Are you a new teacher fresh out of college?
That means you are super busy with training, getting your credentials and working in apprenticeships.
It might seem like there is no time to think about your future finances. However, this is the very best time to take control of your money!
As the saying goes, “There is no time like the present.”
Let’s get to work on streamlining your future finances while lifting the weight of student loan debt off of your shoulders!
First things first, you’ll need an emergency fund.
Building Your Emergency Fund
Your goal is an emergency fund of $1,000.
Have a garage sale or do whatever you need to create that initial fund.
Eventually, you will build this fund up to the recommended amount of 3-6 months of living expenses, especially after you pay off your consumer debt!
You can put this money in a savings account so that you have easy access. A typical savings account will be a lower yield.
A higher yield account, for example, is Ally. They pay 1.9% to 2% for money that is just sitting there.
Some credit unions have specific programs for educators.
It’s worth checking into!
Next, look at the debts that you have.
You’ll want to take action and eliminate any consumer debt with the highest interest rates.
Throw any extra money at these to demolish them as soon as possible.
As you are paying off the card with the highest interest rate, you’ll pay the minimum on all other consumer debts.
Once the high one is paid off, then you will keep rolling down, down, and further down.
Let’s get that weight off your shoulders!
Zero Percent Credit Cards (Just Say No)
Are some of you tempted to transfer your balances to a zero percent credit card?
While that might work in some cases, if you are still adding purchases to credit cards (and have a spending problem) it could be another financial trap for you.
You don’t want to rack up additional debt on a new card.
It will be worth the time to dig into your spending psychology (which usually has its roots in childhood) and discover what your issues with money are (if any)!
Let me tell you that student loan debt for teachers needs to be handled very specifically.
If you have federal loans, you can utilize programs like the Public Service Loan Forgiveness Program (PSLF).
That means if you do everything perfectly, then you could potentially have the rest of your debt forgiven in ten years.
To qualify you must make ten years of on-time payments.
Also, you must request an annual certificate verifying those payments.
It’s a good idea to meticulously document all contact (who did you talk to, what time, the topic) with the representatives regarding your loans.
There's also a teacher loan forgiveness, some states have very specific programs, so it depends on the state that you're in.
Those programs cannot be used at the same time. One has to be used first, and then the other one starts. A lot of the time the public student loan forgiveness could be a better deal.
I want you to know that student loan debt is is a completely different animal. You need to be aware that these programs are out there.
Start from day one, don't wait.
Keep in mind that if you refinance your loans to private loans, you wipe out all of these opportunities.
Do you have an hour to invest wisely in your future finances?
Checking into your savings options will save you years in lost money and regrets!
You don’t want to be in the most expensive plan. If you are a brand new teacher it can cost you an additional 1% above what you need to be paying.
When you are looking at the different plans that are available notice things like how much the Commissions are and how much the internal investment costs are.
The 403 B is like a car. The investments are like the people inside the car. The people inside have their costs.
I recommend that you look at what the costs are.
Some companies are .04 percent a year, all the way up to over 2% a year.
Look for a plan that isn't going to cost you a lot of money, especially if no one is there guiding you through the process.
Investigate your savings options thoroughly before you sign anything!
How do you feel about diving?
Now is the time to get comfortable and dive deep into your employee benefits.
Your pay is important, but so are your benefits. The things that you receive from your employer can add up to a heck of a lot of money saved out of your pocket.
If you do have medical expenses, you might want to take a look at the flexible spending account that you have available to you or what's called an FSA account that will allow you to put money in and reduce your income taxes for the year that you do it.
That money can be utilized for medical expenses, vision, braces, and your eyeglasses. Just keep note that these are use it or lose it plans. Make sure that you're only putting in what you're thinking you're going to spend for that year, or else it might not have been worth it.
If you have children, check out the dependent care accounts as well. These are also usually run through the same companies that have flexible spending accounts. So it's the same concept, you put the money in that you know you're going to spend on your children's daycare or preschool.
The money goes in and reduces your income and then you're able to take it out and use it for those expenses. But once again, these are use it or lose it.
Automate, Automate, Automate
When it comes to saving and paying things, automating is key.
I consider it to be a very important habit when you are first starting!
Think of automating as receiving your take-home pay after other things have come out.
If you automate money going directly to your savings every single month, it's like you never saw it. It's like it's not even there. You think this is my take-home pay, and what I have left to work with.
Also, don't be afraid to invest your money. As long as you pick one of those accounts that isn't extremely expensive!