Many 9-month contract academic jobs will offer you a choice when you begin employment: You can get a bigger paycheck each month over your 9-month appointment but receive nothing over the summer, or you can spread your income out over the full 12 months of the year. Which should choose? Should you take your salary over 9 months or 12 months?
My advice is that it depends — on how financially well-established you are, on your knowledge of your own financial psychology, and on the likelihood that you’ll get summer salary each year. I’ll go over each of those contingencies below, but first let’s review how 9-in-9 and 9-in-12 work, and the fundamental tradeoff between them: between the price of time and the hassle and difficulty of exploiting it.
9-in-9 versus 9-in-12
If you’re on a standard 9-month academic contract with a salary, the most straightforward way to pay you is 1/9 at a time over the 9 months of your contract. Let’s say your salary is $90,000 per year. In that case, under a 9-in-9 system (meaning your 9-month contract’s salary is paid over 9 months), you’d be paid 1/9 of your salary, or $10,000 pre-tax, each month of that contract, then nothing over the summer (unless you get supplemental summer salary, addressed below).
In contrast, under a 9-in-12 system, you receive 1/12 of your 9-month contract each calendar month of the year. This means that your pay each month will be 75% of what you would get under 9-in-9, but your total salary would be the same. In this example, $90,000 divided by 12 is $7,500, meaning $2,500 of your 9-month contract is deferred until summer. Think of it as sitting in an escrow account from September (or whatever month) until the following summer, at which point you receive it back (without interest).
To make things super clear, here’s a table of what your salary looks like each month of the calendar year starting in August under each system on a $90,000 salary, and the difference between them.
| Month | 9-in-9 Pay | 9-in-12 Pay | Difference (12-9) |
| August | $5,000 | $7,500 | +$2,500 |
| September | $10,000 | $7,500 | -$2,500 |
| October | $10,000 | $7,500 | -$2,500 |
| November | $10,000 | $7,500 | -$2,500 |
| December | $10,000 | $7,500 | -$2,500 |
| January | $10,000 | $7,500 | -$2,500 |
| February | $10,000 | $7,500 | -$2,500 |
| March | $10,000 | $7,500 | -$2,500 |
| April | $10,000 | $7,500 | -$2,500 |
| May | $5,000 | $7,500 | +$2,500 |
| June | $0 | $7,500 | +$7,500 |
| July | $0 | $7,500 | +$7,500 |
| Total | $90,000 | $90,000 | $0 |
Either way you get the same total compensation. So why does it matter whether you take your salary over 9 months or 12 months?
The Price of Time
Time is money. Everyone says it, and it’s very true in a few senses. The key sense here is that if you have your money sooner, you can invest it or put it in an interest-bearing account so that it can gain in value for longer. Since taking your salary 9-in-12 is effectively deferring your income until the following summer interest-free, you’re paying the opportunity cost of the money you could have earned on it in the meantime.
How big that opportunity cost is depends on the expected returns. If you need that money the following summer, I wouldn’t recommend you put it in the stock market, so let’s assume that your reasonable options are to put the cash in a high-yield savings account (HYSA), CD ladder, money market fund (MMF), or short-term treasuries. As I write in August 2023, the interest rates for these options are as follows:
- HYSA: Up to 5.25%, but 4.5% is more typical
- CDs: Restricting the search to no-penalty CDs (since you’ll need the money after variable lags), these go up to 4.9%, but 4.5% is more typical.
- MMF: One of the most widely-recommended money market funds is Vanguard’s federal MMF, which is currently paying 5.4%.
- Short-term treasuries: 3-month treasuries are currently paying 5.46%.
Since HYSAs and CD and MMFs and short-term treasuries currently have roughly the same yields, let’s treat them as equivalent. Whether HYSAs or MMFs have the highest interest rates will vary over time, so be sure to update these numbers when making a decision if you’re reading this in the future, projected directly into your mind by your all-powerful AI assistant which is simultaneously directing your self-driving flying car. For now, we can safely quantify the opportunity cost our hypothetical professor with a $90,000 salary is paying each year to take their salary in 9-in-12 rather than 9-in-9. (I’m using monthly compounding for convenience, but it won’t matter much. Don’t judge me, all-powerful AI assistant!)
| Month | Added | Principal | Total (4.5%) | Interest (4.5%) | Total (5.4%) | Interest (5.4%) |
| September | $2,500 | $2,500 | $2,500 | $0 | $2,500 | $0 |
| October | $2,500 | $5,000 | $5,009 | $9 | $5,011 | $11 |
| November | $2,500 | $7,500 | $7,519 | $19 | $7,523 | $23 |
| December | $2,500 | $10,000 | $10,028 | $28 | $10,034 | $34 |
| January | $2,500 | $12,500 | $12,538 | $38 | $12,545 | $45 |
| February | $2,500 | $15,000 | $15,047 | $47 | $15,056 | $56 |
| March | $2,500 | $17,500 | $17,556 | $56 | $17,568 | $68 |
| April | $2,500 | $20,000 | $20,066 | $66 | $20,079 | $79 |
| May | -$2,500 | $17,500 | $17,575 | $75 | $17,590 | $90 |
| June | -$7,500 | $10,000 | $10,066 | $66 | $10,079 | $79 |
| July | -$7,500 | $2,500 | $2,538 | $38 | $2,545 | $45 |
| August | -$2,500 | $0 | $10 | $10 | $11 | $11 |
| Total | — | — | — | $452 | — | $542 |
So, under the current high-interest-rate environment, you’re forgoing about $452 or $542 in interest annually to take your salary 9-in-12 rather than 9-in-9. Of course, your university is probably raking this in for themselves, and they certainly aren’t going to give it to you, so it’s kind of a raw deal. So why would anyone do this?
The Hassle of Harvesting the Price of Time
There are two big reasons I can think of why you might prefer taking your salary 9-in-12 rather than 9-in-9: the costs of hassle, and the much bigger potential costs of screwing up.
The Costs of Hassle
As Ramit Sehti regularly argues, you need a financial system that works without you thinking about it too much day to day. No matter how motivated you are now, other stuff is going to come up: you’ll have a grant deadline or a class to prep or a sick kid at home, and how much money you need where and when won’t always be at the top of your mind. There’s value in just knowing that your same paycheck will be direct deposited to your checking account, every month, without you having to do anything to make it happen.
Now, if you follow the escrow steps outlined above, there isn’t that much more hassle to it. What you would need to do is setup an automatic transfer for 25% of your 9-in-9 take home pay each month from September to April into a Summer Escrow savings account (preferably at a different bank so you keep the money totally separate), transferred on the first day of each pay period. Then, you’ll need to setup transfers in two different amounts in the other direction:
- May and August: 25% of your 9-in-9 take home pay
- June and July: 75% of your 9-in-9 take home pay
If you feel confident that you can setup these automatic transfers each month correctly, there’s probably not much reason to take your salary over 9-in-12. If you’re willing to give up the interest you could earn to not have to worry about this, though, I’m not going to argue too much with you. Especially when it comes to the next issue.
The Potentially Huge Costs of Screwing Up
Frankly, you might screw this up just like you screw up everything else in your life. If you do, it could cost you a lot more than a few hundred dollars in a year.
Think you could never do that? Think again. I screw things up all the time financially. For instance, this month I probably overcontributed to my 457(b) and I only caught it too late, so I’m going to have to call up TIAA and get them to refund some of that contribution to avoid running afoul of the IRS. The only question is whether my university will let the over-contribution go through, which HR helpfully told me that had no idea about so I would need to wait and see. Oh, and have I called TIAA? Maybe they could help. (I had — I called them first, and they told me to call HR. Thanks, everyone!) Other times I thought I set up autopay for my new credit card I’m churning to the same date as all my other cards, but I didn’t (or, in lots of banks’ favorite trick, it takes two billing cycles for that request to go through for some stupid goddamn reason but I didn’t realize, which is surely their plan), and maybe I got charged interest and a fee that I then have to call the bank to get refunded and ensure it doesn’t end up on my credit report.
But those issues in the grand scheme of things are pretty small potatoes. In contrast, if you screw up your summer escrow transfers, you might get your mortgage or daycare payment bounced. Maybe you can patch that up once or twice, but if it happens a few times it could hurt your credit or jeopardize your child care. You might very well prefer to pay a $500 a year opportunity cost to avoid that risk.
To mitigate this risk, you could consider keeping 1/12 of your annual pay in a Screw Up Savings account at the same institution as your checking account, and setup autodraft coverage that pulls from this Screw Up Savings account if (as you might guess from the name) you screw anything up. If (or, let’s face it, when) you do screw up, pull the same amount of money from your Summer Escrow account into your Screw Up Savings account, then tighten your belt by the same amount (minus the interest you earned) come August, and learn your lesson to do better next time.
Other Considerations
So, my basic advice is that it’s worth considering taking your salary 9-in-9 if you feel comfortable setting up automatic transfer systems and fund a Screw Up Savings account to cover your butt if/when things go awry. If that will be stressful to you and you’re willing to pay $500/year to avoid that stress — fine, take your money 9-in-12, but don’t come crying to me when I’m splurging for box seats at the big game or a business class upgrade on a long flight and you’re not.
Now that I’ve pissed everyone still reading this off, here are a couple other considerations to think about that could swing your decision.
How Financially Well-Established Are You?
If you’re a brand-spanking-new assistant professor who just moved to a new city and put a security deposit down on an apartment and bought a bunch of new furniture and some new clothes and paid your first month of exorbitant day care fees and don’t have a ton of cash in the bank, I might advise you to just take 9-in-12 and revisit that decision in a couple years when you’re hopefully better financially-established. It’s not that much money in interest you’re forgoing, and the potential costs of screwing up are higher if you don’t have a ton savings to fall back on. Same goes if you don’t have at least $10,000-20,000 in financial cushion, regardless of your career stage.
How Likely Are You to Get Summer Money?
If you’re a grant-writing rock star and already have your summers totally filled, then there’s effectively no hassle cost or screw up risk because you’ll get the same monthly pay check in the summer that you get every month during your 9-month contract. You don’t need to save money in a Summer Escrow or Screw Up Savings account — as long as that tasty summer money keeps rolling in, you can just plan to live on 1/9 of your 9-month salary every month, year-round.
The only argument in favor of taking your salary 9-in-12 in this scenario is if it makes it psychologically easier for you to save and invest more of your income. If you’re used to living on your 9-in-12 monthly pay and then huge summer checks roll in during the summer, it’s pretty easy to just send that money away to your retirement or cash savings and continue living on the same standard of living.
What If the Choice is Between 10-in-10 and 10-in-12?
Some universities sign you to 10-month contracts instead of 9-month. This doesn’t really affect your decision since the same fundamental tradeoffs apply to a slightly different degree. Just do whatever you would do based on the above information.
Conclusion
Money can earn you interest over time, and if you take your salary spread out over 12 months when you’re on a 9-month salary, you’re letting your university reap those rewards instead of you. However, the various ways to handle that bring a degree of hassle and risk. If you’re comfortable setting up moderately-complicated automated transfers between bank accounts, are financially well-established, and/or have your summer salary consistently filled, I recommend you take the money 9-in-9 (or 10-in-10, as the case may be). If not, it’s reasonable to pay the opportunity cost to not have to worry about all this stuff, especially when interest rates aren’t so high as they are today.