New Teacher Financial Advice I Wish I’d Been Given

I remember being a new teacher, earning that entry level salary while being deep in debt.  I loved the job but wasn’t sure it would ever pay enough. I worried about money as much as I worried about doing my job well. It shouldn’t be that way – and it doesn’t have to.

Now that I’ve hit the major milestones of financial independence and the ability to walk away from work, all earned through a career in public education, I often think about the money advice I wish I’d been given back then.

I’ve written this post as if I’m talking to my younger self – and I hope it’s valuable for you.  If I’d know this when I started, I’d have been happier, may have taken a different path in my education career, and certainly would have been in an incredible financial spot now.  I hope it helps you and any new teachers you know!

As my readers know, I want all educators to be in control of their financial lives so good people stay in public education. These 15 things will help you enjoy your career and build a quicker path to financial independence.

The 15 Things I’d Tell a New Teacher

1. It Gets Better

Optimism about the future is important, which is why I’m leading with this.

This one is true for both the professional and financial aspects of being a new teacher. You jump into it with all of the passion and optimism in the world – and then reality hits. Trust me, you will get it figured out. Things that seem overwhelming now, will become natural. Classroom management becomes fun…eventually. I promise.

From a purely financial aspect, the early years can be tough. You likely have more debt than you’d like and your last year of college may have cost more than you are making now. Teachers in the early years are dramatically underpaid. It takes a few years of experience raises to make a decent wage. You’ll get there though.

But yeah, it’s lean early on. No sugar coating that. It gets better.

2. Don’t Fall for the Poor Teacher Myth

Society tells you that you are doomed to poverty. Lots of people benefit from you believing that entering teaching is equivalent to selecting a monastic life. Don’t fall for it. It will leave you feeling bitter and/or making financial choices that aren’t in your best interest.

You are absolutely underpaid for your worth. Teachers deserve to make more. At the same time, in many places a single teacher makes at or above the median household income. A two-teacher household in our area is in the 80th percentile of household income. If the money is bad, you can consider a move.

There are also some professional benefits (most mentioned below) that enable teachers to accumulate wealth. Some of these are the envy of other professions. Teachers are consistently found to be well-represented in the ranks of millionaires.

So, let’s keep fighting to make sure teachers get paid at a professional level. But, you can take charge of your financial life and do very well. Believe it and you’ll be happier and more successful. Financially and professionally.

If you don’t believe me, check out the Educator on FIOR interviews for real examples of people making it happen.  Some have even retired early! 

3. If You Have Student Loans – Make A Plan for Them Now

First, if I were advising you BEFORE you became a teacher, I’d say a few things about getting your degree:

• Get the simplest degree that will allow you to work where you want to work. Some states require a Master’s degree, but not all. (You’ll see why I recommend this in #5)
• Don’t overpay for your degree – both my wife (TFI) and I went to private colleges. That was a financial mistake. The programs were good, but most of teaching is learned on the job. We could have gotten jobs while paying less for our teaching degrees.

As a new teacher, you’ve likely already accumulated some student loans, though. Make a plan for these right away. Take a look at this list of teacher loan forgiveness options.

Decide which ones you want to access and work towards those. They may require you to target employment at a low-income school. That is worth it for lots of reasons – not just financial.

Once you know how much you are going to have forgiven, you can decide how to deal with the rest of the debt. Make a paydown plan that works for you. Being debt-free is an amazing feeling. You’ll get there.

4. Know Your Contract / Salary Agreement

It’s amazing how many teachers don’t understand exactly how their salary is determined. As with anything, knowing the rules helps you maximize your choices.

If you are unionized, get a copy of your contract. If not, it’s likely in an HR handbook or may be a separate “salary agreement.” Ask your HR office if you need to. Get your hands on it – it’s important!

Analyze your contract to see how you can increase your income, what you can expect in future years, and what choices you can make to accelerate your income growth.

An example: In my third year, I discovered that having my National Board certification jumped me to the top salary column (equivalent to having a PhD.) This was one of the few things I did right (by accident…I just wanted the certification.) It saved me three years of additional college courses and got me earning more early.

What information does your salary agreement hold? Find out and take advantage.

5. Use Education to Your Advantage

Even if you don’t have a huge benefit like the NBPTS one I found in my contract, you can still use education to your advantage. Look for two specific ways that education benefits can impact your future financial health.

Education Credits

Did you know many districts will pay for your college credits? Find out how many your district will pay for each year and make a plan.

Remember earlier when I said that I’d have gone with the lowest degree to enter the profession? That’s because I could have started and been earning my salary AND had credits paid for while I pursued my Master’s degree. Whoops.

Even still, I was able to take advantage and build up coursework for the career ladder. Not all of my credits were paid for – but any that are save you a bunch!

Salary Advancement

Additional levels of education are often one of the best ways to increase your annual income. Again – it’s important to know how your salary schedule works.

Related Post: The Three Es of Educator Income

Use the information about credits, salary increases, and your personal level of motivation to lay out your education and income plan for the coming years. Make sure to balance out the education costs with the income improvement.

Doing this one thing can improve your financial life. You’ll go from those early lean years to a more comfortable income.

6. Make a Reasonable Choice About Housing

Almost everyone struggles with this one. Yet, this personal finance pillar is just as true for teachers. And, I failed at it.

Without even riding into the rent vs. buy debate, I’ll just say that you should choose to live in the cheapest way you are comfortable.

Renting a small apartment might be the best solution.

If you want to buy and live in the community in which you teach – great! Just make a reasonable purchase and avoid the temptation to borrow everything the bank says you can afford. Explore house-hacking options to see if they work for you. You can also consider teacher home buying supports like Landed.

Once you make a choice, resist the choice to keep “housing up.” This was one of our biggest financial mistakes. We left a very reasonable housing choice to move into a house twice as big, which costs twice as much. Downsizing was a major step on our financial journey.

Housing will be one of your major expenses for the rest of your life. Start now by keeping it under control.

7. Understand Your Health Care Options / Benefits

Teachers often (but not always) have access to some of the best health benefits around. They can still be crazy expensive, though. And, there may be some great options within those benefits that aren’t clear.

Young teachers often feel invincible or uninterested. I certainly did. I spent years riding a health plan simply because it was the easiest to deal with. I missed several years of HSA options because I just didn’t pay attention.

Get on your district (or health insurance provider) website, or set up an appointment with HR and understand your benefit options ASAP. Can you better balance your premium and risk? Do you have an HSA option? In my case, I could have been receiving a small district contribution but wasn’t!

Each circumstance differs, so it’s impossible to offer specific advice. However, much like housing, healthcare is going to be one of your major costs for the remainder of your life. Understand everything you can starting now.

8. Have a Plan for Those Automatic Raises

Speaking of plans – something magical is about to happen. For the next several years you’ll get automatic raises. Sadly, these won’t be at the level of your non-educator professional friends, but you’ll get a bit more every year.

Make a plan for how you’re going to use these to improve your future financial life. In the absence of a plan, you’ll just fall prey to lifestyle inflation.

I wish I’d done this. Instead, we just slowly spent more every year for a long time.

Looking back, here’s how I’d have done it.

• First 3 – 5 years (remember those lean years?) I would have taken half of it for expenses, and used the other half each year to pay down debt, savings, and investments.
• After those first few years, I’d have set my lifestyle and sent the additional each year to investments.

This one choice would have made us financially independent several years ago.

9. Start Investing Now – You’ve Got Some Amazing Options

Speaking of investing – start now! Even if it’s a few bucks a month, start something. And this is an area where teachers SHOULD have a great advantage over most other professions. You see, teachers have access to double the pre-tax investing that most others do!

Unfortunately, in some cases that’s been ruined by predatory practices. Let’s take a closer look. This is actually a whole bunch of things wrapped in one – but take “Start Investing Now” as the primary takeaway.

Check the Fees

This is where they get you. Just because someone who works for a “teacher friendly” investment company tells you something is good, doesn’t mean it is. Also, don’t assume because your district offers it, that it’s a good choice. Sadly, not all districts take care of their staff as they should.

It’s enraging, but financial companies have taken advantage of many of these programs and offer fee-loaded financial products. Look at your fees and decide what you are comfortable with.

I personally get uncomfortable with anything over a .25%, but in pre-tax investments a higher fee load may still be worth it. Each individual has to determine their own level of comfort, but know that fees are a major drain on progress.

In my case, I was fortunate enough to have access to Vanguard funds and other options that were well below these levels. And I failed to take advantage of it for almost ten years. Ouch!

403b

Put simply, a 403b is the educator version of a 401k. You can contribute pre-tax and it grows tax-deferred. For 2021, you can contribute up to $19,500.

457b

While I knew about the 403b and just failed to take advantage of it, I wasn’t even aware of a second option – the 457b! If the fees are acceptable, this thing is FIRE magic. Like a 403b, you can contribute up to $19,500 in 2021. Contributions are made pre-tax through your employer and it grows tax-deferred.

However, unlike the 403b, you can take withdrawals upon leaving your employer, regardless of age. For those considering early retirement, this makes it the perfect bridge to retirement age. Unfortunately, ugly fees can lurk here too.

Check out how I compare the 403b vs 457b if you want to dig deeper.

Combining It All

Put all together, in the right situation (watch those fees), these investments can be a huge advantage for educators!  If you look at 403b and 457b contribution limits, you can see how it’s possible for a single educator to get almost 50k a year in tax-advantaged investments.

You won’t be there yet. But start now. Just set up a small contribution to build the habit. Then, use your annual raises to increase it. Set a target to max these out. Your future self will thank you.

10. Earn Extra Money – But Pursue Balance

Teaching lends itself well to earning extra money. Unfortunately, it’s often required to make ends meet in the early years. Eventually, you can use any extra to accelerate your investments. Use these real educator side hustles to earn extra income when you can.

But, do so in balance. Make a little extra each year, but don’t let it affect your family time, health, or professional effectiveness. It’s done all those things at one time or another for me – please don’t make the same mistake.

11. Consider the Career Ladder – But Don’t Do It Just For Income

Education has a clear career ladder that virtually anyone can access. You can literally multiply your income several times over in less than a decade. I chose to be a school principal. That doesn’t mean you should though.

Education leadership options can be fulfilling and improve your earning power. But they’re certainly not for everyone so take your time to decide if it’s worth going from teacher to administrator. Consider how they fit with your skills, passion, and plans.

But DO NOT do it just for income. You won’t be happy, nor will those you serve.

Financial health is part of overall health. If it’s right for you – jump in.

12. Start Tracking Your Financial Numbers Now

This is perhaps the simplest tip in the whole list, but it will have a huge impact. The main reason we lost more than a decade of financial progress was simple apathy. We just weren’t paying attention or thinking about it.

Start now by tracking your finances. I believe in tracking two critical numbers: Savings rate and Net Worth.

We do annual goals and set a savings rate target each year. See this list of personal financial goal examples. Then, we try to reach our goals but don’t obsess. Others track it much more often than that. Decide what works for you.

For net worth, I use two methods. As a spreadsheet junkie, I like to do my own detailed calculations on a quarterly basis. This gives me the best overall picture and “feel” for our progress.

For a quick and simple check, I’ve started using Personal Capital to track net worth. (affiliate link) This simple tool allows you to track all your information in one place and gives you a snapshot of your net worth as often as you like. I can comfortably recommend it.

Choose whatever works best for you. But start paying attention now. Please.

13. Read Financial Books, too.

As a new teacher, you’re probably buried in tons of professional reading. You may also be reading books constantly to find great reads for your students. Keep doing that!

But, loop in a good financial book every once in a while. Learn more about financial health and what is possible when you understand that system. I went 15 years without reading one, and then I read The Automatic Millionaire. Three years later, I make a point of including purely financial reading in my rotation. It makes a difference.

The book I recommend most now is JL Collins’s The Simple Path to Wealth.

It will give you a quick and simple overview of how to achieve financial independence. Jim really does simplify it and his approach is the perfect combination of no-nonsense and optimism.

I’m also currently a big fan of James Clear’s Atomic Habits to learn how to intentionally set yourself up for success.

If I could go back in time, I’d hand these two books to young me and be confident they’d make a difference. Buy them now or check them out from your local library.

14. Your Partner Matters

I’m happy to say I got this one right. We missed by not really talking about money, but fortunately we’re aligned in most of our goals.

This can’t be underestimated. If you are going to partner-up, choosing one with aligned financial goals is important. That’s an intentional “if” – you can absolutely build a path to financial independence as a single teacher  if you choose.

What you should avoid at all costs is tying yourself to someone with opposite financial goals. I’ve seen far too many colleagues dragged into financial trouble by a spouse while they try desperately to pull in the other direction.

We don’t talk about money in our society. I’d encourage you to do it early on in any relationship. Yes, love matters. But we know that money troubles are the leading cause of relationship stress and eventual divorce.

If your goal is to be in control of your money life (and I assume that’s why you’re reading this) then your relationship is a critical part of that.

15. Give What You Can – It’s Worth It

As a new teacher, you’ll see so many things that deserve support. You’ll be asked for even more. You’ll feel the need to give and give even when you don’t have much. That can become overwhelming.

Both spending and charity can be emotionally driven. We often talk about the first, but not the second.

Here is what I would suggest: decide what things are most important to you. Determine what you can give. Create a giving plan. Once you have a clear idea of how much you’re giving and what you’re giving to – do so unapologetically.

A great phase we’ve come to use is “That’s really important. But, our giving for this year is currently going to <insert priority here.> We evaluate that every year if you want to check back later.” This simple response has helped us both stay true to our priorities and exit conversations with a minimum of guilt or awkwardness.

Giving can be part of financial health. Just like everything else, it should be done intentionally.

Don’t give up your soul just for future finances. Give what you can. I did and don’t regret it at all.

Bonus: Don’t Count on Your Pension – Until You Can

Your teacher pension will matter. Eventually. Maybe. Or it might not. Hard to tell.

As a new teacher, if you have access to a pension, do whatever it is you’re required to do to fund it. But then, don’t count on it. It may be around later but you’ll make better choices for now if you assume it isn’t.

As you get a bit further into your career, you’ll have a better grasp and can integrate it into your plans with more time and better information. It’s just too uncertain for now and too many new teachers assume that a pension will take care of their retirement needs. It might help, but you want more.

For now, concentrate on the first 15 and you’ll be in great shape.

Conclusion – Money Advice for New Teachers

You can do better than I did.

I entered teaching at 24, with a total net worth of -$130,000. After 15 years of ignoring my finances, my net worth was just barely positive. Now, we’ve hit financial independence in our 40s.

If someone had told 24-year old me these 15 things, I’d have been there at least 10 years ago.

Wherever you are with your finances, I hope these 15 thoughts help you do better than I’ve done. Feel free to reach out in the comments, or contact me here. If you’re interested in the next steps into education leadership, be sure to check out the 7 Money Things Every New Principal Should Know.

Let’s build a community of financially independent passionate professionals.