Building Wealth the Teacher Way

I once read this maxim that you should save 90% of any windfall of money. I liked that idea a lot. Then I asked myself, why not just save 100% of the windfall? I clearly have been living without the money of the windfall, so what do I actually need it for now? 

As a teacher, I don’t often get big windfalls. There is no yearly bonus and there is no negotiating a raise. So it’s tempting to exclude myself from having to live by this maxim. But there is plenty of extra money that comes our way.

Save 100% of your Stipend Checks

You might coach a sport or advise an after school club, like the yearbook. You signed up because you wanted to provide a well rounded school experience for your students. Just like you didn’t go into teaching for the money, you don’t stay late for the money. So when that extra thousand or two gets dropped onto your check for the year of coaching, just take it and save it! I personally just got a stipend this summer and filled up my emergency fund savings bucket. So instead of having to save $300 every month and it taking 11 months to fill my emergency fund, I am almost finished filling it. 

Save 100% of your Merit Pay

So there are some schools out there still using a merit pay system to try to improve test scores. While we know that incentivizing teachers this way simply doesn’t work, the practice persists. In Ohio, 50% of a teacher’s evaluation is based on student test scores. It has been shown in studies ordered by the Gates Foundation that this kind of evaluations doesn’t improve teaching and learning! SURPRISE, SURPRISE!

If you are lucky enough to win the data game then you just thank whatever god you believe in and put that money away. Pretend you never saw it. You know you have always done the best you can and should treat that money like gravy. If you don’t get it the next year, put it out of your mind. You still did the best you could. Let the merit pay grow in a Roth IRA until you’re 60 years old. 

Save 100% of your Class Coverages

No matter how small, extra money is extra money. Even if you do 10 class coverages a year and you get paid $25 for a coverage, that’s still $250. And that invested over 20 years becomes $1165. 

Save 100% of your PD pay

OK so you get the point, right? Save 100% of all the extra money. Schools sometimes pay you for extra professional development you do outside of the school. If you run a PD session, ask if there is a stipend associated before you volunteer yourself. All of these little pieces are not things you include in your budget plans so just save them! 

Little Leaks Sink a Large Ship

The point I am trying to make here is that there are lots of great ways to save money while you are a teacher. When I sit down to plan out my finances, I use the salary printed in my contract in my budget. I divide it by 26 pay checks in the year and then go from there. 
Just like spending money on a bunch of little items throughout the money will slowly but surely deplete your checking account, not saving a bunch of little bonuses will slowly deplete your potential savings & investments. You don’t want to get to the end of the year and realize you did 32 class coverages and still saved the same amount as the year before. Or even worse, you start coaching and then end up saving less than the year before! I feel very grateful that I discovered and became obsessed with personal finance before my first big stipend came in. I surely would have ended up saving only 90% of it, or worse, only saved 25% and spent the rest. 

Since I have learned to live on less by being a teacher and making a modest income, all extra money can be saved or invested. The next step is to save 100% of every raise!


  1. steveark - Reply

    Most bonuses or stipends or whatever windfalls that come your way involved extra work, or meritorious performance on your part. There is a human factors issue with just putting 100% in savings. If you want to incentivise the kind of extra effort that got you the money then I think it is important to reward yourself. It might just be dinner out or nicer than normal take out but I’ve found every single victory in life should have a small celebration. I had a huge windfall once, gigantic, and my wife and I spent about 4% of it on some things that we use a lot and enjoy. We put 96% of it in investments, but you have to live now too, so I highly recommend spending a little, even if it is less than 5%. When you reward yourself for hard work or good fortune it makes now happy and by saving almost all of the windfall it still accomplishes what you want long term. Just my opinion but it worked to make me financially independent for the last couple of decades. Plus you need account for inflation or you will drive your frugality to possibly impossible levels over time.

    • miriam - Reply

      Good point, Steve! I agree with you about having fun. I guess my view is that I keep fun in my regular budget. I have an “eating out” line item in my monthly expected expenses and do other fun things. I try to keep an even flow of fun or less frugal things so then the extra influx of cash isn’t like “Oh, now I can finally have some fun!”

  2. Ms. Fiology - Reply

    I love what you propose here! You are killing it.

    I suppose I could apply that same concept whenever I get a raise.

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