Financial planning for teachers: 7 smart tips and reasons to avoid teacher credit unions-Bright
Financial planning for teachers has its own complexities. Here are 7 tips every teacher can use
Teachers need financial planning as much as anybody. Maybe more. Especially when multiple income sources are involved, plus out-of-pocket classroom expenses. Budgeting and planning can get complicated.
Tenure provides the kind of stability other professionals often envy. But is it enough for retirement? What about every other goal or milestone? And how do you prioritize different financial strategies?
Here’s 7 tips for keeping your finances on track, practical lessons every teacher can use.
The sooner you can tackle your card debt, the better. Follow a debt payoff strategy, like the Snowball method or the Avalanche method. Or use debt pay-off services like Bright to do it all for you, making smart payments to help you get debt free faster while saving you money.
Stop using your cards as much as you can. Build up and use savings funds instead, targeted for different milestones, like summer break or holiday spending. Automate your savings, so you’re saving small amounts regularly. When you use targeted funds, your saving gets focused with extra purpose.
Big unexpected expenses can be devastating. Many people turn to credit cards and end up with huge interest charges. Experts recommend an emergency fund that covers 3 to 6 months of expenses. That’s a lot, so take your time, saving small amounts regularly.
Try to avoid deferments. Stick to federal repayment guidelines — or try doing better. If you haven’t tried yet, check out teacher loan forgiveness programs. The Dept of Education outlines four of the most common ones for teachers.
Weigh the value of another degree. You may get a bigger paycheck for years to come. Summer employment is always an option, too, including teaching and coaching.
Here’s a basic budget breakdown:
- 50% for essential needs
- 20% to savings
- 30% on wants and unexpected expenditures
The rule works for just about anybody, with any income. It’s a simple way to balance your savings goals with everyday spending. Use it to set your savings goals every month.
Consider investing beyond your employer’s defined-benefit pension plan. You probably also have defined contribution retirement plan, such as a 403(b) or 457(b). But 40% of teachers are ineligible for Social Security benefits, according to one study. A Roth IRA is a popular option with balanced risk and access to your funds. New fintech services offer low or no-fee portfolio investing too.
Credit unions are often misunderstood. They’re not as flashy as many banks, and they don’t advertise everywhere, so they’re not so well known.
Teachers should know better. So let’s tackle the most common myths about educators’ credit unions.
A credit union doesn’t have the same services offered by traditional banks.
Fact: Credit unions offer the same services as banks, including automatic bill payments and direct deposit as well as lending and savings options.
Banks have more money than credit unions.
Fact: Credit unions are not-for-profit organizations that may not look as fancy as banks. Instead, they rely on your community for marketing, and as a member, you might even earn dividends from your credit union.
Credit union ATMs are hard to find.
Fact: Credit unions are often part of larger networks of ATMs. They may not have your credit union’s name on it, but you’re often able to use them fee free. It’s worth asking about.
Rates and fees are higher at credit unions.
Fact: Nope. Credit unions almost always charge lower fees, and their interest rates are often lower than traditional banks. That’s largely because they’re non-profit and often offer loyalty programs that even pay you for using some of their services.
Credit unions don’t offer reward programs.
Fact: Many credit unions do offer reward programs on credit and debit cards. For those that don’t, take a look at the fees that are associated with the various accounts. At a credit union, you’ll save on fees. Do your bank rewards outweigh the fees you’re paying on each account?
Credit unions aren’t very tech-savvy.
Fact: Time to look past the flash. With online and mobile banking issues, credit unions earn higher satisfaction ratings than banks. Why argue with the users who actually use their sites and apps?
Credit unions are just like banks.
Fact: No, there’s a big and fundamental difference. When you join a credit union, you own a piece of the organization, with say on how the credit union is managed. Credit unions also return all earnings back to members with their low fees and great dividend rates.
Credit unions aren’t FDIC-insured, so they’re not safe.
Fact: Not true. Instead of FDIC insurance, credit unions are backed and insured by the NCUA, a federal agency that regulates and supervises credit unions, holding them to the same laws and regulations as banks.
Bright gets teachers
Bright studies your income and spending habits and moves funds and makes card payments when it makes sense for you.
Bright finds the fastest, smartest way to get you debt free, while boosting your credit score and building more savings.
It only takes 2 minutes. Just download the Bright app from the App Store or Google Play. Link your checking account and your cards, set a few goals and let Bright get to work!
Originally published at https://www.brightmoney.co.