How I saved almost half of my gross salary by living as a graduate student for just over a year.
Kevin Corcoran’s post about toasters today was excellent. At the beginning of the piece he talked about how he managed to spend little money on furnishing an apartment. He didn’t say much about his income at the time, but I assume it was relatively low.
It reminded me of my situation in 1975, when I moved to Rochester, New York as an assistant professor at the University of Rochester’s Graduate School of Management. My income was not low; it was high. Including summer pay for the summer of 1976, it was about $20,000. Adjusted for the Consumer Price Index (which, admittedly, overstates inflation), it was about $116,000 in November 2024.
But I had an additional limitation. I arrived at U of R on an F-1 student visa and without my dissertation completed. I was able to join the faculty because I was doing “on-the-job training.” The government allowed a maximum of three periods of six months of practical training. That would take me to January 1977. I calculated that I needed to have my dissertation completed and approved by early December 1976 so that I could receive the Ph.D. in 1976 and had the US Department of Labor declare that no American could do my job (that’s how special I was!) and therefore I was able to get my green card.
But what if I’m not ready yet? I was still in the process of obtaining data from various state mining authorities. (My dissertation was on the effects of safety legislation in underground coal mines.) I didn’t know how quickly my key advisor, Harold Demsetz, would give me feedback on chapters. (It turned out great, but I didn’t know that in advance.)
A number of things can go wrong. I needed a Plan B. And having a plausible Plan B would reduce my stress in pursuing Plan A: writing my dissertation on time.
This was my Plan B. One provision of the immigration law at the time stated that if you came to the United States to start a business and invested at least $10,000 in the business, you could get a green card. (Today’s amount has been adjusted to $500,000.) So my goal was to save at least $10,000 and, if I didn’t finish my dissertation on time, start a business. Which things? I would open a bookstore and keep it open from 1:00 PM to 5:00 PM. My mornings, my most productive time, were spent finishing my dissertation.
I started with a deficit. I owed my ex-wife $1,000 and because she needed major repairs done on her car, I sent her another $1,000. So that cost a large part of my wages for the first few months.
My plan was to live like a graduate student. I had been living like this for 3 years and had done it without a car in Los Angeles. I was going to buy a car on credit for a modest price (which turned out to be a lemon, but that’s another story).
I found a very modestly priced 2 bedroom apartment. I heard about it from two U of R secretaries who had shared it but went their separate ways. When someone asked me how I would decorate my apartment, I replied that the motif was “early American graduate student.” I bought a used bed, a used sofa and a used kitchen table and chairs. (By the way, the kitchen table and chairs lasted well into the 1980s.) I already had dishes, a stereo, records, and a bicycle, all of which I brought from Los Angeles. I was done.
I rarely went to restaurants and when I did it was closer to McDonald’s than Steak and Ale. Funny story: when I interviewed there, Richard Thaler was on the faculty. He told me there were almost no good restaurants in Rochester. It turned out that he and I had very different views of “good.” To me, anything better than McDonald’s qualified as good.
Remember, I had also moved to the high-tax state and was single. This was before inflation indexing of tax brackets, both in New York and the United States. And I had few deductions and even less idea how to maneuver within the tax system. So taxes took a big bite. The only saving grace – and it was a big one – was that because I wasn’t a resident, I was exempt from Social Security.
With all that, how much did I save by the end of the fall of 1976?
Are you ready?
$9,200.
It would have been easy to ask my father, a man of modest means, for an $800 loan to reach the magic $10,000 mark.
And to put it in perspective, I was living better than when I was a great student. For example, if I wanted to take a woman out to dinner, I could do that occasionally. If I wanted to drive to Toronto to see my sister and some friends, I could do that.
That was a good lesson in saving, which served me well when we sent our daughter to an expensive private school from 5th grade onwards in the 1990s and then to an expensive private school.
If you detect more than a little pride in my story, then you have a good detector. I’m still very proud of what I did. That saving became important when I bought my first house in 1978.
By the way, my strategy didn’t work in the short term. In July 1977, the Immigration and Naturalization Service rejected me for a green card and immediately began deportation proceedings. But that is also another story.
The photo above is of a used sofa.