Friday, November 14, 2014

7 Financial Mistakes Teachers Make Over Their Careers

Teachers can be great at what they do, teach.  But as a group they stink at investing.  Sure, there are some teachers, a small percentage of every faculty at every school in this country, who make investing a priority, along with the development of their craft.  But the majority of my peers could really use help with planning for their retirement.  Along those same lines, many of them unknowingly shoot themselves in the foot, so to speak, as they focus entirely on their profession, leaving only their accumulated state teachers' retirement  "pension" to see them through after retiring.


Now, I realize that the national average teacher salary is around $56K (2013) with rookie teachers making in some States as low as $33K!  The cost of living is obviously different regionally.  Making ends meet becomes the number one concern in this case.  Trust me, I know how hard it can be to simply make it to the next month.  However, practicing tough love...I must add that it has never been solely about how much one makes, but rather how much one keeps at the end of the month that makes the difference.  Earning more money always helps, so promoting to the next level (quasi-admin or admin) is something I recommend.  Don't go for the promotion so you can afford more luxuries though.  Keep expenses down!

Here are 7 financial mistakes teachers and other educators make during their careers:

1) They don't invest or don't invest enough.  Why?  Lack of knowledge, know-how, cash savings, time, etc.

2) They don't contribute or don't contribute enough to a tax deferred 403b plan.  Every year teachers are given a chance to elect to contribute to a 403b.  Some will pass on the opportunity to meet with the representative, others will meet with the rep, but stick to the same contribution as the year before.

3) They don't participate in Section 125.  Using pre-tax dollars to pay for Dependent Day Care or Out of Pocket medical expenses is a must.  Just make sure you don't over elect for the year as these unused dollars are not returned to you come year's end.

4) They overspend yearly in classroom supplies.  As an educator, you can deduct up to $250 ($500 if married, filing joint, and both spouses are educators) for un-reimbursed classroom expenses.  Now isn't this a dang shame?  What is wrong with this country when teachers are only allowed to deduct a measly $250 in teaching related expenses annually.  I know teachers who've spent three times this amount in a year!  It is really sad.  While it is noble of you to go the extra mile for your students, please also be mindful of the financial implications throughout your career.  It adds up!


5) They marry other teachers.  I don't know what it is about Education, but many of my peers "hook up" with other educators.  Teacher couples often end up working at the same school!  Talk about not having healthy separation time.  (I wonder if they favor convenience over time apart?  Or maybe it is an economic strategy, only needing to use one vehicle for transportation to and from work?)  Now, to each his own, of course.  But, marrying an equally broke teacher will not help you financially over the course of your career.  Venture out if you can.

6) They wait to promote until the end of their careers.  Being a classroom teacher for twenty-seven years, and then jumping into admin for the last eight years will spike your monthly base salary in retirement, no doubt.  However, you've lost many more years in wealth accumulation potential having not promoted earlier.  If you don't plan to ever be an administrator, okay, no problem, I get it.  But if you do have aspirations to join "the darkside" one day, why not go for it as soon as possible?  Making more income during your formative years will snowball roll your retirement savings.

7) They drink too much premium coffee and eat out.  Teachers are notorious for their Starbucks runs.  It's great coffee, no question.  And the kids drain the life out of you.  Yet, brewing your own coffee at home will save you hundreds of dollars each year.  The same goes with packing a lunch each day.  That's what left-overs are for!  If you have to go to Subway daily, then you shouldn't be complaining about not having enough money to last until payday.  At minimum, buy a cafeteria lunch.  They are cheaper alternatives than fast food, and healthier in many cases, as food standards for students have improved.

As Always, Thanks for Reading!  Share with others, please.
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