7 Expert Financial Planning Tips for Teachers and Professors: Advice From a Financial Planner

Teachers are the unsung heroes, playing a vital role in molding the minds of tomorrow. Yet, their noble profession often comes with financial challenges. They must juggle tight paychecks, demystify the chaos of student loans and constantly worry about less-than-ideal retirement funds. But fear not! With a sprinkle of savvy and profession-specific financial planning, teachers can navigate these hurdles and pave a worry-free path to a secure financial future.

Understanding your financial health as a teacher

Teachers face unique challenges in the areas of personal finance that require careful planning and strategy:

• Manage student loan debt repayment.
• Navigate complex retirement plans.
• Balance living expenses on a teacher's salary.
• Make the best of limited opportunities for career advancement and salary growth.

To create a roadmap for financial stability and growth, you must clearly understand your financial situation. Connecting how income, expenses, debts, and assets are integrated, you can identify areas for improvement and develop a comprehensive financial plan.

Here are a few strategies for navigating common financial obstacles you’ll encounter as a teacher:

• Create a sustainable cash flow plan (and stick to it). 
• Explore student loan forgiveness and repayment assistance programs.
• Understand and maximize employer-sponsored retirement plans and benefits.
• Seek professional financial advice when needed.

Practical money moves for teachers

Navigating financial challenges requires a practical and effective approach. By focusing on cash flow management, student loan repayment and maximizing employee benefits, you can create a solid foundation for your financial future.

Hone in on cash flow

A good financial plan always starts with understanding and managing cash flow. Examine income in versus expenses out. This is the first step in the “organize it and then prioritize it” approach. The next steps are to prioritize essential costs such as housing, food and transportation while also allocating cash for an emergency fund and debt repayment. 

Sometimes, we’d ask our clients to try “reverse budgeting,” which is the 2024 version of “pay yourself first.” Here’s how it works: First, set aside money for your saving and investing goals. Then, allocate what's left for your expenses and discretionary spending. But you can’t do that without a cash flow review. 

But expect some trial and error. It might go something like this: Make the plan, execute the plan, expect the plan to go off the rails, throw away the plan, and start a new plan. The premise here is that life changes, and so should your plan. 

And give it time to work — it took 18 months to construct Walt Disney World, the literal happiest place on earth — it’ll take more than a week or even a month to construct your cash flow plan (it might not be the happiest place on Earth, but it can be as sustainable and fulfilling!).

Tackle teacher student loan repayment

It’s rare to find a teacher who enters the profession without some sort of undergraduate or graduate student loan debt. If that's you, congratulations! Having served over 200+ teachers in my career, you’d be considered a unicorn without this kind of debt. 

If you have student debt, know that getting a handle on it sooner can save you thousands. Income-driven repayment (IDR) plans, which adjust monthly payments based on income (AGI) and family size, can be beneficial early in your career when the starting salary is less than (or equal to) the amount of debt.

Benefits of student loan forgiveness programs

Explore loan forgiveness programs like Public Service Loan Forgiveness (PSLF) early on. This program forgives the remaining balance on federal Direct Loans after 120 qualifying monthly payments (usually 10 years) under a qualifying repayment plan. It also requires you to work full-time for a qualifying employer (a 501(c) or nonprofit institution). 

I realize that teachers have every reason not to trust the PSLF program. Prior to the pandemic, it was historically flawed. The lack of success could be misconstrued as targeting the teacher profession specifically. The truth is that PSLF was poorly implemented for all borrowers. 

The program has improved significantly, thanks to the PSLF waiver (expired October 2022) and the IDR waiver (expires June 30, 2024). These waivers are, in essence, a “mea culpa” from the Department of Education. Borrowers have also seen better education and transparency surrounding the PSLF journey, making it a lot stronger today than in 2019. 

While the struggle for teachers pursuing PSLF from 2007 to 2019 shouldn’t be overlooked or ignored, the profession must accept and be ready to move forward with PSLF as a potentially effective way to speed up their financial wellness.

Related: Teacher Loan Forgiveness Program vs. Public Service Loan Forgiveness for Teachers: Which is Better?

The icing on your financial cake: Reducing a teacher’s tax burden

Taking advantage of teacher-specific tax deductions can significantly reduce your tax burden. Deductions for unreimbursed classroom expenses and tax credits like the Lifetime Learning Credit for further education are valuable. 

Here are some tax-saving tips for deductions to consider:

• Classroom supplies and materials
• Continuing education and/or professional development expenses
• Educator expense deduction
• Union dues or fees
• Contributions to tax-qualified accounts (401(k), 403(b), 457(b), HSA, FSA)

Long-term financial planning to build wealth as a teacher

As an educator, you can set yourself up for a secure future if you focus on making smart choices with big decisions. Let’s explore some financial planning tips.

Saving for retirement

Many teachers are eligible for state pension plans, which can provide a reliable source of income during retirement. Longevity risk in retirement is just as important as market risk folks, it’s just not as sexy to talk about. 

While certain states are more complicated than others (I’m looking at you, Minnesota), understanding the specifics of these plans and supplementing them with additional retirement savings vehicles, such as an IRA, 403(b) or 457(b), is crucial.

Contributions you make to these tax-advantaged accounts can help increase assets (retirement savings go up), lower future student loan payments on an IDR plan (deferring contributions with pretax dollars lowers AGI) and reduce your taxable income (Lower AGI = lower taxable income). But don’t forget about matching contributions — employers often match your contribution up to a certain percentage amount. This is free money that can help to build a more comfortable retirement.

Homeownership for teachers

With careful planning, buying a home on a teacher’s salary is possible. A teacher mortgage loan can provide down payment assistance or discounted interest rates, making homeownership more manageable. 

When house hunting, stick with affordable homes in your budget range. It also helps to save up for closing costs and moving expenses before getting preapproved for a home loan.

Insurance and risk management

You likely get health insurance through your employer as a private or public school teacher, but what about income insurance? As an educator, your income depends on your ability to work. An unexpected illness or injury could jeopardize your financial stability. Long-term disability insurance is often overlooked, but it provides income insurance if you become disabled and are unable to teach for an extended period.

Diversify income sources

While your teaching salary is the primary income, adding additional revenue streams through side jobs for teachers can boost your wealth-building. Consider tutoring, teaching summer school or creating educational content online. Real estate investing, like buying a rental property or getting into crowdfunding, is also a good option to consider.

The teacher’s blueprint for financial wellness

Long-term financial wellness requires a strategic and proactive approach. Here are some essential tips to help you build financial security, optimize resources, and pave the way for a stable future — even on a teacher’s salary:

• Develop and implement a spending plan, cash flow plan or money map plan. You can call it whatever makes you feel empowered or brings a smile to your face (I’m a fan of the dough directive). The important thing is just to do the plan.
• Explore student loan repayment options. Look into repayment assistance and loan forgiveness programs. You are your biggest self-advocate here. Don’t go down easy; your net worth depends on it.
• Optimize contributions to the employer-sponsored retirement plan. And make sure to take advantage of any matching contributions. Please. Don’t. Leave. Free. Money. On. The. Table.
• Protect your income with disability insurance. As you grow your wealth, you’ll need to protect it. Disability insurance is how you safeguard your income and make sure you and your loved ones don’t suffer financially if you have an unexpected disability.
• Do the little things well. Plan for taxes, take advantage of deductions and explore additional income opportunities. Many people would pay for what’s in your brain — I’ve seen some creative teacher side hustles! 
• Seek professional help from a financial planner. A quality financial advisor looks at your entire picture and understands your pain points and strengths. As best we can, let's skip the financial advice from the product salesperson who sits in the breakroom with free pizza and tries to sell 10% commissioned annuities to teachers as a career.

For personalized financial planning tailored to the teaching profession and taking into account your specific financial goals, consider working with SLP Wealth. We’re a fiduciary financial planning firm dedicated to helping teachers navigate their financial journeys confidently. 

Taking control of your financial future today can help you achieve financial stability and peace of mind. Long-term financial wellness is within reach with the right strategies and support, paired with small, actionable change rooted in your financial priorities.