How Teachers Save  for Summer

It’s day 14 of the first summer off for both my wife and I. She’s a school social worker at our elementary building {Update: My wife left the district in June 2020- I’ll be sharing her story soon!}. And when I say summer off, I mean fully off (as in off as much as you can be as a teacher!). No part time bar tending or waiting on tables, and no summer school! It has been a thing of beauty, and so good for our one -year old son and our relationship as husband and wife. We are here to share how we and how teachers save for summer. 

• Looking for ideas on how to stretch your teacher salary further? Check out How to Stretch a Teacher’s Salary: 5 Tips from a Teacher

In this article, we are going to show you how we planned to save for the summer utilizing a budget system that revolved around deferred pay. In further articles, as well as our newsletter, we will provide other actionable tips to help you understand how teachers save for the summer and how you can too! 

How did we plan? 

We definitely don’t knock anyone’s socks off when it comes to our current salaries, and any other income we might bring in during the year. Surprising right? Wouldn’t you expect a teacher and social worker to rake in six figures each?! No? Well, we aren’t even close {Update: In 2019-2020 school we FINALLY hit 100k combined}. We both hover in the middle 40s and we will see a modest .4% raise this upcoming school year. Yes, our contract is FABULOUS! Not. But, our modest income has been paired with a modest lifestyle and minimal expenses. During the school year, we are a little tighter on money, as our daycare ($600/mo.- cheap, I know!) cuts out a lot of our wiggle room. Plus we contribute heavily to our son’s 529 plan during the school year {Update: We have since scaled this back in favor of other investment. More to come on this later}.

However, during the summer, both of these larger expenses go away, and so do a couple others. We stop driving so much, and so we save a considerable amount on gas each month, we eat out and get take out less often, and we have to buy less clothes and other necessities of work life. All in all, we cut about $800-1000/month of expenses during the summer! This cost-cutting helps us to manage through a period of no traditional paychecks coming in. However, we do have a source of income that helps us, and, if you have the option, you should utilize it as well! 

How Teachers Save for Summer: Deferred Pay

One of the main tools in how teachers plan financially for summer is deferred pay. For my wife and I, our cut in expenses works well for us as we already live a fairly frugal lifestyle. But we need to tighten our belt a bit in the summer since we live just off savings. At the end of the school year, my wife and I both receive hefty deferred paychecks equivalent to four normal paychecks. Except these ones do not deduct for health insurance! So on June 30th, we get handed a little over two months worth of income to add to our modest savings. For the wife and I, this brought our survive the summer savings total to $14,000!

If you have the option of deferring some of your paychecks until the start of the summer, this may be a great option for you to help plan financially for the summer. 

The Why and How of Deferred Pay

Deferred paychecks make budgeting and long term planning financially much easier for teachers. (NEA, the National Education Association, has a great article on surviving the summer paycheck gap and explaining deferred paychecks) Deferred pay also allows you to get a better view of how much you will make each month. Additionally, it is simple and requires little effort on your part. Surviving the summer months without another source of income is much easier with deferred paychecks. When you get your paycheck at the end of the school year, you can place this money aside in a specific account to be transferred to your main checking account every two weeks like your traditional paycheck. 

This helps to provide stability and ease of planning financially for teachers. 

There are a few drawbacks. You are obviously giving your employer an interest free loan of your money that they are deferring until the end of the school year for you. Schools do not like to pay their employees when servicing aren’t being rendered (yet, we clearly are doing lots of planning and professional development). If you do have a source of income in the summer, it doesn’t make sense to defer your paycheck. I would suggest taking your full paycheck during the year, and putting more of your money during the school year into pre-tax investment accounts. For information on how to invest as a teacher using a 403(b), check out this post, from the leading experts on 403(b)s at 403(b)Wise, on 403(b) basics.

Budgeting System 

My wife and I used deferred paychecks to help us develop a budgeting system. This system was designed to plan our finances out in the least effort possible, and allow us the most freedom for this fantastic summer together as a family. As we got into summer, we had about 11 weeks to go until our first full paycheck the next school year, so we had to devise some form of budgeting plan that could get us to that point. Budgeting was going to be key to making sure the money lasts us the summer and to, hopefully, have some left over to start the fund again! Now- I am not a big fan of super strict budgeting. But some times its necessary to make a clear plan for every dollar that you can. With deferred pay, this budget was going to be pretty easy to implement, and therefore, hopefully one we could stick to!

The 700/500 Plan

As part of our plan, we divided up our total deferred pay that we received into equally portions for 11 weeks. The $14,000 we had at the start of the summer would give us about $1,200 a week in our budget. Therefore, we put in place a 700/500 rule. At most, each week, we would move $1200 from our account to our checking to cover expenses. We knew (from tracking our expenses) that we spent no more than $4,800/month. With the decrease in our usual expenses for the summer, we planned to scale back how much of our deferred pay was to be dedicated to spending. However, we were also realistic and knew we’d want to pay for valuable experiences and traveling with our son. So, a super restrictive budget wasn’t for us.

• If you want to be more restrictive and get on the path to building wealth, check out this post on Building Wealth as a Teacher. Or check out my FREE ebook.

The idea with the 700/500 was that $700 would be moved over each week through automatic transfer between our accounts. This way, regardless of expenses, we’d be sure all bills are paid without worry. $700 was our minimal amount needed to cover basics bills and expenses. The additional $500 of the $1200, would only be moved if we had a big surge of bills paid in a week or other large expenses, such as at the end of the month when the mortgage payment is deducted. Additionally, we often do a little traveling or home improvement in the summer and this would provide some cushion and guilt free spending when we need it.

Now, if you are a mathematician, and you are thinking this old history teacher made a mistake, you’d be right. I oversimplified and said $14,000 divided by 11 is $1,200, and that’s not quite right. It’s actually $1,272.72 per week that we would have to spend. But our plan actually took the $72 that were left over and placed them in our emergency savings account. It wasn’t a whole lot and the account grew slowly, but it did help us add almost $800 by the end of the summer. 

Beyond the small $72 we moved to emergency savings, we also planned to hold that $500 of the 700/500 plan as many weeks as we could. This would help us end the summer in a better situation that we started it. 

Our Outcome

If we were lucky, this plan would force us to save over $4,000 (our rough estimate) of our summer savings to start again preparing to survive the summer next year {Update: We saved $5,127 by the end of the summer!}. This system and approach worked well for us. But we aren’t the only ones who have implemented a strategy such as this to successfully save for the summer. 

Conclusion

If you were wondering how teachers save for summer, hopefully you’ve got a better idea now of what ways there are to do it without working a second job.

• Take advantage of deferred pay
• Create a simple budget system that you can follow
• Plan for guilt-free spending (you need to be able to recharge!) 
• Pay yourself first (even if it’s only $72 a week!)
• Set a goal for what to have left at the end of the summer

If you’ve implemented a system that’s helped you to survive the summer, let us know in the comments down below or drop us an email at teachmoneylife@gmail.com. We look forward to hearing from you!