We know that youâre focused right now on sharpening pencils and finishing up your lesson plans for this school year, yet as a new teacher, itâs also important for you to make time to think about finances and the future.
Sure, youâve just started your career (or maybe youâre on your second one), but the sooner you get started planning for financial success, the better off youâll be and the more options youâll have. âIf you can just put a little bit of money away for retirement early, the value of that money compounding over time is exponential,â says John Cicala, a financial advisor with Equitable Advisors. Itâs all about growing your confidence as you build that safety net of financial security.
But if youâve never given much thought to saving for retirement, it can feel overwhelming. Hereâs are five steps to getting started:
1. Sign up for your 403(b) plan.
Many teachers are lucky enough to have a pension, which can provide guaranteed income in retirement. This gives you a strong foundation to build upon. Youâll also want to personalize a plan to meet your specific needs. A 403(b) is a great place to start.
Remember that any amount that you can set aside will go into the account tax-deferredâand grow tax-deferredâuntil you take the funds out in retirement. When you contribute on a consistent basis, you build confidence in your own ability to optimize saving and investing while still living life to the fullest!
2. Save for emergencies, too.
Putting money in a rainy-day fund may not seem like itâs part of retirement planning, but having money set aside for unexpected eventsâfrom a leaky roof to car repairsâmeans that you wonât have to tap into your retirement account or use a high-interest credit card should something like that occur.
Eventually, youâll want to set aside about six monthsâ worth of expenses in your emergency fund, but like retirement savings, even small contributions will add up over time. Make it easy on yourself by setting up regular, automatic transfers into a high-yield savings account or another account where the money is safe and easily accessible.
3. Have a plan to pay down your student loans.
Itâs common for teachers to start their careers owing money on the loans that helped pay for their education. You may be able to make those loans less expensive by consolidating them into a lower-rate loan or signing up for a loan forgiveness program, such as the Teacher Loan Forgiveness Program, available to teachers who work for five consecutive years in a low-income school or educational service agency.
4. Make a budget.
If it seems like your income wonât allow you to live your life and cover steps one through three above, creating a budget can help. By making sure you take care of these obligationsâand other billsâfirst. Instead of waiting to see how much money you have leftover at the end of the month, you can spend on everything else without feeling guilty.
âBudgeting doesnât have to be difficult,â Cicala says. âYou want to look at monthly income versus monthly outflow. You want to know how much youâre spending on a monthly and an annual basis, so you can plan for what you need now and what you want for your future.â
5. Increase your retirement savings over time.
As you make progress toward your other goals, such as paying down debt or building up your emergency savings account, you can think about increasing the amount that youâre able to contribute to retirement. One easy way to raise your contributions is to boost them every time you get a raise at work. That way, youâll still be taking home extra cash in your paycheck and wonât even miss the extra savings.
You got into education for the kids and to have a positive impact on their lives. Creating possibilities through expanding knowledge and building confidence is what teachers do, and itâs what you need to do in your financial life, too. And you donât have to do it aloneâlots of teachers rely on financial planners to guide them through the process. Because when you understand what you know and whatâs next to learn, you can make decisions that benefit youânow and in the future.
