Finance Friday - How I Manage My Personal Finances (as a “Broke” Educator) - Introducing Personal Finance

This post is an update and a re-launch of Chang the World’s personal finance section  - Finance Friday! In this section, I will be diving into a variety of topics that you may find useful. Future posts will be topic specific complete with resources you can use for yourself or your students! 
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I have a lot of interests; personal finance being one of them. This is one of those subjects that should be taught in school. It’s so huge that I incorporate it into my economics class ever since my first year. Let’s face it. Most students are more likely to use personal finance skills straight out of the classroom than wonder about how the supply & demand of eggs are affecting its prices. I wasn’t taught it in school and “life skills” ALWAYS come up whenever you ask students what they want to learn.

Being an educator is tough and sometimes it can be a thankless job. We're not going to dive into the whole "we're underpaid" argument. Until there are massive policy change in how we treat education and how we pay our teachers, we need to get a grip of our own finances and look at how we can make things work. 

​I’ve had my fair share of students who aspire to be educators only for them to tell me, “I’m not entirely sure if I want to go through with it. Teachers don’t get paid a lot.” I feel the media exaggerates the myth. Don’t get me wrong. I do believe it’s true that educators are overworked and the amount of work and hours we put in do not match our compensation. I teach in California and I cannot compare how much I am compensated versus my peers in other states like Arizona and West Virginia. Compared to those states, I do get paid more. However, I do teach in the Bay Area, which has a ridiculously high cost-of-living. I can’t afford my own place and have housemates. The most I can do is to manage my budget well. I’ve been managing my budget quite well that I can say I live comfortably in the Bay Area on a teacher’s salary. I’ve been talking about this to my (teacher) friends a lot about this topic and they’ve shared some of my insights with others. I’ll post what I shared with them today on how I manage my budget and still be able to save money. ​

Teacher Resources
Before I dive into it, I want to share a very cool resource I use in my classroom - Next Gen Personal Finance (NGPF). This non-profit organization provides financial literacy absolutely free. There is no paywall and their resources are excellent and constantly updated. They even offer a full semester course!
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Two books where I draw lessons from and sometimes assign as readings are:

• The Richest Man in Babylon by George C. Clason​

The Richest Man in Babylon is a short text with very simple to understand parables of basic financial wisdom such as “pay yourself first” and compound interest. 

• How to Win Friends & Influence People by Dale Carnegie

Really a self-help book, but it definitely teaches one a lot of people skills. I read this book before I became a teacher and a lot of the lessons I got out of this book I was able to directly apply to my teaching practice. An example is “Remember that a person's name is, to that person, the sweetest and most important sound in any language.” Learning my students’ names is my number goal at the beginning of every school year. 
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There are a lot of tools out there to help one keep track of their budget. I personally don’t use it, but I do introduce the Mint app to my students since everybody has a smartphone these days. I tried it for about 2 days and demonstrated it to my students. A few former students told me they use the app since it’s convenient. 

Here’s the link to my budget template sheet if you ever want to use it to keep track. There’s two sheets. The first sheet is to keep plan my monthly budget and the second sheet I use to keep track of my total assets (liquid and non-liquid). It’s a bit ridiculous much, but #adulting. 

I used to keep track of it on a composition notebook. I actually I still do, but a spreadsheet is so much easier to keep up-to-date efficiently. I use the notebook to keep track of my daily/weekly spending habits, a habit I developed maybe 5-7+ years ago. 

Story Time! - Where My Own Personal Finance Story Began
My parents never taught me personal finance. I learned it on my own. I first picked up a sense of personal finance in the 8th grade to pay for my hobbies, which my parents refused to support. The hobby was Magic: The Gathering cards. My parents didn’t see the value in wasting money on cards so I had to use my Lunar New Year’s money on it. When I used up all of the money, I thought, “Oh crap. I’m broke.” I even "borrowed" money from our family coin jar before just so I can buy cards. I never returned that money...

That was my first lesson in personal finance: I had lived beyond my means. What I should be doing is living within my means. 

Here’s a few lessons I’ve learned over the years: 

First Rule of Personal Finance:

Pay Yourself First

• Before you plan any budget, set aside a certain amount of money to put aside to save or invest (and I don’t mean go shopping). Put away for a rainy day fund (emergency fund). The suggested amount of an emergency fund is 6 months’ worth of budget on the assumption something happens where you don’t have an income anymore. At the very least, save for 3 months’ worth; 6 months is most ideal. 
• I try to set aside half my paycheck for saving and use the remainder to budget my expenses
• It doesn’t matter how  much you put it as long as you are putting SOMETHING in! 
• How I Do It: 
  • I try my best to save about half my paycheck before I plan anything. I don’t live a cheap life. I live it frugally. Learn to differentiate between needs & wants. Do I have to eat out? Do I need to buy this? 
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Where to Keep My Money? - Go Credit Unions Instead! 
I have 2 bank accounts, all online or credit unions, and in high-yield accounts. I had a third one but I closed it because the rates and services are not competitive enough. 

Large corporate banks (Citibank, Chase, BofA) are NOT worth it, especially with the savings interest rate, which is typically at 0.01%. The current inflation rate is at around 1.5%-1.7%. This means our money LOSES value by keeping it in savings. It sucks that our economy is designed for us to spend and invest money rather than saving. This can be dangerous. Anyways, that means we need to put money in places where we can slow the loss, or even earn, such as investing. 

Much better rates. And don’t worry, most credit unions are part of the Co-Op Network where you can access their ATMs fee-free, or at 7-11s. 

These are the 2 banks I bank with:

• SchoolsFirst Federal Credit Union (Main Account, only available to educators, not limited to California. Look at membership requirements here)
• Ally Bank (Online, purely meant for savings) 

If you do mobile banking, then you shouldn't have any qualms about opening an online bank account. Most of my banking has gone online and/or mobile. The last time I went into a physical bank was to withdraw money from an ATM machine. 

• Do your own research and find out which ones give you the best rates.
• ​Keep shopping!

Here is the breakdown of my banks’ interest rates as follows (as of December 2019:
SchoolsFirst

• Investment Checking (Checking Account) - 0.05% ($0 - $24,999), 0.08% ($25,000 to $99,999), 0.10% ($100,000+)
• Liquid Advantage Money Market (Savings Account) - 0.25% (Tiered, depending on balance)
• Summer Savers - ~3.75%

Ally Bank

• Online Savings Account - 1.7% (December 2019 Update. It's no longer one of the best out there. It barely matches inflation rate) You can check out this NerdWallet link for other options) 

Side Note:
As of posting, HSBS Direct Savings has a rate of 2.02%.

How about Certificate of Deposits? They Suck. Opt for High-Yield Savings Account Instead
Do NOT open Certificate of Deposits (CD)! Most interest rates aren’t even above 1% unless you lock in your money for longer periods of time. There are high-yield savings accounts out there like Ally Bank (2.1%) that already beats CD rates AND it’s liquid! Ally Bank is 2.2%! You can get better returns by investing in that money. More on that in future Finance Friday posts
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In a Nutshell, This Is How I Roll:
My Summer Savers allows you to deposit $2000 max/month and it renews every year, so up to $24,000. I have money from my Liquid Advantage Money Market automatically transfer to my Summer Savers.

Direct Deposit → SchoolsFirst Investment Checking → Move money to Liquid Advantage Money Market to ensure I have my automated amount so it can transfer to → Summer Savers

• Any leftover money I do an external transfer to my Ally Bank Online Savings Account where I earn 2.1% in interest rather than the 0.05% or 0.3% in the other SchoolsFirst accounts

And this is how I maximize my interest rates. I also put some money into other investments like my IRA and stocks. At this moment, most of my liquid assets are in my Summer Savers, Ally Bank Savings Account, and my Robinhood stock account.

Where My Other Assets Are:
With the exception of Robinhood, the rest aren’t liquid, but I contribute to them.

• Robinhood (If you sign up for an account, click my referral link here and we’ll both get a free stock!) - Commission-free stock trading! Since I started investing in April 2016, my portfolio has seen over 35% growth! But it also comes at its risks.
  • Do your due diligence and research
• 403b Plan. This website will help you compare various 403b plans.
• Traditional IRA with Vanguard - which acts as a Tax Shelter - I just opened it so I can’t tell you much about it yet, but Vanguard has a very reliable reputation. So far, I've seen some growth in my portfolio.
• I still have some money in my 401k back when I was in the private sector. I have to roll that amount over to my traditional IRA soon.
• I also pay into a pension as a California public school teacher. It is automatically deducted from my paycheck. I do not pay into Social Security after all.

Things to Consider:

• Live within your own means
• Do your due diligence and research
• NEVER, EVER, open an account with a fixed annuity!!! It is NOT worth it. And it will screw you over the long run. It essentially functions like a long-term CD with a guaranteed rate of return regardless of the market. However, if the market does well, you don’t get ANY of the growth. For example, if your fixed annuity is at guaranteed 5% and the market goes up by 10%, you don’t get any of the growth. And if you want to move your money, some fixed annuities have heavy surrender chargers.

There you have it. This is how I manage my finances in a nutshell. I covered a lot of topics, but I’ll go more into details with them in future posts with additional resources and links I use for myself and my students. This initial post is to give you a simple glimpse of my finances.

Thank you for reading!