Wow, it’s mid-August already and back-to-school times are starting! In some places, school is already in session. Here, staff return to work at the end of August and school starts immediately after labor day. It’s a hectic time, but filled with positive energy and optimism.
This will be the first time in 20 years I’m not fully immersed in back to school. I went work optional this summer, and haven’t yet decided on my next path. That won’t stop my partner and I from doing our usual back to school financial check!
Doing this over the last several years has been a key part of our financial progress. This simple review is also one of the first things I talk about with any educators who ask me about financial progress.
These last days of summer when you’ve started thinking about school again but aren’t yet weighed down by the daily challenges of the school year are a great time to conduct a back-to-school financial review. Spending just a bit of time on these four steps will help set you on the path for a successful financial year!
1. Check Current Financial Health
Summer can be a carefree time. Routines slip, we travel more, and it’s easy to lose track of our spending. That’s okay – but don’t let it get away from you!
Take a minute to check your current financial status. What do you expect to spend between now and your next paycheck? Do you have enough to cover it? Are there other summer goals you haven’t hit yet?
This is especially critical if you work for a district that pays you in 10 month installments instead of 12, or if you get three paychecks at the end of the year to cover you for the summer. (Yes, teachers do get paid in the summer. Kind of.) Thankfully, these are true for fewer educators these days – but it still happens!
I remember in our early years, right about mid-August we’d suddenly realize money was going to be VERY tight until we got paid at the end of September. In our worst year we had to bridge it with credit cards. Yikes – that is inviting financial catastrophe.
Check now and make needed real-time adjustments to avoid overspending.
If you’ve done a good job tracking or you’re firmly on the saving path, take this opportunity to do a net worth check. Monitoring your net worth is a great way to take the pulse of your overall financial progress.
If you want an automated tool, Personal Capital will do it for free. (affiliate link) It’s an easy to use tool for a quick glance once you get your accounts entered. I use Personal Capital for quick checks, but also calculate my net worth quarterly in a spreadsheet.
If you do this every August, you’ll be surprised at how it impacts your financial habits.
2. Review Your Contract / Salary Agreement
I constantly emphasize how important it is for all educators to know their contracts or salary agreements. Unionized staff typically have fairly substantial contracts, while non-union districts generally at least publish a salary schedule and summary of benefits. You can often find these on your HR website. If not, contact your district office to ask for copies.
Here is what you should review each year:
These change frequently and you should check it annually. First, you want to know what you should be paid so you can confirm your pay is accurate on your first check. Payroll departments are not infallible.
Second, it will give you a good idea of what raise, if any you just got over the summer. Educators in the early to mid parts of their career will see an experience step raise. Many teachers, even those at the top of the schedule, will see a cost-of-living increase. You’ll use this information in step 3.
Finally, looking at the salary schedule can give you an idea of your income potential. You can see what you’ll be making with another year of experience or how you could grow your income with a little more education. Look at where you are now and where you could be in the future. You might be surprised.
I remember being a new teacher struggling at $36k a year, and realizing that I could be making $70k in the future. It helped motivate me.
Also, take this chance to check out any stipends you should be paid for the coming year. These may be for extra duty, special assignments, or endorsements.
Insurance Benefits / Prepare for Open Enrollment
Sometime in the coming year (often in the fall) you will have to re-enroll for health insurance. It’s a good idea to begin planning now. Unfortunately, insurance seems to get continually more, rather than less, complex. Costs continually rise. You don’t want to start thinking about it at the last minute.
Review the insurance benefits your contract provides. Then, if available, look at the costs for the coming year. Use that information to make the best decisions for your family circumstances.
If you have an HSA option and it makes sense to use, you can start planning your contributions for the coming year.
Don’t forget to check for any optional insurance benefits your district may provide. Some districts make life insurance or disability insurance available, but only if people actively opt-in.
This will be a critical one for us this year since I’m switching onto TFI’s insurance.
Professional Development Benefits
Your district may cover all, or part, of the costs of continuing education. You may have travel or conference benefits.
These can save you money on activities you might have done anyway. Or, they might motivate you to continue improving your practice.
You might even be able to have the costs of continuing education covered and move to a higher salary column for free! It’s one of the most powerful ways to increase your salary.
Either way – it’s a win. It’s always amazing to me that in many districts these benefits aren’t fully utilized.
Know your contract and take advantage of all the benefits it provides.
3. Allocate Any New Money
Remember that possible raise I mentioned? I wanted you to be aware of it now, before your first check.
I know from personal experience how easy it is to just let spending grow. Try to avoid the worst of lifestyle inflation.
Instead, stretch and put as much of it as you can to work for you. Challenge yourself to take at least half of any raise and use it to do one of these things:
- Build an emergency fund
- Pay down high interest debt
- Start saving/investing
Choose one of those and set up an auto-payment / withdrawal.
This small action can make a big difference over time. Here’s an example of what I’d encourage:
A teacher is making $50,000 year. That’s $4166 a month.
The teacher receives an experience step and a small cost-of-living increase for a total of 4%. That doesn’t seem like much, but now she is making $52000 or $4333 a month.
That’s $167 a month more. Take $80 of that and start an automatic investment.
Review your 403b and 457b options. If they aren’t fee-load annuities, I’d use them. If they are, you can contribute to a traditional or Roth IRA. If you can, use them all! If not, here’s how I choose between a 403b vs 457.
$80 a month is almost $1000 a year that you weren’t investing before. Just starting one of these accounts will be a huge leap forward for your financial future. If you’re already contributing, increasing the amount will accelerate your wealth building.
If you do this every year, you’ll be surprised at the progress you make. Check out an example of what can happen to a household doing this: Two teacher path to FI.
I wish I’d taken this step early in my career instead of playing catch-up later. Time is your most valuable ally.
4. Set One Financial Goal for the Coming Year
If you’ve done the first three you have a good idea of where you are now and have likely started thinking more about where you’d like to be.
Set one financial goal for the coming year! Do it now while you’re aware and optimistic. It will help guide and motivate you during that mid-year push we all feel at times.
Some possible options:
- Increase your salary through continuing education.
- Earn $__ extra this year. You could accomplish this through a side hustle or by taking on an extra duty stipend.
- Pay off $__ amount of debt
- Contribute $__ to an investment account – You can get a great start on this in step 3. Maybe you can stretch yourself more
- Decrease spending by 10%
- Open a 457b
- Fund a 529 plan for your child
These are just a few possibilities – the options are almost unlimited. Here is a list of personal financial goal examples for you to review. What you choose will depend on your current financial situation and your personal financial goals.
Set one goal and you’ll be taking charge of your financial future! Over time, you may replace or renew that goal or add others. In the years we’ve been pursuing FI we moved from a single goal to a much longer list. Now that we’re there we are simplifying it – but still have goals every year.
Do what works for you – just take action!
Have a Great School Year
Spending just a few hours on this back-to-school financial review will pay off more than you can imagine. The first time you do it will take awhile. The next year it will be much faster. Following this process over time has led to a dramatic improvement in our financial health. I know it can do the same for you!
Four Step Back To School Financial Review
- Check your current financial health
- Review your contract / salary agreement
- Allocate any new money
- Set one new financial goal
Best wishes for a great school year ahead and a fantastic financial year for you and your family.
Also, for other helpful suggestions check out Penny’s 10 Back to School Teacher Money Moves.