As teachers we get paid 20 equal paychecks that arrive twice per month, from Sep through June. June is followed by a wonderful unemployment paycheck drought of July and August. Mrs. JumpStart and I are both teachers and have lived this dual teacher money cycle for 22 years. In my early twenties, I estimated I needed 3500$ per summer month. 7000 bucks for the summer meant I needed to save 700$ each paycheck month to prepare for our summer paycheck drought. The graph displays 4 yearly cycles of the resulting summer money in my checking account. The left two cycles are an ideal world where I spend $3500 each summer month and save $700 each work month. The cycles on the right are meant to be a little more sloppy realistic, where I run out of money at the end of the summer, don’t save enough at Christmas, and play catch-up in the spring.
In reality between summer jobs, home improvement projects, car issues, children, tax refunds, NBCT money, and vacations, the real graph would have even less rhythm. In our twenties, preparing for summer was tough, and there were several reasons. We didn’t make as much money, student loans, a car loan, and we were spending money renovating the house, buying tools, buying furniture, etc. I always knew that I could pick up some construction work if necessary, but we typically got by, and I mostly avoided summer jobs. In our thirties, it became a lot easier to reach 7 grand in summer money. I hate to admit it, but if we saved more, we had a more extravagant summer, and spent more on things like renovations and better vacations.
Money on this graph is money we prepared to spend. There was money funneled to other accounts, because we had decided to pay ourselves first. Soon after graduation, automatic withdrawals from our bank account were setup to purchase mutual funds. In hindsight, we should have funneled more money, and set up a ROTH-IRA earlier, but we have managed to accumulate a decent chunk of money in mutual funds.
Breaking the cycle.
Over the last few years, we have begun to break the pattern. There have been several factors at play:
- Higher salary.
- No car payment.
- Extra income from selling on Amazon.
- Extra income from Myrtle Beach townhouse.
- Cheap vacations due to credit card bonuses.
Surviving the summer no longer seemed as daunting, and today we could put away $7000 in 2 months.
Times are changing.
JumpStart Jr. is graduating, going to college, and there is a new cycle looming. There is a summer and college tuition to prepare for this year. $30,000 is a nice round number that covers college tuition and summer expenses. It wasn’t all done this year, and we had help, but we are on track to be there by June. I don’t know the details about tuition payment dates or amounts, but we’ll spend a chunk of money this summer, and we’ll spend $20k on college next year. In order to be ready for next summer, we need to save $3,000 each work month next year. Our new cycle is below. It doesn’t look that different, until you notice the y-axis. The original graph maxes out at $7k while the new graph tops out at a whopping $30k.
The New Graph.
The new graph is oversimplified, and there are a couple of issues. The college tuition bill is twice a year, not annual, and I do not know which months tuition is collected. Money for spring freshman year is already saved, and I will begin saving for fall sophomore year before that spring freshman tuition is spent. It may be appropriate to separate the tuition spend into different seasons. In addition, the balance will never be 0 at the end of the summer, because I will still have $10,000 ready waiting to pay the spring semester bill. Unfortunately, I am not smart enough to wrap my head around an accurate shape for the cycle. Regardless of the shape, the simple idea of the graph is our new reality. Bottom line. We need to save $3,000 each month during the school year, to prepare for summer and tuition expenses.
Anyway this is the plan. I don’t have all the answers. The plan doesn’t consider year 4 where there are 2 kids in college, and I don’t even want to think about grad school. I am going to have to accept this new cycle.