Financial Literacy · The Unraveled Teacher

Financial Management for New Teachers

It’s no secret that teacher salaries tend to be on the lower end, especially for new teachers in certain areas. However, this does not mean that teachers are doomed to struggle financially for the entirety of their careers. Here’s some things to do to make the most of your financial situation as a new teacher.

1. While starting salaries are low, there are pay raises and pay incentives for various additional duties.

In the beginning, many new teachers will find that their paycheck seems small relative to the amount of debt- particularly student loan debt- they carry. It’s important to recognize that your salary will increase as the years go by. Of course there is a lot of variance from district to district in terms of pay steps, but the pay steps do exist, and new pay scales and raises are often negotiated yearly. In my first three years of teaching, I saw four different pay bumps and three bonus checks that I was not expecting when I first started.

Additionally, many schools offer additional pay for certain responsibilities. Coaching a sports team, signing up to teach summer school, running extracurriculars, etc. usually come with extra pay. Sometimes you are also eligible for bonuses based on school ratings and AP or IB exam pass rates. There are little hidden paychecks everywhere in the world of education.

2. Focus on Debt Reduction

Debts are a huge obstacle to achieving financial stability and freedom. For student loans, you should do a littler research to find out if you’re eligible for any debt reduction or forgiveness programs.

Credit card debt is usually one of the most expensive debts a person can carry. As soon as you are hired, make a plan to eliminate your existing credit card debt. Making the minimum payment on credit cards will almost certainly ensure that you never get out of the debt hole. Set aside an additional amount to apply to your monthly payments. Change your spending habits so that you are spending money rather than credit. Do not let decorating or supplying your classroom from your pocket contribute to your debt.

3. Advanced Degrees and Salary Steps

Some districts give a pay boost for teachers with Master’s degrees and some districts will even help you pay for a relevant degree. Ask your HR department about college credit assistance or reimbursement. Check the salary schedule to see if you’re in a district that rewards teachers holding advanced degrees with a reasonable bump in pay. I taught in one district that only gave a one-time $2,000 bonus for a Master’s and another that was a permanent $3,000 per year raise. Obviously if I were to stay in the first district, going through a Master’s program wouldn’t be worth it.

4. Take Advantage of Your Investment Account Options

As a new teacher, you will get to decide how to handle your 403b. This basically the education world’s version of the 401k. You can contribute part of your paycheck to your 403b which is a tax-deferred retirement account. Your contributions are pre-tax which means they are not taxed when you put them into your 403b account which lowers your total tax bill come tax season. When you are eligible for distributions from your 403b in retirement, you will pay the tax at that point.

In addition to the 403b, your district may offer another option called the 457b. It works similarly to the 403b but without age restrictions on when you can start taking distributions.

Personally, I prefer to use the 403b and open my own Roth IRA. The 403b is a fine account for tax-deferred retirement that you won’t have to think about much during your teaching career. A Roth IRA on the other hand, comes with some incredible benefits for those savvy enough to take advantage. A Roth IRA is a tax-advantaged account that you fund with after tax dollars. You pay the tax upfront today, invest the money in the Roth and it grows tax free. Roth IRAs are retirement accounts but you can actually withdraw any contribution you make to a Roth IRA at any time without penalty. And earned money (from investments in your Roth) can be withdrawn once you hit the 59.5 age threshold.

You can contribute up to $6,000 per year to a Roth IRA, but this is something you will have to do independent of your school district. In other words, you’ll be managing and making contributions on your own rather than having them automatically done for you as is the case with 403b.

For a Roth IRA that allows you to invest without fees, consider using Webull. It’s a user-friendly investment platform that offers both Roth and traditional IRAs without fees. You can invest in stocks, ETFs, and even crypto. It’s a great way to get your feet wet with self-directed investing. I do think teachers can benefit greatly from self-directed investing as it’s important to understand and learn about investing rather than just letting it sit on autopilot. There’s something incredibly empowering about building your own dividend portfolio or buying shares of great companies that are projected to grow over time. Part of securing your financial stability is being directly involved in your investments. A self-directed Roth IRA is a wonderful way to achieve that!

Related Post: Investing in Real Estate with Little to No Money: A Guide for Teachers

5. Utilize Summers to Build More Income

Summer vacation is arguably one of the greatest perks teachers have. Many use this time for travel, but this is also a really unique opportunity to work on your financial health. While teachers technically don’t get paid during the summer months, most can opt for “summer pay” in which some money is set aside from paychecks throughout the year and paid out in the summer. What’s valuable about summer is the ability to work another job or build a business. The teacher “side hustle” is common, but I propose a slightly different option. Building a business that can produce passive income during the months you are teaching is one of the most valuable ways to spend your summers. Start early in your teaching career and maybe your side business can overtake your teacher salary at some point! There are some obvious teacher opportunities for businesses like Teachers Pay Teachers. Creating and uploading lessons and teaching resources for sale is kind of a no-brainer. Spend a little time using Canva as a design tool (it’s free!) and open a TpT store. If you work on building it each summer, you can easily create some passive income that can amount to a car payment (or more). Imagine getting $300-$400 extra each month without having to clock in at a part-time job on the weekends! I cannot stress enough how thinking about passive income can transform your financial situation. Teachers Pay Teachers is just an example- there are plenty of other ways to open a business online that has the potential to generate passive income. The print-on-demand stores are easy, free, and a lot of fun. Check out Teepublic to get an idea about the print-on-demand world. You can also create digital products to sell on Etsy, start blogging, or working on a YouTube channel. Consider making review videos that you can use in your classroom that would also be helpful for other students and teachers. You could start working on a monetized YouTube channel. These are all things that teachers are already great at doing. Put those skills to work during the summer and start building your own stream of passive income.

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