Disclaimer: The statements made in this post are the opinion of the author. They should not be viewed as financial advice. Please consult with a financial specialist before making any financial decisions.
This post may contain affiliate links, meaning I’ll receive commission at no extra cost to you for your purchase.*
Everybody knows that teachers are underpaid. Putting aside salary the job is incredibly draining, requires long hours beyond official “contract time”, and the benefits that long compensated teachers for their work are slowly being chipped away.
The problem is even though people give lip service to paying teachers more, they don’t follow through at the ballot box.
Now we could sit around and cry about it, but that attitude isn’t what strong teachers are made out of. Instead, teachers can take their financial situation into their own hands and make themselves rich.
No one is going to do it for you.
If that pep talk didn’t help, and you still think there is no way teachers can get wealthy, consider these five reasons why every teacher should be rich.
5 Reasons Teachers Should Be Rich
As a disclaimer not all of these reasons will fully apply to every teacher. But at least 3, and probably 4 of them will be. Many teachers even enjoy all five benefits. So please take this information and adapt it to your own situation.
1 Time to Hustle
This is the teacher super power. More so than any other profession, teachers have baked in time off from work.
Now I realize there are other obligations on teachers during that time. Trust me, I’ve been to enough summer professional development.
But the two month long summer, full weeks off for holidays, and other days off throughout the year give teachers a unique ability to put in extra hours of work on a side hustle while still getting paid during those days off.
Now there are many side hustles out there that are easy, especially for a teacher during the summer months, but that doesn’t mean they are a good fit.
As a teacher you will need to find a side gig that balances high income and seasonality/flexibility to make the extra work worthwhile.
Driving Uber and making $10 an hour is not the solution. Uber puts a drain on your car, your gas, and your time. Many side hustles fall into this drain category and essentially keep you busy without really increasing your income noticeably. Especially if you have to pay for day care.
Instead look for work that is at least $15/hour, (higher in some locations depending on daycare or other costs). Some of these jobs require training or certification, but other don’t. It just takes more effort to find them than applying to the first restaurant job you see.
Some great teacher side hustles I’ve heard of include:
- Driving with CDL or large vehicle certification (this picks up in the summer)
- Owning a local swimming pool (the owner also employs other teachers as life guards)
- Selling a seasonal item like flowers, ice or fireworks
- Renting out bounce houses and slip ‘n slides
- Building a passive business like drop shipping
- Shopping the sales and making money reselling items on Amazon
- And so much more!
2 Multiple Retirement Options
Teachers are in the unique position to, most likely, have access to the maximum number of retirement accounts possible. If you want more information on these retirement accounts check out this post on Making Sense of Investing.
Also, just because a retirement account is available doesn’t mean it is good. Be sure to look out for some common investing pitfalls before opening a retirement account to get a Good Return On Investment.
A 403(b) essentially acts the same as a 401(k) but for public employees instead of private employees. That means you can put money in from your pay check to save for retirement.
This is a service that is offered through your school district’s HR department so you’ll have to talk with them for more details.
In a traditional 403(b), you reduce your taxable income by every dollar that you put in. This can be a great way to save on taxes and prepare for retirement.
If you are like me an don’t make enough money to pay taxes, that might not be a concern yet. So the ROTH 403(b) option might be better since you pay the taxes upfront, but then you let it grow tax free and pull it out tax free at retirement age.
On top of the 403(b) most teachers also have access to a 457(b) plan which acts like a 403(b), meaning it has to come from your income through your employer.
But, the money in a 457(b) plan is more accessible than a 403(b) because you can access that money without penalty when you separate from service with your employer.
That means that if you have money in your 457(b) and you retire at age 55 instead of 59 and a half (or whatever retirement age will be by the time we get there) you can pull that money out and use it to retire. 403(b) money would not be available without penalty until you hit the approved retirement age.
The 457(b) is seriously a teacher retirement savings super power.
AND many districts offer a ROTH 457(b) option which gives you all of the benefits listed above for the ROTH 403(b) with the added benefit of avoiding penalties when you separate from service with your employer.
A lot of teacher benefit programs are slowly being chipped away. One of those is healthcare. Premiums only ever seem to go up.
One way to handle this is by offering a Health Savings Plan (HSA). The purpose of the HSA is to allow people to pay for medical expenses with tax free dollars.
But if you contribute to an HSA and never touch it for medical expenses, you can invest it and pull it out when you retire without penalty AND without taxes. That is 0 taxes on all of that money!
If your district offers an HSA, and you are healthy enough not to need it, then I recommend opening one and investing it to take advantage of the tax savings.
An Individual Retirement Account (IRA) is available to anybody. I literally went to Fidelity and opened one up in 5 minutes. It is just another place to put money aside for retirement and to get tax advantages.
The amount you can contribute is less than a 403(b), but every little bit you can set aside counts.
Just like the 403(b) there is also a ROTH IRA option with all of the same benefits listed above.
Putting it All Together
Now, here is where it gets crazy. Let’s say you have all four of these retirement accounts. Here’s what you can do (in 2021).
For your 403(b) you can put in $19,500 a year (that’s $1,625 a month)
For your 457 you can put in the same amount in addition to that, so another $19,500 a year and $1,625 a month.
The limit for an HSA is $3,550 per year or about $295 per month
And The IRA limit $6,000 per year and $500 per month.
Of course talk to a tax professional before doing this, but in theory a teacher could contribute $48,550 per year or $4,045 per month without giving a dime in taxes.
Now that is a ton of money, especially on a teacher’s salary, but if you have two salaries, or if you can cover expenses with a side hustle then you could basically give your entire working salary to investments without paying taxes.
Or you could put all that money in after tax to a ROTH account and let it grow tax free for decades and have a huge nest egg to retire with.
The point is most teachers will pretty much never run out of retirement accounts to invest in.
3 Forced Saving
I am not a believer in pension plans. I think that they are all going bankrupt due to poor management, and teachers 20 years from retirement will be lucky to get a pension, let alone teachers starting today.
That being said, I could be wrong and teachers are fortunate that they are in a system that even has a pension because any kind of safety net at retirement age, even a small one, will be nice to have.
The reason pensions are a super power is that you have no choice. Regardless of how much you invest in retirement accounts you are investing in a pension plan if you have one.
So if you’re in teaching for the long haul then this could be a fantastic way to cushion your retirement on top of the investment options we’ve already looked at.
Just makes sure you don’t depend on it. If you invest as if you don’t have a pension plan, then end up getting pension benefits, that icing on the cake will make retirement all that more sweet.
Related: Why Is It So Hard To Save Money?
4 Debt Forgiveness
Many educated people come into their profession with a heavy burden of student loan debt. The difference between teachers and other professionals is the ability to get student loan forgiveness.
Usually this requires being part of a program that caters to underserved communities and/or staying in the profession for a certain number of years.
But all told, having tens of thousands of dollars of debt disappear without putting your own money towards it can be very beneficial financially.
Of course, if you can avoid student loan debt then please do. But if not, look into getting your loans forgiven.
5 Predictable Raises
I know what you’re thinking, teacher raises are a bit of a joke. But there are a few things that can compound to make your raises actually worthwhile.
First, you get an additional year of service raise. Second, you get a cost of living adjustment of the pay scale most years ranging from 1-3% in general. Third, additional education or certification can increase your raise by hundreds of dollars.
Using a combination of these things, you now have the super power of knowing you’ll get a raise and being able to plan accordingly.
That’s where the 50/50 rule comes in. Whenever you get a raise, spend 50% of it on yourself and 50% of it on investments. If you increase your investments into a retirement account as soon as you get a raise you’ll never miss it.
So let’s say your total raise is only $50 per month every year (which is on the low end). $25 a month is yours to keep and $25 is there to be invested.
That means you invest $300 in year one, $600 in year 2 and so forth. Over the course of 30 years you’ll have invested $139,500!
Assuming an 8% return, however, you would end up with $346,293! While that isn’t enough to retire on, most people could contribute more than $25 a month per paycheck. Just $75 a month increasing by $75 per month each year would get you a million dollars!
Use this predictability to your advantage!
3 Reasons Teachers Are Poor
If it is so easy for teachers to become wealthy, why aren’t more teachers rich?
First, let me acknowledge that sometimes there are circumstances beyond your control that prevent you from becoming wealthy. But there are still general obstacles that every teacher can overcome to get one step closer to becoming wealthy.
1 Lack Financial Education
The first obstacle is lack of financial education. As educators, teachers know first hand the importance of being educated. But somehow financial education falls through the cracks for many of us.
The real problem is most people never encounter the opportunity to gain a good financial education before being dumped into being an adult.
And worse, some people grow up in an environment where incorrect financial principles are taught and reinforced regularly.
That means you need to take your financial education into your own hands.
There are so many ways to do this, but I would recommend two resources other than this blog to begin.
First, Dave Ramsey is a powerful advocate for teachers and his program teaches the basics of how to get out of debt and stay out of debt very well.
Second, 403bwise.org has a wealth of information for teachers and other public employees.
Learning a few basic principles about getting out of debt, saving, and starting to invest will go a long way toward overcoming a low paycheck.
2 Poverty Mindset
Have you ever heard, “I didn’t get into teaching for the money”? If you have then you’ve heard someone express the poverty mindset.
There is an unspoken rule in education that we can’t be rich because we are teachers so we must speak of money as if it is dirty and evil.
I’ve fallen into the trap. It is so easy to shrug off responsibility for our finances with a flippant comment like, “I’m underpaid” or “I don’t make enough money for this”.
It almost feels like teachers collectively have taken a vow of poverty, or at least must maintain that façade to the world, as part of the role of being a teacher.
This mindset doesn’t have to prevail if teachers can become financially educated.
All educators have heard of growth mindset. It is a staple in discussions on helping kids learn.
And yet, teachers are some of the worst culprits of having a fixed mindset there are.
The poverty mindset is a fixed mindset. A mistaken belief that you have to stay poor because you’ve chosen teaching as a career.
This is not true. With the right education teachers can become rich because we have the grit and the talent to do it.
3 Putting Others Wellbeing Before Their Own
Lastly, we have the other problem with teachers–we care too much. Now I don’t want to say that caring, especially about students, is bad, but sometimes it is.
Let me give you an analogy that everyone can understand.
When we get on an airplane we are subjected to the same safety demonstration that makes all of us role our eyes.
Think back to the last time you actually listened to what the flight attendant was saying. Do you remember the part where they instruct you to put on your own oxygen mask before assisting others?
If you tried to help someone else before putting on your oxygen mask you’re liable to pass out. Then you can help no one.
When teachers put the benefit of their students in front of their own, the teacher will eventually pass out. This is called teacher burn out.
This happens emotionally, and financially.
On the emotional side, make sure that you keep time for yourself sacred. Avoid taking work home with you (I know it sounds impossible) and find ways to unplug from the classroom.
On the financial side, I have even harder advice. Stop spending so much of your own money on your classroom!
Let me be clear, I understand that there isn’t enough funding to make your classroom as cutesy as you’d like. But seriously, set a budget for how much you can spend in a year (not in a month, it shouldn’t be that big of a number) and then don’t exceed that.
Take things from retiring teachers. Get supplies from students before they leave at the end of the year since they’ll probably throw them away anyway. And for heaven sake, don’t spend half of your paycheck on candy!
If your financial house is not in order, you have no business spending money on supplies to build somebody else’s house.
It is a hard truth, but teachers everywhere need to hear it.
Teachers have a lot more opportunities than many workers to become wealthy. And in my opinion, having a middle range salary is kind of an advantage because there is little to no pressure to keep up with the Joneses.
In fact, according to Dave Ramsey, teachers are one of the top five professions most likely to be millionaires.
So if you want to take control of your finances, get your financial education and join the ranks for teachers who have proved that money knowledge is money power.
Have you ever used one of the rich teachers super powers listed above? When is a time you’ve heard a teacher express the poverty mindset? Tell me about it in the comments below.
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A list of definitions used on this blog can be found here.
Pension Plan: A system where employees of a company or organization pay money into an investing pool over the course of their career and in return get a pay out from that pool after they retire. The payout usually has to do with number of years someone contributed to the pool and an average of the highest salaries obtained by that person.
50/50 Rule: Whenever you get a raise 50% or that raise goes towards investments and retirement and 50% goes into your pocket. This allows you to almost automatically invest for retirement without ever missing the money from the raise and getting to enjoy the increase in you spending at the same time.