than underestimate.
Emily Roberts: 27:55
Again, of the money you take home, set aside that amount for taxes, but also keep in mind that if you’re retaining some earnings in your account and on your books for a given year, it may look like your income is even higher than what you took home. So keep that in mind as well.
Chris Cloney: 28:12
Awesome. Great tip! I’m thinking back to my taxes now. I didn’t create a separate account when I was a sole proprietorship, but I did do some of these things. Every dollar I made, I’d take out half of it and put it in a separate savings account. The savings account happened to have other stuff in there, but I kept a spreadsheet that identified the money allocated to the business.
I think it was 50 or 60%. Part of that was to pay for the taxes on the income of the business. Part of that was for reinvesting. I started doing that at the very start. I wish I had opened a separate bank account because there were a lot of hours lost tracking between sheets and subtracting when it could have been easier. So, that’s another plug for tip number one.
Emily Roberts: 28:58
Yeah, exactly. I do the same thing, Chris. When I pay myself from my business account to my personal account, I immediately allocate that income in different ways. I set aside some for tax and I have a separate savings account for taxes. I pay myself: 20% goes towards my retirement immediately and I do some other percentage-based allocation of all the money that I take in. That happens to all the money we take into our household, not just from my business.
The separate savings account is an excellent tool. So now we were talking about three accounts. We have a business checking account, a personal checking account, and at least one savings account for paying your taxes.
The first tip in this category is to set aside the money that you can reasonably expect to pay in income and self-employment tax. The second tip is to track everything: track your income, track your expenses. Having that separate account is going to help with that, but there may be some other things within your personal expenses that can be deducted as business expenses.
I think you should also track your time and your mileage. For me, the time has come in pretty helpful when I’ve tried to deduct a portion of my internet expenses. I work from home. We pay for our Internet and our home, but I can deduct a certain fraction of that based on the amount that I use it for business versus using it for personal stuff. Tracking how much time I am spending using the Internet for my business can help me estimate what fraction is appropriate versus the fraction that is used for personal stuff. That’s one example. There are many other ways that tracking your time can come in handy, but specifically for taxes, that’s one.
If you do any driving for your business, keep track of your mileage. There are apps that can help you with that, but just track everything. It will probably be very, very helpful at tax time for getting additional appropriate business deductions.
Chris Cloney: 31:02
I love it. That’s an important tip. The last thing you want to do is wait till tax season and then have a $3,000 bill that you don’t have the cash to pay for. That’s probably a good sign. It means you made a substantial amount of money. But you need to be prepared for that. Sole proprietors have shut down because they get there and go, “Oh crap, I’ve got to find this money.” So put it enough aside- that’s a big tip.
Emily Roberts: 31:29
Exactly. Put it aside. Also track everything so you can minimize that tax bill as much as possible.
The third sub-tip is specific to the US but you can tell me how it works for you. That is to look into or consider paying quarterly estimated tax. This is something that I talk about a lot in my business because it affects a lot of grad students and postdocs. If they are being paid fellowship income versus being employed by their universities, they often have to handle all their own income tax payments. In the US, the IRS expects to receive money from every taxpayer throughout the entire year, not just one time when you file your end of year tax return.
So, for people who are employed, their income tax is being withheld for them by their employer. But if you don’t have a job, whether it’s because you have fellowship income or because you’re self-employed, you are responsible for sending the IRS money four times per year, quarterly tax payments.
This is where the self-employed and the grad students, postdocs on fellowship overlap. They both have to look into whether they’re required to pay quarterly. The way you do that is by filling out Form 1040-ES. If you’re already doing it for your fellowship income, it’s easy enough to do it as well for your self employment income or if you’ve ever done it in the past for that reason or vice versa.
Emily Roberts: 32:57
The form may tell you, “Hey, don’t worry about it. Just pay your tax at the end of the year. No problem. That’s not enough of an effect or maybe you have an exception for some reason based on your previous income.” Or it may tell you, “Oh yeah, you need to pay quarterly.” That’s where that savings account for tax money is going to come in handy four times per year, not just once per year.
Chris Cloney: 33:21
In Canada, it’s changed so much since we became a corporation and started paying salaries, dividends, and contractors that I can’t speak intelligently to what it is at each time, but I know as a sole proprietor, it depends on your income level. So at some level you can do annual, at some level, maybe you have the option and probably at some level you’re forced. I’m not exactly sure what those numbers are, but it sounds very similar to how it is in the US.
So, we went through the first four tips. What’s tip number five?
Emily Roberts: 33:54
I’d like to add one more thing to that last step. In your first year of starting your online business, you may not need to pay quarterly estimated taxes. You may end up with a higher tax bill at the end of the year, but in the US, if you pay 100% of the tax you paid in the prior calendar year in the current year, throughout the year, then you won’t be penalized if you just pay all the extra at the end of the year. So, in your first year of earning money through your business, you’re probably going to be okay just working off of paying throughout the year or the amount you paid in the previous year from your normal job or whatever.
Emily Roberts: 34:39
It’s that second year of business where you might start getting penalized for not paying throughout the year. Still, as soon as you start the business, look into Form 1040.
That’s my guess for how it’s going to turn out in that first year. Don’t freak out about it, but just go and check it out and address it. It’s likely going to say, “Hey you don’t have to pay quarterly.” Great. Put that off until the next calendar year, but still be setting aside the money to pay the taxes. You could have about up to a year of reprieve from having to file quarterly.
Emily Roberts: 35:07
By the way, filing quarterly is not complicated. You just do the calculation and send in the money. The IRS doesn’t even want any forms. They just want the money.
For those of you who are currently in graduate school or in a postdoc, and if you are realizing now that you need to file quarterly estimated tax or potentially may need to, go to my website. I have a huge article on how to do this. I also have a course that runs throughout the year, where you can get tons of content on how to do this. I also make myself available for live Q&A’s every single quarter before the deadline comes up. So Chris, if you don’t mind, we’ll put those two links in the show notes.
Chris Cloney: 35:44
No, I would 100% recommend that you go learn from somebody who knows what to do in these scenarios. This sounds like a great opportunity to get one on one to talk with somebody and say, “Hey, these are the specific questions I have.” So definitely check those out. We will definitely include those at gradblogger.com/17.
I think we had space for one more tip. So what’s the final parting big tip that we should be looking at?
Tip Number Five: Have a Job For Your Earnings
Emily Roberts: 36:10
This final one is more about the personal stuff than the business stuff. So, with the income that you’re paying yourself, my recommendation is to give it a job within your budget.
We talked earlier about the reasons for not allowing your business income to float directly into your personal account without some intentionality around it. This is the same thing. Even once you’re intentionally paying yourself within your personal budget or whatever it is that you do, have a job for those earnings.
If this is just a side income for you, especially at the beginning, maybe the money could go towards additional savings, additional investing or additional debt repayment if that’s what you’re working on. Or maybe it’s going to fund some lifestyle expenses. Maybe you’re like, “Hey, I’m working so hard on the side to earn this extra income. I’m going to treat myself. I’m going to go on an extra vacation or I’m going to be going to this fantastic concert or I’m going to be going out to eat more often.” Whatever it is.
Another idea is that you could assign your business earnings to pay a certain bill within your personal expenses and every quarter or something, have a different goal for a larger bill that you want those earnings to pay. Maybe at first it’s paying like your Netflix bill and then maybe it’s paying your eating out expenses and then it’s paying your groceries and then it’s paying your rent and whatever it is. You can assign it to pay a specific bill and use that as motivation to keep earning.
Emily Roberts: 37:40
The bottom line here is just to be intentional about the money you receive into your personal account. This is also for those of you who are side hustling because you’re a grad student or your postdoc stipend or salary is quite low and you need this money to be paying basic bills. Having the money that you earn tied to something specific in your personal finance is going to keep you motivated to keep earning.
Maybe you are nervous about pulling the trigger on a certain product offering or you’re nervous about networking to get that speaking engagement or whatever it is. Think about your personal expenses and what that money is going to do once you pay it to yourself and use that as motivation for putting yourself out there in your business.
Chris Cloney: 38:28
Yeah, I couldn’t agree more. Setting a monetary goal is exceptionally motivating. It drives you to continue with your business and do the hard things like pressing play on a recording or shipping content you created. That’ll be an extreme motivator and I think that’s a great tip to end off on.
I’ll do a short summary. We went through five finance tips for Ph.Ds. running online business. Tip number one and the big takeaway from this is to open a separate bank account. I didn’t because I didn’t imagine opening a second personal bank account. I always had the corporate bank account in my mind, but it would have been a lot easier for me had I done that.
Chris Cloney: 39:14
So,that’s a great tip. Split the money into at least two chunks and intentionally pay yourself is tip number two, using some percentage or set point. Number three is to retain some earnings for reinvestment to the business.
We had a big discussion about preparing for tax time. We talked about four different areas there. Make sure you put aside the money as it comes in, tracking everything so that you can figure what your deductions are and maybe you can add some more deductions that you weren’t thinking of. Look at quarterly tax payment options and then keep in mind that in your first year of business, things may be different than in subsequent years. That’s where you’re starting to think about talking to an accountant and figuring that out.
Now we close on tip number five, which I love. Give every dollar you earn a job and you’ll watch those little soldiers march out and do things for you. That’s a great way to stay motivated during your work.
There are two notes I should make. One is that this has been mostly focused around sole proprietorship. Once you incorporate, things a little different and you’re probably at a stage where you should look at getting a bookkeeper or accountant. Tip number two is that neither of us are CPAs, so this isn’t advice, it’s just a combination of the lessons we’ve learned from growing our own businesses.
Chris Cloney: 40:39
So, with that, I just want to say thank you again, Dr. Roberts, for coming onto the show and sharing your immense background. Your story and your entrepreneurship journey are as interesting as the tips that you shared. So I appreciate that.
Emily Roberts: 40:56
Oh, thank you so much. It was a pleasure.
Chris Cloney: 40:59
If somebody wants to follow up and learn more about Personal Finance for PhDs, where’s the best spot for them to go and learn what you’re about?
Where Can People Learn More About You?
Emily Roberts: 41:06
The best spot is definitely my website. That’s the hub where you’ll find all the stuff that I do, but another great place to connect with me is on Twitter @pfforPhDs.
Chris Cloney: 41:20
If you liked this episode, definitely let us know. Hit us up on Twitter @GradBlogger and @pfforPhDs. Let us know you liked this episode. Maybe shoot some questions to Emily in the show notes and I’m sure she’ll go back there and help you on that.
As always, if you want to read the transcript of this episode, you can get it at gradblogger.com/17. We’ll also create a cheat sheet by condensing these tips into a one-pager.
Chris Cloney: 42:03
As always, I appreciate your listening to GradBlogger. We’re here to help you build your online business and help you build the personal brand and the authority in online spaces that you need to make the big change that you want to see in the world. Have a great week ahead and I look forward to talking soon.
Resources
Dr. Emily Roberts
Website
Twitter
Youtube
Facebook
Podcast
Other Links
The Complete Guide to Quarterly Estimated Tax for Fellowship Recipients
Quarterly Estimated Tax for Fellowship Recipients (Tax Year 2019)
Workshop
Best Financial Practices for Your PhD Side Hustle
How to Pay Tax on Your PhD Side Hustle
