Saving Money by Not Spending

How I saved almost half my gross salary by living like a graduate student for a little over a year.

Kevin Corcoran’s post on toasters today was excellent. Early in the piece, he talked about how he managed to spend little money when furnishing an apartment. He didn’t say much about what his income was at the time, but I assume it was relatively low.

It reminded me of my situation in 1975, when I moved to Rochester, NY as an assistant professor in the University of Rochester’s Graduate School of Management. My income wasn’t low; it was high. Including summer money for the summer of 1976, it was approximately $20,000. Adjusted by the Consumer Price Index (which, admittedly, overstates inflation), it was about $116,000 in November 2024 prices.

But I had an added constraint. I arrived at the U of R on an F-1 student visa and without my dissertation being done. I was able to be a faculty member because I was engaged in “practical training.” The government allowed up to 3 6-month stints of practical training. That would take me to January 1977. I calculated that I had to finish my dissertation and have it approved by early December 1976 so that I could get the Ph.D. in 1976 and have the U.S. Labor Department certify that no American could do my job (I was that special!) and, therefore, I could get my green card.

But what if I didn’t finish by then? I was still in the midst of getting data from various state mining authorities. (My dissertation was on the effects of safety legislation in underground coal mines.) I didn’t know how fast my main advisor, Harold Demsetz, would be at getting me feedback on chapters. (He turned out to be great, but I didn’t know that in advance.)

A number of things could go wrong. I needed a Plan B. And having a plausible Plan B would reduce my stress at pursuing Plan A: writing my dissertation on time.

Here 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. (The amount today has been adjusted to $500,000.) So my goal was to save at least $10,000 and, if I didn’t get my dissertation done in time, start a business. What business? I would start a book store and have it open from 1:00 p.m to 5:00 p.m. I would spend my mornings, my most productive time, finishing my dissertation.

I started off at a deficit. I owed my ex-wife $1,000 and, because she had to get major repairs on her car, I sent her an extra $1,000. So that took a large hunk out of my first few months’ pay.

My plan was to live like a graduate student. I had already lived like that for 3 years and had done without a car in Los Angeles. I would buy a modest-priced car (which turned out to be a lemon, but that’s another story) on credit.

I found a very modestly priced 2-bedroom apartment. I heard about it from two secretaries at the U of R who had shared it but were going their separate ways. When someone asked me how I would furnish my apartment, I replied that the motif was “early American graduate student.” I bought a used bed, a used couch, 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 set.

I rarely went to restaurants and, if I did, it was closer to McDonald’s than to Steak and Ale. Funny story: when I interviewed there, Richard Thaler was on the faculty. He told me that there were almost no good restaurants in Rochester. It turns out that he and I had a very different view of “good.” To me, somewhat better than McDonald’s qualified as good.

Remember that I also had moved to high-tax state and I was single. This was before inflation-indexing of the tax brackets, either in New York or in the United States. And I had few deductions and even less idea of how to maneuver within the tax system. So taxes took a large bite. The one saving grace–and it was a big one–was that because I wasn’t a resident, I was exempt from Social Security.

So, with all that, how much did I save by the late fall of 1976?

Are you ready?

$9,200.

It would have been easy to ask my father, a man of modest means, for a loan of $800 to get me to the magic $10,000 mark.

And, to put it in perspective, I lived better than I had as a great student. If, for example, I wanted to take a woman for a drink, I could so occasionally. If I wanted to drive up to Toronto and see my sister and a few friends, I could do so.

That was a good lesson in saving that served me well when, in the 1990s, we sent our daughter to an expensive private school from Grade 5 on and then to an expensive private college.

If you detect more than a little pride in my telling of this story, you have a good detector. I’m still very proud of what I did. That saving turned to be important in my busing my first house, in 1978.

By the way, my strategy didn’t work in the short run. In July 1977, the Immigration and Naturalization “Service” turned me down for a green card and immediately began deportation proceedings. But that’s also another story.

The picture above is of a used couch.