In a nutshell..
Have the attention span of a regular internet users? Here are the bullet points :-)
- Try to dial back spending on your class.
- Avoid bad debt (especially cars, clothes and credit cards).
- Make sure you claim everything you can on your tax.
- Earn more money if you can (overseas, second job, side business)
- Watch, listen, read, ask others about money and investing
- Invest your money in something that generates COMPOUND INTEREST
DISCLAIMER: I'm not a financial advisor and this is not financial advice. Don't sue if you read this post and you aren't a millionaire tomorrow. I'm not rich. I drive a 1998 Subaru Liberty and my financial goals are to be able to spend time with my family...maybe with a trip to the Maldives thrown in.
I've been teaching for 13 years and I love it.
As teachers each day we're faced with a new opportunity to change the world.
It's like being a charity worker...but we get paid for it.
However, we certainly don't earn "big bucks", that's why it's all the more important to understand some of the fundamental rules of money and investing.
These are some of the financial fundamentals I wish knew when I started teaching:
Good vs Bad Debt
When I received my first paycheque as a teacher I immediately when to the bank...
and got a loan...to buy a camera.
It was a 6.1 megapixel camera and it cost me $4,200!!! Now it would be lucky to fetch $10 at a garage sale. It took me three years to pay off the loan.
That's bad debt. Anything you borrow money for and it's value goes DOWN is called bad debt.
- A fancy NEW car
- An iPhone
- Tickets to One Direction
Good debt, is debt that you use to purchase something that will go UP in value.
- A COLLECTIBLE car
- Shares in Apple
- One Direction Memorabilia (I'm not overly sure about this one)
As a very rough rule of thumb, if it's fun now...it's probably bad debt. If it's going to allow you the have a LOT of fun later, it's probably good debt.
Buying my camera wasn't the worst experience, but if it had of been on a credit card or for some reason I couldn't pay the loan repayments (illness, lost my job, spent all my money on music (MP3s,CDs, Cassettes, Records)) things could have gotten ugly very quickly.
I'm not saying "No bad debt for you!", I am suggesting it is a good thing to be aware of how you are using your money.
Stop spending on your class
I know, this is sacrilegious.
But it's not your responsibility to buy lunch for every kid in your class, everyday. Your students don't all need a new Smiggle pencil just because it's Thursday.
Most teachers are guilty of spending money on their class (most of us have spent enough to buy a small island in the Maldives), but at some stage you have to draw the line.
For me it was having my own kids. What I spent on my class dropped by about 90%, BUT my creativity/resourcefulness went up by 90%.
I focused on getting my students what they need by asking their parents or the school. I also created experiences for them rather than giving them "rewards/prizes". My favourite experience was allowing all 28 of them to dump a bucket of ice water on my head...far cheaper (and better) than a Chuppa Chup.
After many years of teaching I remember getting my final big pay rise.
$11,000 per year or $200 per week extra. BIG Party!
After taking out tax, superannuation, laptop hire and my student loans I was left with around $6,000 per year or $110 per week...medium party.
We should all pay our share of tax.
But as the president of "Youland", you should be aware of what you can claim as a tax deduction(the government will refund you on some of your work related expenses) and keep records (take a photo of your receipts and save them in Dropbox/Google Drive/etc).
Things teachers might be able to claim on tax:
Any questions?...seek advice from an accountant.
- motor vehicle
- annual association membership fees or union fees (for example Teachers Federation)
- clothing, including compulsory uniforms, protective clothing, laundry and dry-cleaning
- self-education (workshops, courses, magazines, journals, newspapers, etc)
- home office – phones, calculators, internet, electronic organisers, computers and software, meals, and teaching aids
'Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.' - Albert Einstein
When you invest money your aim is to make money in the future.
Compound Interest is "Interest on your interest".
Basically over time the amount of interest you earn grows, because the principal grows by the amount of interest you got last time...clear as mud?
Here's an example of compound interest works after starting with a sum of $10,000 and compounding interest (10%) over 30 years.
0 years- $10,000
5 years- $16,105
10 years- $25,937
15 years- $41,772
20 years- $67,275
25 years- $108,347
30 years- $174,494
If you left that $10,000 under a mattress, it would still "only" be $10,00 after 30 years.
Compounding at a healthy 10% means you would profit $164,494
The point is: Start investing in things that grow as early as possible. Let time do the work.
Chase the $$$$
My wife and I worked in Hong Kong for six years.
Teachers can be paid significantly more in Hong Kong and the tax rate there is much lower (around 6-12%).
Add the fact that Hong Kong is an awesome place to live and you have a recipe for teachers chasing the $$$. I would particularly recommend Hong Kong to young teachers trying to to get a "financial head start" and great experience. Hong Kong certainly isn't the only places teachers are in demand and paid well. Search the net, but make sure you do thorough research before you head off overseas so you know what you are getting yourself in for.
Super or 401K
Let's face it, Superannuation/401K is a sexy as santa...naked.
Personally, I still don't take as much interest in mine as I should.
As a minimum you should know where it is, how much you have and how it is invested.
As to how to invest it you need to speak to someone that knows more than I and get an...
This is where you can model "life long learning" for your students.
Read a few books on finances, investing, small business, budgeting, property, shares, etc and talk to them about what you learn.
There are a million books, YouTube clips, podcasts, websites, etc from a millions different sources. This is great because you are sure to find someone that suits your style. It sucks because a lot of them are about as knowledgeable as me (not very), so be careful.
But whatever you do, make sure you start.
Generate more income
Check with your employer/principal first in case your school or department doesn't allow this.
If you are allowed and you have time, and a skill/knowledge, use it to generate more income.
It might be a second job tutoring, Teachers Pay Teachers , stacking shelves, stunt doubling, personal training, neurosurgery...whatever fits you.
Or you might start your own business: a stall a a market, an online shop, the next Facebook.
Just don't lose sight of your work/life balance. Working hard is great, but not at the cost of your health or your love of teaching.
Get comfortable with less
I'm very happy with my 1998 Subaru Liberty. It gets me from A to B (most of the time). Have I had a few students mock me for my "old bomb"? Definitely, but I'm ok with that.
I have found what makes me happy, time with family and friends, so that's where I direct my money. I don't need a new car, camera or clothes.
In the time of YOLO it's not sexy to think about tomorrow, which is all the more reason why those that do will likely be in a much better position financial in years to come.
I hope this blog post give you a few ideas, if it does please share it with your friends...that way you'll have someone to play with when you retire young.