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Financial Planning for Teachers: 10 Tips I Wish I Knew
Plant an optimistic financial future with these tips.
Although often overlooked, financial planning for teachers is essential. Teachers are so busy with their students that they can neglect their own needs, such as their financial security. In today's world, that can be disastrous. I didn't start taking care of my finances until I was 43, and I wish I knew earlier what I know now. Here are some tips for taking care of your financial future.
Pay Down Credit Card Debt
This is the top priority. Few can afford to carry this debt, so it's got to go. Line up all your credit cards and figure out which has the highest interest; that's the card to pay off first. After that card has a balance of zero, move to the card with the next highest interest. When all your cards are paid off, stay on top of your balance by paying most of it off every month. Cut down on purchases by asking yourself: is this a want or a need? Don't close your credit card accounts, however, as that can adversely affect your FICO score.
Further Reading: Teaching Resources on a Budget
Build an Emergency Fund
This can be hard to do if you're aggressively paying down debt, but it's an essential part of good financial health. Automate your savings by directly depositing money into a savings account. If you don't see it, you won't spend it. Even if you can only afford to save the cost of a cup of coffee each month, do it—it adds up. Bank your tax refunds and stipend money. Aim to save at least three to six months of living expenses.
Pay Off Your Student Loans
This should also be a priority. Pay as much as you can each month—preferably more than the minimum payment—and try not to defer your loans. If you meet certain requirements, you may be eligible for loan forgiveness; it's worth looking into.
Maximize Your Economic Potential
Most schools pay step raises for advanced degrees, so you can expand your knowledge base and boost your long-term salary. Teaching also provides a multitude of ways to make extra money through summer school, coaching, and tutoring opportunities. You can even become an advisor to a club. There are plenty of ways to boost your salary if you look for them.
Save for the Future
Although many teaching positions still offer pension programs, you should be proactive in supplementing your retirement income. A Roth IRA is a great way to do that. If you have an emergency, you can always withdraw what you put into a Roth IRA. If you can, try to sock away 10 percent of your pay.
Invest in Long-Term Disability Insurance
Long-term disability insurance is relatively inexpensive (a few dollars a paycheck), and in the event that you're unable to work, you can still receive approximately 60 percent of your salary. Your school may have a plan in place, or you can purchase it through organizations like the National Education Association.
Consider Buying Life Insurance
This is not a necessity. Only buy life insurance if someone in your family depends on your income to survive. My financial idol, Suze Orman, says never buy whole life insurance; only purchase term life insurance.
Make a Will
If someone depends on you for financial support, you need a will, a trust, and a power of attorney; Suze Orman has always stressed this on her show and website. I'm shocked at how many of my colleagues who are parents don't have these documents. While you'll have to pay an attorney to help you create them, it's well worth it to know your loved ones are protected.
Buy a fireproof, locked box for your important paperwork, including your will and trust. Be sure someone has passwords to all your accounts. Save your receipts and other forms; you'll thank me at tax time when everything is at your fingertips.
Examine Your Finances
Ignoring your money situation can have catastrophic results. Suze Orman says, "You have to face it to erase it." I believe that to be true. Financial planning for teachers should occur at least twice a month. Plug leaks, spend less, save more. Knowing where you're at is half the battle.
Further reading: How to Make Your Teacher Salary Work
As a teacher, you have a busy life. These simple financial planning tips will go a long way toward providing you with security and peace of mind, and we could all use a little of that!