Use Pareto’s 80/20 Principle
A newly qualified teacher starting work in England in 2020 will earn a minimum salary of £25,714 per annum (excluding schools in London and its fringes where this figure is slightly higher).
I never paid much attention to my pay when I began teaching. I spent what I had to on necessities, like food and rent, and refrained from spending anything further for fear of getting overdrawn. Any money I saved sat in my current account, but I didn’t pay much attention to how much (or little) this was.
If you haven’t yet considered how to manage your salary in a way that can offer you some financial security, here is some advice I wish I had known sooner:
Richard Koch in his book ‘The 80/20 Principle: The Secret of Achieving More With Less’ takes the Pareto Principle (the observation Pareto made that 80 per cent of Italy’s wealth was owned by 20 percent of its population) and notes that this can be applied more universally. In particular, that the minority of your decisions create most of your results.
When we apply this principle to your teaching salary, it means that 80 per cent of your salary should be spent on necessities and the remaining 20 per cent should be saved. These figures are relative though so it could be 90/10 or even 95/5. The important thing to remember is that it’s the the smaller percentage which is going to be of greater value to you in the long-term.
Let’s see what this could look like using 80/20 as an example:
|Expenses (80 percent)||Savings (20 percent)|
|Rent or mortgage||Save and Never Touch (3%)|
|Council Tax||Irregular Shocks (5%)|
|Food||Bucket List (2%)|
|Utilities (Gas, Electricity, Internet, Phone etc.)||‘You Asset’ (5%)|
|Personal Spending (a trip to the cinema, a meal out etc.)||Giving Back (2%)|
These days most bank accounts can be accessed online and with an app. Many even have the function to organise separate accounts (or ‘buckets’) to separate your saving goals. I suggest considering these:
Save and Never Touch
A cash reserve should you ever get in trouble. A decent sum would be six months worth of living expenses. Any extra after this could be shifted to investing (which is riskier).
Cash you can use in case of emergencies, such as an unexpected dentist bill.
Money to put towards any future goals you might have, such as a trip abroad.
Money to invest in your personal education, such as courses, books or professional coaching.
Examples include buying Stocks and Shares, Bonds or cryptocurrency or on a business venture of which you have some knowledge. This is high risk, high return.
Not only could this be donations to charity, but it could also be presents for friends and family. Charity begins at home after all.
Some other ways of saving money:
It’s worth noting that a lot of your expenses are negotiable. You can always have a go at haggling when your tenancy agreement is up for renewal. Your monthly food bill can go down depending on what you buy and where you shop. Utility companies are often keen to hold on to customers so if you’re happy to spend a bit of time on the phone explaining that you’re going to leave, you’ll usually get made an offer of a cheaper bill.
Bring your own lunch to school
I cringe to think how much money I spend on ready-made sandwiches in my first few years of teaching. A colleague commented that I must be very well-off, so I quickly started cooking larger portions for dinner at home and bringing in leftovers for lunch the next day.
Take care and repair
Look after your belongings and they will look after you. Instead of buying new clothes or shoes, consider whether they could be cleaned or mended for a fraction of the cost.
Buy or find second-hand
Items bought used are often far less expensive than they would be brand new and often work just as well. There have never been more ways of finding used items people no longer want and are willing to part with for a small sum or for free. I’ve used Ebay, Gumtree, Freecycle and Nextdoor to name but a few.