Winter is Coming, Every Summer! 8/26/23

Hello NFC Clients and Friends,

“Winter is coming,” every summer for North Carolina teachers. An odd proclamation on what may yet prove to be the hottest day of 2023, but it is a fact that should ring true for more than just Game of Thrones fans. Many teachers in the Tarheel state remember the days when episodes of GOT were released each Sunday (2011-2019), dragon <tales> soared through classrooms and workrooms the following morning, and we had the option of taking our pay over 12 months, which most did. While it took me until this summer to binge watch my first season of the Seven Kingdoms drama, apparently I was already living by the creed, “A Lannister always pays his debts.” What is good for the family name is patently good for personal finance. Living a financially fit life became a bit more challenging for teachers in NC when the state eliminated the 12 month pay option as of 2021-2022 school year. As 10 month employees, we have since received 10 (larger) paychecks a year. Seems fair, but it does take some adjustment.

As I write this post, it has been 3 months since our last paycheck in Durham Public Schools (May 26th, 2023). For many, this has been a tough stretch of time financially speaking for a variety of reasons beyond the interruption of pay. Inflation, while moderating (3.2% in July), is still a thing, and does its pernicious work slowly, behind the scenes, shrinking our purchasing power. And free time is anything but free. Ten plus consecutive weeks of summer vacation is a tremendous opportunity for relaxation, rejuvenation, and reflection! [This is to say nothing of the two weeks we have off for winter break, the week off for spring break, and the myriad of 3 day weekends sprinkled throughout the year created by Teacher Work Days and National Holidays. Talk with anyone in the private sector about their PTO or leave time as compared to our 14 weeks off each year, and you will not get much sympathy regarding our interruption in pay.] Time is everyone’s most valuable, non-renewable resource, and teachers are afforded more than most. But can we afford it? Finding ways to enjoy your free time without breaking the bank is the subject of another blog post, or book. The focus here is on the logistics of creating a source of funds for the summer.

How much do we spend during this free time? Many Norman Financial Coaching clients use Personal Capital’s (now Empower) powerful, free FinTech tool which shows them exactly how (much) they “spent” each summer, and every other month of the year. I bet you can guess when you spend the most money throughout a given year. It doesn’t take a CPA to figure out that travel and or large expense experiences happen when time permits these adventures. Toss in Murphy’s Law (e.g. car, AC, or some other key component of your life calls it quits), and the unpredictable but to be expected spikes in expenditures rear their ugly heads on their own schedule. A well funded Emergency Fund handles the unpredictable but expected. But how should teachers plan for our annual summer sabbatical without pay?

There are 3 basic approaches, each of which I have employed over the course of my career, learning from mistakes along the way. One thing is for sure, Ben Franklin was wise, so I would listen to him: “If you fail to plan, you are planning to fail.”

Plan 1: Budget for June and July. Carve out a percentage of each paycheck over the 10 months to “pay yourself” checks in the summer. Ideally, you would know how much you anticipate spending in the summer. Divide that amount by 10, and deduct this amount each month from your paycheck.1 Alternatively, you could simply provide yourself 12 equal paychecks throughout the year by multiplying your monthly take-home pay (net taxes and deductions) by 10, divide by 12, multiply that number by 2, then divide by 10 to see how much you should deduct from each paycheck.2 Either way, I recommend automating this process and having the funds routed to a separate high yield savings account (HYSA) with a bank like Ally, or use the SECU’s “Summer Cash Account.”

Note: If you plan on living large for part of your summer— plan for this. Selected Norman Family monthly spending charts from Personal Capital are included below.* Can you see which month last summer we spent 2 weeks traveling to Los Angeles, Santa Monica, the Grand Canyon, and Las Vegas? Or which year we blew it out at Christmas? These were not surprises. The unpredictable but to be expected happened in May of 2020 (minivan called it quits!). Thank you Emergency Fund! And with a 4th driver emerging in the family and 3 kids in 3 different public schools, we bought not one, but TWO pre-owned cars (for cash) on the same day that month. Outside of our emergency fund, we had budgeted for the addition of one car. The death of the minivan was an unpredictable but to-be-expected “surprise” handled by our EF. Like people, cars don’t live forever.

Plan 2: Work Many teachers work summer school, run camps, work at camps, bartend, design/teach online courses, mow grass, manage pools, etc. I have done all of the above and more. One summer I spent dragging, watering, and lining softball fields at IBM’s facility in RTP even as I coached Durham’s American Legion baseball program. I was young, extremely busy, covered in dirt most of the day, unmarried (perhaps related to the dirt?), but very happy. Another summer I was an “Enumerator” for the US Census! Hustling kept me occupied, earning, and for the most part out of trouble. But this is not for everybody, and certainly not for me as I settled down and began the “messy middle” of life with my wife raising 3 children. Well, she raised three children, and tolerated me—thanks Lindy!

Plan 3: Combination of both. In the waning years of my career, I no longer have to hustle as much during the summer, but still enjoy the boondoggle that is the AP Reading in Tampa, FL which pays well and covers all expenses for the week. I do set aside some money from my paychecks to augment the work I do, including financial coaching with NFC, but have other options now thanks to working a financial plan for the past quarter century. Another mental accounting trick one could use is to take any bonuses or irregular pay (e.g. retention bonus, extra duty pay, coaching checks, stipends, supplements, etc.) and deposit them into a HYSA for use in the summer. Once you reach your target savings, regardless of your method(s), you are done! Winter is coming each summer, so plan for it.

Please consider adding comments to this post to share how you plan on handling this relatively new challenge to teacher pay in NC. If you have questions of what approach might best serve your needs, please do not hesitate to post those questions as well, or reach out to me directly. I am happy to help.

Yours in Financial Fitness,

David Norman Financial Coaching

1 Summer Savings Plan A: Based on anticipated summer “spending.”