Navigating Big Purchases and Debt Management as an Educator

Clay Scarborough
Clay Scarborough
High school principal; M.A. in Education, principal certification
A woman calculates her finances at home with papers, a pen, and calculator around her.

Since you are an educator, you probably did not sleep on a bed of dollar bills last night or go to all five of the best steakhouses in your town for dinner this week. You most likely have to be more intentional about your spending and how you budget or allocate your money, especially when looking at making big purchases.

Big Purchases You May Be Considering

One of the primary characteristics of those who have success with their money is that every dollar has an assignment and they live within their means. This means they don’t want to tie their hands by spending too much each month on a car or house.

So before we get into those big purchases such as a graduate degree, a car, or house, let us take a look at managing the money you have to make these purchases possible.

How to Manage Debt as an Educator

Managing and getting out of debt as an educator is likely the biggest challenge to making big purchases as an educator. Many of us have had or still have student loans that we need to pay off.

Let me make a plug for getting out of debt as soon as possible. Many debt reduction options exist, from debt snowball strategies and consolidation, to loan forgiveness.

The first tip for managing debt as an educator is to have a budget to work from. Make sure your four walls are taken care of first:

  • Rent/mortgage
  • Must-have utilities
    • Rent/mortgage and utilities = no more than 30-35% of your take-home pay
  • Food/clothes
  • Transportation to get work

The next step for most people is their debt or student loans. Between the four walls and debt, most people have to be very intentional about what they do next with their money. If there is room in your budget after your debt minimums, see what you can add to that to pay off your debt more quickly.

After the first five things mentioned above (four walls and debts), some of you may want to look at setting money aside for a down payment on a car or house. By having a budget, you will know how much you can use to get out of debt or how much you can save for a big purchase. This will also give you a timeline for when you can make that down payment on a car or house.

When gathering and saving the cash you need, check your credit score. This will allow you to take care of things that may need to be done before you buy, especially if your credit score is low.  

Preparing to Buy

When your debt is either gone or a solid management plan is in place, perhaps you’re looking into a master’s or doctorate degree.

During this time, don’t make any major purchases that will impact your credit score and start with two things in mind: the end goal and what you can afford. Once the degree is achieved, most employers are only concerned with your experience and what you bring to the table, not where your degree came from.

It might be worth it to take the online master’s program that is $5,000-$10,000 less than the more “prestigious” program that will end up getting you the same job and salary. That may potentially be $10,000 less you have to pay off in loans.

Although they are not as plentiful, graduate-level scholarships, grants, and loans are available for graduate college. Do your research on this and talk to your graduate school of choice about these possibilities. You also may be lucky enough to find a place to work that will pay for any of this in return for you to work there for a certain number of years; go for it! It will pay dividends in the long run.

Now, how does this work with a car purchase? Your budget will tell you how expensive of a car you can afford. Your goal each day is to get from your residence to your work safely and reliably. Can this be done for $200 less a month with a Honda versus a BMW?

There are also many car loans out there for educators, such as Educators Credit Union and Teachers Federal Credit Union with lower interest rates, different loans to fit your needs, and some 100% financing. There are local banks that will have rates for educators also. It will take some research on your part, but some options will cost less in the long run for educators.

Making the Purchase

Don’t be afraid of looking at used cars. You could get the same car with only 30,000-40,000 miles on it for as much as $10,000-20,000 less than if you bought it new, saving you hundreds of dollars a month on the same car.

Many of the financing options for the car will give 36 to 72 months to pay it off. Remember, the shorter the terms, the sooner you pay it off, but you cannot go over what you can afford.

When it comes to home purchases, the process is similar to the car. Although you are in debt when purchasing a house, it also accrues value, and a car does not. What can you afford, and what will it take to get you in there?

There are mortgage options for educators to get down payment assistance, first-time homebuyer rates, and no fees. There are also some mortgages out there for 3% down, which is very attainable for teachers and others that make a mid-range salary.

After The Buy

Don’t forget to make room in your budget for car or house maintenance. One key to keeping your car running and home gaining value over time, is regular maintenance. Not only does it help the value of your house, but for your car, it increases the chance that you actually pay off the car and still have a good reliable vehicle that is paid for.

In short:

  • Manage your budget and know what you can afford
  • Make sure your four walls and debts are taken care of
    • Get out of debt as quickly as you can
  • Look into loan programs for cars and houses
  • Research graduate programs scholarship options
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