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Financial Planning for Educators

By  Brian Thorp

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As an educator, your students are your priority. Every day, you work hard to provide them with the knowledge and skills they need to succeed in life. Whether you work in a local school, regional college, university or an online education platform, you have the opportunity to make a positive and enduring impact in the lives of others. 

But even though you may have holidays and breaks to tend to your personal matters, it’s all too easy to place financial planning at the bottom of your to-do list. After all, you want to use your time off to relax and participate in hobbies you may forgo when school is in session.

If you’d like to live a fulfilling life, free of financial stress, financial planning is crucial. In between teaching, grading papers, supporting extracurricular activities and relaxing on your days off, it’s important to make time for your personal finances. 

Challenges of Financial Planning for Educators

Unless you teach personal finance, there’s a good chance you’re new to or unfamiliar with financial planning. After all, you specialize in other subjects and it’s impossible to be an expert at everything.

That’s where this informative guide comes in. We designed it to help you jumpstart your journey to financial security. You’ll find it addresses the unique money-related opportunities and challenges you face as an educator. 

In addition to this guide, it’s in your best interest to seek the guidance of a financial advisor. Fortunately, there are a growing number of financial advisors who specialize in helping educators take on the special financial planning challenges of your profession.  

Financial Planning for Educators

There are a number of topics to consider and questions you’ll have when you’re planning your finances as an educator. Here’s a brief overview:

Living Well on an Educator Salary

Your education level and years of experience as well as the location of your school and whether it’s public or private will determine your monetary earnings. According to the U.S. Bureau of Labor Statistics, here are the average salaries for several of the most common types of educators:

Of course, there are opportunities for you to earn extra income by managing extracurricular activities or picking up other employment like tutoring or working at a summer camp during the holiday breaks and summers.

While you may not get rich on an educator’s salary, you can lead a comfortable lifestyle. To do so, however, you must figure out your financial priorities and budget accordingly. If you’d like to travel as much as possible, for example, you may need to settle for a smaller home and less expensive car. 

Here are a few questions a financial advisor can help you answer to make the most of your educator income: 

  • How much should I have saved today in order to retire comfortably at my desired retirement age?
  • If I don’t have enough saved today, what steps can I take to get back on track?
  • What financial planning insights have you gained working with other educators like me?

Repaying Educator Student Loans

A college degree is frequently a requirement if you’d like to work as an educator. In fact, many teaching jobs require more than a bachelor’s degree. If you’d like to advance in education, a graduate degree or even doctorate may be necessary. 

To meet these educational requirements, you may find yourself with student loans. It’s no surprise that teachers with graduate degrees hold an average of $50,000 in student loan debt. If you’re facing student loan debt, no matter how large or small it may be, there are loan forgiveness programs at your disposal. 

The Teacher Loan Forgiveness Program states that if you teach full-time for five years at a low-income school or educational service agency, you may qualify for up to $17,500 of forgiveness on your Direct Subsidized and Unsubsidized Loans and your Subsidized and Unsubsidized Federal Stafford Loans.

Other loan forgiveness programs you may want to consider include Public Service Loan Forgiveness (PSLF) Program, Perkins Loan Cancellation for Teachers, and State-Sponsored Student Loan Forgiveness. A financial advisor experienced working with educators can help you determine which programs you’re eligible for and advise you on an appropriate student loan payoff strategy for your situation. 

Making the Most out of Your Educator Employee Benefits

Most educators receive certain benefits unavailable to professionals in other fields. As a teacher, you’re likely entitled to medical, dental, and vision insurance for yourself and your family. You may also receive sick days and paid leave as well as opportunities to cash in on a number of teaching grants. And defined-benefit pension plans can be a valuable tool to help you reach your retirement planning goals.

If you’re a public school teacher, there’s a good chance you’re a member of a teacher union like the National Education Association or the American Federation of Teachers. Your union works with your school district to negotiate your salary and benefits. Your teaching career may also open the doors to summer vacation and holiday breaks. 

A financial advisor can help you ensure you take full advantage of your benefits. Here are a few questions they may help you answer. 

  • How can I ensure my finances are in good shape in the summer and other times when I’m off?
  • How much of my income should I invest in each of the retirement and savings plans available through my school district, university, or state to maximize my benefits?
  • How should I allocate the investments in my retirement and savings plans?

Buying a House as an Educator

The home buying process is usually straightforward for educators. As long as you have a steady job at a school, university, or related facility, you shouldn’t have a problem getting approved for a loan. The question will come down to how much house you can and want to afford. 

It’s important to consider your current salary and situation rather than anticipate raises in the future. You should also figure out other financial priorities you have and ensure your housing choice doesn’t get in their way. Unfortunately, many educators buy too much house and find they have to pick up extra work in the summers and other vacation periods to cover their mortgage. 

A financial advisor can help you come up with a budget for your house and recommend the right mortgage type for your situation. With their support, you can turn your dream of home ownership into a reality without taking a toll on your finances. 

Saving for Retirement as an Educator

If you work in a public school, you may be able to take advantage of a defined benefit pension plan, which promises a specific payout when you retire. Rather than investment returns, this type of plan uses a formula to figure out how much you’ll receive. 

The plan usually requires you to teach a minimum number of years and pay a portion of your salary into the pension. It takes your final average salary and multiplies it by the number of years you’ve worked. Therefore, the amount you collect will depend on when you decide to retire. 

In the event you work in the private sector and a pension is unavailable, you may be eligible for a 401k or 403b plan, which is investment based. You’ll need to deduct money from every paycheck so that you can invest in your account. 

When you partner with a financial advisor, you’ll work together to design a strategy to help you retire when and how you’d like to. You’ll discuss questions such as: 

  • How much do I need to save to meet my preferred retirement lifestyle?
  • How can I make the most of a defined benefit pension plan?
  • How should I save for retirement if I’m not eligible for a pension (or to supplement my pension)?

Expenses and Deductions: Keep More of Your Educator Income

Just like other professions, you’ll be required to pay taxes as an educator. Fortunately, you may be able to deduct unreimbursed school, trade, or business expenses of up to $250 on your federal tax returns. This number will increase to $500 if you and your spouse are both educators and married filing jointly.

If you choose to take this deduction, it’ll be your responsibility to keep all your purchase receipts. Some of the most common examples of deductible educator expenses include fees for books, computer equipment, and other teaching supplies, expenses for professional development courses, and the costs for special equipment and supplementary materials used in the classroom. 

In addition, you may save up to $2,000 per year on taxes via the Lifetime Learning Credit as long as you’re pursuing a master’s degree or enrolled in courses to improve your skills. Lastly, if you live in a state like Ohio or Iowa, you may qualify for a tax credit or deduction if you use your own money on school supplies. 

If you work with a financial advisor, they can help you address questions such as: 

  • How can I reduce my tax liability as an educator?
  • Which federal and state deductions am I eligible for as an educator?
  • Should I take the standard deduction or itemize?

Your Insurance Needs as an Educator

It’s highly likely that your state or school district offers several health insurance options. In most cases, you’ll be able to choose from an HMO, PPO, EPO, or HDHP. The plan that works for your co-worker isn’t necessarily right for you, so it’s wise to ask a financial advisor for their assistance. 

They can help you evaluate your current health situation, needs, and budget so you can make the best decision. An advisor may also assist you with other types of insurance like life insurance and professional liability insurance. 

Financial Planning is a Necessity

Although you lead a busy and fulfilling life as an educator, financial planning should be top of mind. If you let it fall by the wayside and fail to take full advantage of all the benefits you’re entitled to, you may steer yourself into debt and financial stress. A solid financial plan can ensure your earnings as a teacher works for you and your family for years to come. A financial advisor can help you create a personalized plan so you can meet your unique goals. 

Enjoy a Secure Financial Future 

Even if you qualify for a pension, you’re not guaranteed financial security. There are many steps you need to take to achieve your goals and live a life of happiness that’s free of financial worry and uncertainty. Financial planning is essential for leading the life of your dreams today, tomorrow, and years down the road. 

How To Find The Best Financial Advisors for Educators

While you may find a great financial advisor to work with through the referral of an acquaintance or whose office you drive by near your neighborhood, it’s important to consider several factors to improve your odds of hiring the best financial advisor for your individual needs.

As an educator, you may decide the best financial advisor for you is one who specializes in understanding the unique financial planning challenges and opportunities common among teachers and education professionals. These specialist financial advisors may hold credentials that demonstrate their expertise along with considerable experience working with educators that could benefit your own financial planning needs.

Because many financial advisors can work with you online, you’re not limited to hiring a financial advisor in your neighborhood when the best financial advisor for you may live hundreds of miles away.

In other words, whether you choose to hire a financial advisor who lives near or far, it may be most important to hire a financial advisor who truly understands your individual needs based on their education, experience and commitment to helping people just like you.

In 2021, you’ll find a growing number of financial advisors on Wealthtender who serve teachers, including advisors specializing in working primarily with educators.

FAQs

Are there financial coaches who specialize in working with educators?

Yes. While financial advisors are generally best suited to help educators who need investment advice and guidance, many financial coaches have considerable experience working with educators whose busy schedules have meant day to day budgeting and financial habits could use improvement.

Use the Wealthtender Financial Coach Directory to find the best financial coach or counselor for your individual needs.

The Best Finance Blogs and Podcasts for Educators

With over 250 personal finance blogs and financial podcasts featured on Wealthtender, you’ll find several that regularly publish articles and episodes with financial planning insights useful to educators.

You’ll also find a list of popular blogs and podcasts for educators at the links below offering articles and interviews on a range of topics including financial and career advice:

Do you have a favorite blog or podcast for educators not featured above? Let us know in the comments section below or by email at yourfriends@wealthtender.com.

About the Author
Brian Thorp, Founder and CEO of Wealthtender profile picture

About the Author

Brian Thorp

Brian is CEO and founder of Wealthtender. He and his wife live in Texas, enjoying the diversity of Houston and the vibrancy of Austin.

With over 25 years in the financial services industry, Brian is applying his experience and passion at Wealthtender to help more people enjoy life with less money stress.

Connect with Brian on LinkedIn

Disclaimer: The information in this article is not intended to encourage any lifestyle changes without careful consideration and consultation with a qualified professional. This article is for reference purposes only, is generic in nature, is not intended as individual advice and is not financial or legal advice.

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