Is there such a thing as a wealthy teacher? It’s probably safe to say the answer to that question is a quick “no!” Most teachers are very good at their money management. You have to be to live on a teacher’s salary and manage a classroom on a teacher’s budget. However, sometimes you accrue some debt and need a way to pay that debt off fast.
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Paying off debt fast on a limited budget can seem daunting. That’s because teachers are capped at a low salary and will generally not make more than $60,000-$75,000 at the most – and that’s with perhaps a Master’s degree and at least 15 years of experience. This also varies widely based on where in the country you are teaching.
Most teachers will make an average income, after a few years of experience, in a $40,000-$55,000 salary range. Clearly, teachers don’t get into the education industry for the money! With such a low salary, how in the world can teachers actually pay off debt fast?
Creating a side-income isn’t necessary to pay off debt, but it can help you to work through the next three suggestions if you have some cash outside of your main budget. Having a side-income will also give you some wiggle room in your main budget and will allow you to focus on a few items of debt that you can pay off quickly and not have to chip away at the balance month-by-month.
A side-income can come from all types of things. You can get a part-time job in the evening, you can use skills you already have such as bookkeeping or blogging, you can be a virtual assistant, or you can sell physical or digital products online.
Note: If you have to make a choice between saving or paying on a debt, look at the interest rate on the debt vs the interest rate on the savings account (Roth, IRA, general savings, etc.). Sometimes, putting the money towards the debt that has a higher interest rate is the better option. It’s costing you more to hold that debt than you would earn by saving.
Establish a Solid Savings Account:
Regardless of how much money you make, it’s a good idea to set aside at least one month’s worth of living expenses. Some financial gurus suggest setting aside six months of living expenses but that may not be feasible on a teacher’s salary.
Plus, it’d take a long time to save up that money and if every bit of savings goes toward that, you’d be unable to do anything else for however long it takes to save that much. Dave Ramsey suggests having a $1,000 emergency fund in addition to a savings fund.
If you’re trying to tackle debt, though, you may have to make a choice. Start by having an emergency fund set up and then use the extra money to pay off debt. I realize that establishing a savings account seems odd when you are looking at paying off debt fast.
What would you do if an emergency comes up? Put it on a credit card at a high-interest rate? Or use a little bit of the savings you have set aside to cover it? Not adding to your debt balance is a faster way to get out of debt!
Classify Your Debts
Not all debts were created equally. Therefore, paying them off shouldn’t be done in equal proportions. For a teacher to pay off debt, it takes a lot of planning and sacrifice. With that in mind, the best way to pay off debts is to start small.
Dave Ramsey calls this “snowballing” your debts. It’s where you arrange your debts in order from smallest to largest and then tackle them in that order, starting with the smallest debt.
Once that debt is paid off, you can move on to the next one. Not only does this give you a sense of satisfaction for accomplishing a goal sooner, it is a great way to chunk up your debt.
Tip 2: Take the money that you were putting toward the first small debt and use it to double the payment on the next debt. This will help to pay off debt fast by increasing the payment each month and decreasing that balance.
Putting these tips in place will help teachers pay off debt faster. Unlike those in many other professions, teachers live on an extremely tight salary in spite of having obtained a good education. Living on a teacher’s salary, it can seem impossible to do anything outside of paying bills.
Applying the first tips will be the KEYS to helping you to pay off debt fast. However, neither of the two tips will work if you aren’t strict about it all. Try to refrain from spending the money you’ve put into savings. Also, pay off the debts with the money you have left over.
Creating a plan and then sticking too it will be the best thing you can do to pay off your debts. It’s not just about how much money you pay out each month, it’s about being consistent. Make yourself a detailed plan and stick to it!
Any bit of savings is better than nothing and paying down small debts is certainly better than letting them sit and accrue interest each month which adds to the balance. Do your best and let the rest fall into place.