Money Matters

Graduation cap on a piggy bank

When Jameson Hirsch found out that $19,000 was all he could expect for his predoctoral internship at the State University of New York Upstate Medical University, he wondered how he'd support his wife and two young children. Not only did he have to move the family from Wyoming to New York-which would mean huge moving costs-he also had to find an apartment in one of the most highly taxed states in the country.

To prevent panic later, he started planning months before he even began his internship by setting aside three months of apartment rent. To do that, he and his family sold most of their possessions-except for a few personal items-which also kept them from having to pay a moving company around $4,000.

Hirsch knew he and his family would have to make some additional lifestyle sacrifices-shopping only at discount stores, for example, and living in a smaller apartment than before-to make the money last. But, he says, up-front budgeting helped make it possible.

Most internships offer stipends of $17,000 to $22,000 a year, requiring students to manage finances responsibly to avoid debt and the Ramen Noodle diet.

"It's hard to look ahead as an intern," Hirsch says. "In a few months you will be a doctor, but right now you don't have that prospect of making money for a few years still. It can be really disheartening for graduates. You get this far in your education, but you're still not making as much as some of your peers who did not go as far in their education."

Students can take heart, though, that things should change after internship: The average salary for a full-time psychologist with one year of experience is $47,000, and it rises to $52,000 after two to four years, according to APA's Research Office.

Until then, financial experts and students offer the following advice to make the most of your money.

CREATE A BUDGET

Experts recommend planning your budget before you go to internship and then sticking to it. A budget typically includes such items as transportation, utilities, food and rent, experts say. Students might budget 20 to 25 percent of their stipend for rent, suggests Stuart Tentoni, PhD, counseling coordinator and training director at the University of Wisconsin­Milwaukee Norris Health Center. Tentoni often leads financial seminars for early-career psychologists.

A contingency fund is also important in case of financial surprises, Tentoni says. For example, students can save $3,000 in a year if they save $250 a month. In other words, an intern making $20,000 could allocate $500 for rent, $100 for utilities, $200 for food and $200 for entertainment, and then place the remaining $250 into a savings account, Tentoni suggests.

Terry-Ann Hudson-Mitchell credits a budget for helping to keep her expenses on track during her $12,000 internship at the Presbyterian Medical Center at the Philadelphia College of Osteopathic Medicine.

"A budget helps me to keep my [shopping] impulses down," says Hudson-Mitchell. She budgets for items such as housing, food, books and entertainment and tracks her spending habits to see where she needs to trim.

And she's found every dollar counts. For example, she saves a dollar every day of the week and then uses the money to eventually treat herself, such as going to the movies or out to eat.

SACRIFICE OR SUPPLEMENT

However, a major threat to staying on an internship budget is the temptation to prematurely live like a professional-which means overspending on such items as clothing, furniture and a car, Tentoni says.

Interns may see others with money and feel like they have to compete, says Bart Boyer, president of Parsec Financial Management in Asheville, N.C. That's a mistake, he says, because an intern's pay is nowhere comparable to what professionals make.

"Focus on what you make, and choose to live below what you make-even if you see a higher income happening in the future," Boyer says.

For instance, to cut transportation expenses, Tentoni recommends using public transportation instead of owning a car, or living close to the workplace and using a bike. He also advises living with other interns to help lower rent and cutting up credit cards-or at least lowering the credit card limit to $1,000 or less-to avoid accumulating debt. Otherwise, students can end up with huge credit-card balances, considering that some credit-card companies charge interest rates of up to 20 percent, Tentoni notes.

Students who want some extra cash to improve their lifestyle might supplement their incomes-such as with loans, grants, a weekend part-time job or help from a relative. Hirsch was able to qualify for student loans through his university since he has to pay tuition for his internship credits.

SHOP SMART

Those who want to stretch their existing dollars should also become informed buyers, Tentoni advises. Before making a major purchase like a new laptop, for example, use the Internet to check merchant and discount sites and compare prices, he recommends. Students can find discounts on computers, books and small electronics at such sites as www.ebay.com, www.pricewatch.com or www.pricescan.com.

Also, look for deals on used items, Tentoni says. Check out classified ads and campus bulletin boards for furniture, appliances, cars and places to live.

Industrial-organizational graduate student Jalane Meloun of The University of Akron buys inexpensive clothes-sometimes priced as low as 25 cents-at yard sales and Goodwill stores. At one yard sale, she even found a $3.50 designer wool suit to wear to professional events.

"I almost never deny myself anything," Meloun says. "My standards aren't just outrageously high. You don't have to have the fastest computer or the best television at this point in your life."

Meloun even found a way to save $60 a month on her local telephone service by using Local Measured Service, which allows her 30 calls per month for $2.45 and 8 cents for each call over that limit.

SAVE-WHEN YOU CAN

Given the amount of scrimping you might have to do during internship, saving may seem far off. But financial experts recommend starting to save now for your future. "If you're in the habit of not saving, it's a difficult habit to break," Boyer says. "Be a saver from day one."

Investing can help increase wealth in the long term, Boyer says. He usually advises saving 15 percent of your pre-tax income in order to accomplish independent wealth-that is, eventually replacing earned income-within 45 years. To get high returns, he suggests using the stock market and an index fund-such as Vanguard Total Stock Market Fund-as well as owning real estate.

A case in point is Meloun who, in an effort to gain equity, opted to buy a house using income from her student loans before she began graduate school. She then rented rooms to other students as a way to help cover the mortgage.

Meanwhile, Jameson Hirsch invests $25 from each paycheck into a retirement account offered by his internship site. It's not much, he says, but "at least I feel like I'm putting something away for the future."

And while the financial situation is bleak now, Hirsch believes the savings and budgeting he does today will help him in the future when his salary increases. "I see the light at the end of the tunnel," he says. "I think that is important to keep in mind-that the financial outlook will improve five years down the road."