Those of us in education, cannot thank you enough for entering this profession. Perhaps no other profession truly changes the trajectory of lives and gives so many opportunities to do just that daily; it is part of what makes the teaching profession so rewarding.
However, I am sure you know that the teaching profession is not known for making millionaires every few years. Let’s face it, you did not enter the education profession for the money. Much like your lesson plans every day, with some planning, you can still achieve your financial goals on a teacher salary. For example, some beginning teachers in my state (Texas) are making over $60,000 a year.
Much of this process can be achieved by following solid financial advice.
Make a Budget — Budgeting Tips
The most essential step in managing finances is making a budget. It also is probably the best first step to any financial goal.
On a sheet of paper, list all your expenses (make sure you include them all!):
- Cell phone
- Credit cards
- Loan payments
Next, estimate what you spend per month on groceries, eating out, entertainment, toiletries, etc. Then, total all of that up and see where you stand versus what you bring home each month. It may take cutting some corners and not eating out every night to make it work. Getting your spending under control can springboard you toward your financial goals!
What is important here is to make sure you are covering your four walls (housing, car, clothes, food) and then paying your bills.
Is anything left over now? If not, cut spending. For example, if you are “car-poor” (spending too much on a car per month that it is hard to buy groceries) or “house-poor”, then make some changes as quickly as you can.
If you have money left over (which is what you are trying to accomplish), then let’s look at having an emergency fund and getting out of debt.
Build an Emergency Fund
Life happens, things break, the dryer goes out, the car breaks down, etc. Before you do anything else, even before paying off debt, you need to build an emergency fund. This is because life happens, and you need a cushion for when it does.
Some people teach to start with a small emergency fund of $1,000. This can cover most incidents and give you some security moving forward. Others recommend a full month of expenses to be saved up. Choose what brings you the most peace of mind.
Getting Out Debt (Including Student Loan Repayment Plan!)
Some people will teach you to include your car payments in this. I do suggest this as this is a large sum of money that, if you can pay it off, you have freed up a lot of money to use elsewhere.
With that money left over in your budget and with your emergency fund fully funded, let’s start putting money toward getting out debt. List your debts from smallest to largest. Once the smallest is paid off, use that money toward the next debt: it is called the debt snowball.
For example, if you have a minimum payment of $50 a month on a Visa card and you have $200 a month that you can put toward paying off that card, then once it is paid off, you will use that $250+ you were paying on another debt to pay that off next. It gives you some quick wins but also it allows you to build momentum toward getting your money back.
Goal Setting, Maximize Your Earning Potential
From my experience, the best way to move forward is to be with the least amount of debt you can manage. I know that can be daunting, but it frees up your money so much to do what you want to do.
Say you are out of credit card and loan debt; where do you want to go next? Do you want a doctorate? Do you want to save for your next car? Save for a down payment on a house? Set up a three-to-six-month emergency fund?
Consider where your earning power can be. Is a master’s degree enough for what you want to accomplish in your career? Do you want to start an IRA or 529 Plan? Many states offer good solid retirement plans that, if you put in the years, will allow you to retire well and not take a second job when you are 80 years old, but extra savings for retirement are never a bad idea.
Many people, at this point, will attack retirement, college funds, paying off the house, and more education (masters or doctorate).
In short, the main budgeting tip is to have a plan for every dollar you earn. Is that money going to getting out of debt, or your next degree, or your retirement? A plan will point in the right direction.
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