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Let’s talk about a simple, powerful step to help you take charge of your financial life. Do you know that many educators don’t even know what they get paid? Or that some miss out on powerful benefits? In this post, I’ll give you a simple format for analyzing your contract to help you maximize your income and benefits.
I’ll walk you through the process I use, share a simple template I’ve developed, and give you an example of a quick analysis of three different districts. After spending an hour on this process, you’ll know more than virtually all of your peers. Best of all, you’ll be able to make better financial choices.
Why Should I Look At a Boring Contract?
Look, I’m the first to admit that doing what I’m about to ask you to do is boring. Trust me, it’s worth it. It will make a dramatic difference in your finances over time. Maybe even immediately.
By understanding your salary, benefits, and potential options you can make better professional and financial choices. Spending a few minutes to review your contract may enable you to unlock a clear path to higher income, lower your costs, or find new ways to save for retirement.
Let me give you a personal example. I spent the first few years of my career only vaguely understanding how my salary was determined and what I could do to change it. Then in my third year, I discovered that National Board Certification in my district automatically moved me to the highest pay column. Even better, a district benefit granted leave, mentor support, and partial payment of the program.
Within a year, I was able to increase my income by 30% and the district paid for most of it!
Not all examples will be that dramatic, but by carefully looking at my contract and benefits I’ve since made better financial choices.
And, if you’re in the job hunt, you can use this tool to either help you decide which districts to apply in or to choose from among multiple offers. (Hopefully, you read last week’s post to help you get the job: Interview Keys for Educators.)
Convinced? Good – let’s do it.
How To Do a Simple Contract Analysis
Depending on the district you work for, or are considering, you can often do 100% of this simple analysis with online searches. In some cases, you may need to work with the HR office or login to benefit sites.
The principles are the same whether you are a teacher, administrator, or support/classified staff. As I typically do, in today’s examples I’ll use teacher contracts. Most of the information is the same across employee groups. I do the same analysis with administrator contracts. I’ve used this analysis personally, as well as with potential candidates to show them the benefits of working in my district.
Your district’s human resources site will often contain everything you need.
If your position is unionized, then you want to start with your labor contract. This will contain just about everything you need. If not unionized, search your HR site for salary schedule, salary agreements, or HR handbooks.
Other than those documents you’ll also need to look up medical benefit plans (not typically published in contracts because they change annually) and retirement plan information.
I can typically find all of this information for a district in less than 20 minutes. The first time through, it may take you an hour. It’s an hour well spent. I’ll try to make it as simple as possible for you.
Simple Contract Analysis Template
Now, you need a way to organize and compile the information that matters to you. Here is the simple template I use. Feel free to download and change or print it.
I’ve included the major categories I look at, and room to add any information that may be unique to your district and situation. This is for a simple overview, so you may choose to gather more or different information, as you become more familiar.
If you don’t understand the basis for most educator pay, give The Three Es of Educator Income a quick review.
Now for a quick explanation of each major category and data point that I recommend gathering.
For this portion, use the salary schedule. If your district publishes salary schedules for future years, feel free to use those for year 3 and 5. If not, just use the current year schedule. Remember – this is just for overview purposes and will still give you an idea how you can expect your salary to grow.
Salary Year 1: Review the salary schedule and enter the salary you’ll earn in the current school year.
Salary Year 3: Enter the salary you’ll earn in three years if you don’t get any additional education. I typically don’t count on having the time /energy for significant coursework during the first three years of a new job. If you are sure you’ll get more, feel free to use a different data point.
Salary Year 5: Pick a reasonable education target (say 15 credits) and see where that would place you in 5 years. Again, if you are more sure of your education plans, use the appropriate data point for you.
Work Days and Paid Leave
This section is mostly useful for comparing two districts in which you may work. However, it never hurts to understand your work calendar! Also, leave is a part of your income and/or quality of life.
Contract Days: Total number of workdays in your contract. Teacher contracts range from 180 – 200+ work days. It’s important to know this to really understand your income options. A $1000 raise for 10 more work days isn’t really a raise.
Sick Leave: Days of paid sick leave per year. (You may also wish to note the number of days you can accrue, but that isn’t included in this simple template. You can add it easily.)
Other Leave Types (Family Illness, Personal, etc.): Enter the number of paid leave days available in each of the other types. These will vary by district in both availability and number.
Health / Insurance Benefits
Early in my career, I didn’t take much time to understand my insurance options. I simply selected something in my first year and rolled with it. I missed out!
This simple sheet is not intended to cover the complexities of insurance, but rather to help you begin to understand the costs you face. As you understand your insurance offerings more you can optimize choices.
For this section, you’ll most likely need to use your HR site to find a benefts overview. They may link you to a plan provider. If you can’t find it online, an email to your district HR should get you the appropriate documents.
Out of Pocket Amounts: For medical, dental, and vision enter the monthly cost to you for each of the insurance types you’d choose. For some districts this is zero! In other cases, your choices could range from $0 to over $1000/month.
Disability: It is becoming increasingly common for districts to cover some level of disability insurance. It is typically described in % of income replaced. That’s what I enter here.
Life: If your district provides life insurance at no cost to you, enter the total amount provided.
HSA: Review to see if you have an Health Savings Account (HSA) plan option. This is a powerful benefit, but make sure you research and understand the benefits and dangers before choosing it.
Other Benefit Types
This section is is to help you capture other benefits that may directly impact your yearly income and costs.
Extra Duty Salary: Note the extra duty income you may earn for any position you plan to do. Most contacts or salary agreements have a table of extra duty stipends.
Education Credits:This is a powerful benefit that too few educators take advantage of! Most teacher salary schedules are based on education attainment. That is, reaching a higher degree level or additional credits will often increase your annual salary.
But – college credits can be costly!
Many districts provide a tuition benefit. Review your contract and enter any benefits you have here. That can help you plan out a path to advance in salary, or skills, while limiting your out-of-pocket costs!
So education benefits will come in the form of a direct dollar amount. For example, “$1500 of tuition reimbursement per year.” Others may describe it in number of credits, e.g. “6 credits per year at local university rate.” If possible, you can convert these into dollars to help you understand the total benefit.
The real power is helping you know and plan for your continuing education.
Other Benefits Available / Value:
I can’t possibly list all the different benefits available in district contracts. These spots are for you to add additional benefits you may discover. As one example – I worked in a district that allowed an additional paid day for assessments. You could enter that here. Another example would be cell-phone stipend if provided.
Use this section as you see fit.
Pension plans are complex. Your first step is simply learning what you have available and what it costs you. You can build from there.
Related Post: 4 Ways to Include a Pension In Your FI Planning
Confirm that you have a pension plan. Most educators do – but certainly not all. Then, and most importantly, enter the amount of your income you are required to contribute to your pension benefit.
Finally, I left a note section for anything else you want to record. This could include the number of years required to begin receiving a benefit, the years to receive full benefit, and/or the percentage of your income it will replace.
Other Retirement Options
Sadly, districts remain awful about building awareness of these plans. They often leave it up to salespeople looking to get you into costly plans. Sometimes, you can find the information you need on your HR website. Often, I’ve had to do a simpe google search: *district name* 403b plans usually works.
Awareness and understanding of these plans can dramatically improve your financial future.
403b/457b: Does your district offer these? I wish I’d even known these existed early in my career! Some contracts still refer to the 403 as “Tax Sheltered Annuities” or TSA. The 457b is sometimes called “Deferred Compensation plan.”
Related Post:457 is FIRE Magic: What, Why, How
401k matches in the private sector are a key component of retirement planning. Unfortunately, this is much less common in education. But it never hurts to look!
Does your employer contribute any money to your 403b or 457b? While rare in teacher contracts, I’ve seen administrator contracts that include 403b contributions.
Note: This next section will typically require you to review plan documents and potentially even investment company websites. Some districts require you to contact agents for further information – If that’s the case, you can assume your options are bad.
Index Funds?: If you wish to get deeper down this retirement plan hole, you should review what options you have available in your 403b and 457b. Index funds are the holy grail in the FI community, but you can adjust this to include any investment options you prefer. Target Date retirement funds are also solid if they have decent fees.
Expense Ratio:Beyond simply having access to your investment of choice (again, I go with index funds) it’s important to review their expense ratio. Good providers will make their expense ratios transparent and clear. The harder the fees are to find, the more likely they are to be high.
Once you get deep into reviewing your contract, you may start noticing other things that are important to you. These could be financial benefits or workload information. This section is for you to fill in as you like.
There you go – a quick review to give you a greater understanding of the building blocks of your finances as an educator. While this is only a beginning, I know that had I done this earlier, I would already be financially independent.
Example Quick Contract Analysis
Now, I want to show you what this might look like and how it can be used as a tool to help you choose between potential employers.
To complete this section, I picked three districts at random. I have no familiarity with any of these districts and compiled all of the information through online search in less than 20 minutes per district.
Note: This was done as an example of what could be quickly compiled. I would spend more time on each if I were analyzing in reality. Also, do not assume my information is 100% accurate. As always, the biggest benefit in learning is doing it yourself! (such a teacher thing to say, right?)
In order to do this analysis I made the following assumptions:
- A teacher with 3 years experience looking to change jobs
- Master’s Degree (and will complete an additional 20 credits in 5 years)
- Single for insurance purposes – choosing the cheapest option
- Not interested in extra duty
The three districts I reviewed:
- Iowa City Community School District (Iowa)
- Tacoma Public Schools (Washington)
- Hillsborough County Schools (Florida)
The links take you to the primary salary document. I also used the district websites and plan provider information.
Which district would you choose? Are you surprised by the variance between the three districts?
Now you see why it’s important to review these things to make your best choice! The information here varies even more because these are spread across the country. Incomes will typically be closer if you are comparing within a geographic area.
Related Post: Where Can You Make the Most Money? Educator Geoarbitrage
My conclusions: In reviewing these three districts, I was pleasantly surprised by the transparency and simplicity with which Iowa City Public schools presented their information. Tacoma was also accessible, though they clearly have an active union because the contract was more than a hundred pages. Tacoma wins slightly in the comparison in my opinion even when factoring in cost-of-living for the Seattle area.
Both Iowa City and Tacoma had solid retirement options and accesible information. These are good signs.
The Florida district took the most work to find the least information, which is unsurprising given how poorly they fared in the comparison. (Tip: Districts that are hiding compensation and cost information are almost always less competitive!)
To create a comparison sheet of your own, just download the template and add as many columns as you need.
Closing – Analyze that Contract
Not very exciting right? Don’t let that stop you from doing it!
Whether you use the template or approach that I do, take a few minutes and learn your contract. It won’t make you an expert, but it will raise your awareness. This simple first step will be a crucial building block as you take charge of your finances and build your path to financial independence.
Don’t hesitate to contact me if you have any questions.
If you’ve analyzed your contract, or do it after reading this, please let me know anything you learned in the comments below. I’m interested!