Personal Finance and the Economy

[spork]

Forgot to mention previously that I have no other debt. I pay off my credit card balance in full each month.

[Harlow2]

I was in a similar situation though in a time of somewhat higher interest rates and decided to double the amount of principal paid each month. I had read somewhere that it was a good idea to label the extra amount clearly for the bank so that funds intended for principal would not  not be mistakenly applied to the interest. It was gratifying to see the progress, but I could have held off for a while if I had needed the funds

[Vkw10]

Faculty at my university are discovering a principle that Clean has repeated for years. Do not include your summer salary in your family budget.

At my university, administrative roles like program director for the MS in basket weaving, typically receive a stipend for summer work. The role often involves tasks done throughout year, but the stipend will be for a month or so of summer work. It's paid during the summer, not spread over the year.

At a recent budget update, an alert faculty member asked what the "Summer Budget Reductions" line meant. Were we going to reduce summer class sections? No, summer enrollment generates revenue so we will pay instructors for teaching courses that make. Instead, much of the savings is attributed to a 40% reduction in funds budgeted for summer stipends for nine month faculty who have administrative roles. Which summer stipends are being cut? That hasn't been decided yet.

At Faculty Senate, several days after the budget update, every faculty member who spoke on issue commented on how this not-a-salary-cut would affect the family budget. As I listened, I was thinking, "Clean has been warning about summer pay for years." Clean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.

[clean]

Clean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.

Wouldnt sell.... faculty dont have money!!

[apl68]

Clean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.

Wouldnt sell.... faculty dont have money!!

I can guarantee you that if such a book ever comes out, the ILL offices of every institution that buys a copy will be inundated with requests for it within a few weeks after release.  I saw something much like that happen many years ago while working for ILL lending.

[Ruralguy]

I think many faculty probably have decent net worths, especially as they age. The problem is that we do so with fairy boring investments, such as workplace retirement vehicles and staying in the same modest house for decades. So, probably not much extra money to invest in anything fancy and to make us worry much about tax solutions. Some of the most boring millionaires are probably academics, and not even the ones who necessarily had 6 digit incomes.

[dr_codex]

Faculty at my university are discovering a principle that Clean has repeated for years. Do not include your summer salary in your family budget.

At my university, administrative roles like program director for the MS in basket weaving, typically receive a stipend for summer work. The role often involves tasks done throughout year, but the stipend will be for a month or so of summer work. It's paid during the summer, not spread over the year.

At a recent budget update, an alert faculty member asked what the "Summer Budget Reductions" line meant. Were we going to reduce summer class sections? No, summer enrollment generates revenue so we will pay instructors for teaching courses that make. Instead, much of the savings is attributed to a 40% reduction in funds budgeted for summer stipends for nine month faculty who have administrative roles. Which summer stipends are being cut? That hasn't been decided yet.

At Faculty Senate, several days after the budget update, every faculty member who spoke on issue commented on how this not-a-salary-cut would affect the family budget. As I listened, I was thinking, "Clean has been warning about summer pay for years." Clean, have you ever thought of writing a personal finance guide for faculty? This week, it might sell.

Something similar happening here. A lot of people planning to pay bills with extra service payments are wondering if they are ever going to come. The uncertainty may or may not be deliberate; it is certainly freaking people out.

Similar issues face those who spent their raises. No sign of said raises, although a lawsuit is in the works.

Apparently, personal savings rates have gone up during Covid. No doubt it's partly due to stimulus money, and to the fact that it's hard to blow money on a vacation when there's nowhere to go. But I think also that many of us are spooked, and putting away everything that we can.

As, of course, Clean has been advising all along.

[mamselle]

I vote for Clean's book, too. I've thought for many years that your input would be welcome.

You could call it something alliterative, like, "Finances for Faculty in Freefall."

Or, maybe just "Finances for Faculty"....

;--}

M.

[fourhats]

Here we are paid for nine months, but spread over 12 months. So no summer stipend. How would this work? Put your entire summer salary aside?

[onthefringe]

Here we are paid for nine months, but spread over 12 months. So no summer stipend. How would this work? Put your entire summer salary aside?

We are too. But in the summer we are being paid in arrears for work already completed, and we are technically  off duty. This has two outcomes.
1) If you leave the university at the end of a spring semester, they still owe you 1/4 of your salary, which will get paid over the following three months.
2) If you are making summer salary (from a grant or administrative attachment), then during one or more summer months you get ginormous checks that are your normal paycheck plus 1/9 of your total salary. So in the clean model, you should not be depending on that extra money to live on.

As far as the scenario Vkw10 describes, if you are paid in the summer for work you did the previous year, and they are deciding not to pay you after all for a job you are already doing, then I a) would throw a fit on that basis, rather than making the "I can't pay my bills" argument and b) would stop doing whatever (now uncompensated) work was associated with that job. They can (try to) find someone who wants to do it despite a lack of compensation, or live without it.

[Vkw10]

Here we are paid for nine months, but spread over 12 months. So no summer stipend. How would this work? Put your entire summer salary aside?

We are too. But in the summer we are being paid in arrears for work already completed, and we are technically  off duty. [snipped]

As far as the scenario Vkw10 describes, if you are paid in the summer for work you did the previous year, and they are deciding not to pay you after all for a job you are already doing, then I a) would throw a fit on that basis, rather than making the "I can't pay my bills" argument and b) would stop doing whatever (now uncompensated) work was associated with that job. They can (try to) find someone who wants to do it despite a lack of compensation, or live without it.

At my university, the first of the month is regular pay day. The nine-month faculty who opted for twelve-month pay have earned their base pay, so they get it as usual. The tenth of month is adjusted pay day for stipends, overload pay, summer school pay, and anything else that isn't base salary, so faculty with a one month summer appointment get an adjusted check on June 10.

Scuttlebutt is that some chairs and deans followed the Provost's suggestion and told faculty who have been paid stipends for part-time administrative duties to consider those duties as part of their service for the year, resulting in lots of undone or marginal work.

My dean reviewed stipends with chairs, looking for options that didn't result in uncompensated or undone work. Of the three faculty in my department who had stipends, one is getting same amount this year, one is getting half stipend and a work study student for the year, and one is getting a course release spring semester. None of us are happy that we didn't learn about the summer stipend issue before the year started, but the faculty were willing to accept alternative compensation this year. I don't expect them to agree next year.

[spork]

If you think your employer might not meet payroll in the coming year, contact HR and get your paychecks over nine months. But also ask about whether shifting from twelve-month distribution to nine-months will have any effect on your employer-provided health insurance benefits.

[clean]

We used to be able to choose between being on a 12 or 9 month cycle.  (Insurance was not relevant as we were covered for the summer IF (and only IF) we had not said we would not be back in the Fall. (IF you tell them you wont be back, they dont pay the state's share of your insurance!  - our summer insurance premiums were deducted from the last paycheck, so they didnt owe you a refund).

NOW we have switched to Workday and lots of things have changed!  We now get paid over 9 months. NO option.  Our insurance for the full year is deducted over the 9 months.  IF you tell them you wont be back, then they Might or Might NOT pay you for the insurance you have overpaid.  (I simply advise folks to resign no sooner than August 2 - the last summer start date.... I dont write the rules, I simply must play by the rules the ADMIN set up!  remembering that IF you are not looking after YOU, then NO ONE IS).

TO budget for summer, you would simply take your 9 month check and deposit 25% to a savings account. That will provide you enough money to have equal pay each month of the year.
(For example: IF you get $4000 a month, you deposit 1000 into a savings account right away. That leaves you with $3000 to spend. By the start of  summer you have saved $9000 or $3000 for each of the 3 summer months).

When I started doing this, the interest on the account meant something.  Not too much but maybe a Big Mac Meal. Now, it is not even that!  But NOW we have no choice but to be paid over 9 months.

At my first job we got paid every 2 weeks (the 1st and 15th).  IF you decided to get paid over 24 checks instead of 18, your last payday had 7 direct deposits!  (the last, plus the six for the summer!) It was nice to have six extra checks hit on the same day, especially IF you were teaching summer classes and would get additional checks over the summer!

[lightning]

We used to be able to choose between being on a 12 or 9 month cycle.  (Insurance was not relevant as we were covered for the summer IF (and only IF) we had not said we would not be back in the Fall. (IF you tell them you wont be back, they dont pay the state's share of your insurance!  - our summer insurance premiums were deducted from the last paycheck, so they didnt owe you a refund).

NOW we have switched to Workday and lots of things have changed!  We now get paid over 9 months. NO option.  Our insurance for the full year is deducted over the 9 months.  IF you tell them you wont be back, then they Might or Might NOT pay you for the insurance you have overpaid.  (I simply advise folks to resign no sooner than August 2 - the last summer start date.... I dont write the rules, I simply must play by the rules the ADMIN set up!  remembering that IF you are not looking after YOU, then NO ONE IS).

TO budget for summer, you would simply take your 9 month check and deposit 25% to a savings account. That will provide you enough money to have equal pay each month of the year.
(For example: IF you get $4000 a month, you deposit 1000 into a savings account right away. That leaves you with $3000 to spend. By the start of  summer you have saved $9000 or $3000 for each of the 3 summer months).

When I started doing this, the interest on the account meant something.  Not too much but maybe a Big Mac Meal. Now, it is not even that!  But NOW we have no choice but to be paid over 9 months.

At my first job we got paid every 2 weeks (the 1st and 15th).  IF you decided to get paid over 24 checks instead of 18, your last payday had 7 direct deposits!  (the last, plus the six for the summer!) It was nice to have six extra checks hit on the same day, especially IF you were teaching summer classes and would get additional checks over the summer!

In your state, do you get unemployment for those 3 summer months? Some state force their teachers to be paid over 12 months, so unemployment doesn't have to be paid (unless the state is one of those states where teachers and other types of employees with 9-month recurring contracts, by law, are not to be paid summer unemployment, in which case it doesn't matter).

[pigou]

I've always been surprised by people who choose to receive their salary over 12 months. It's not just the tiny interest you get from putting aside some of it on a savings account, but it also helps deal with unexpected expenses. It's much better to dip into a savings account for your summer salary than to not pay off a credit card and pay 20% interest. But then I've seen people choose a 12 month salary while carrying credit card debt, and I'd be mortified to look at what the rest of their financial planning looks like.