Ask the grumpies: How to deal with 9 month salaries?

Kaycookie asks:

My husband is new TT science faculty and I am also working part time teaching in a different department. Okay, very part time because we have 3 little kids. Anyways, any suggestions on dealing with a 9 month salary over 12 months, but then also getting summer support (he is guaranteed this for at least 4 years)? We budget just fine during the year, but not much left to save (about $300/month on top of mandatory retirement at about 13% salary with their match). Is it a bad time to just plan on saving mostly in the summer since we get almost half or our income then?

Hm, here’s another one we should have made an effort to answer earlier.

I’m assuming here that you’re saying that you can save $300/month during the school year but are expecting a deficit during the summer, not that you’re saving $300 on top of saving for the summer during your regular 9 months.

I was in a similar situation for two years (I had 9-months only, DH had summer salary for two years).
1. I sat down and figured out our actual expenses (these include the $1K “emergency” or forgotten fixed expense that we seem to get almost every single month) and our required expenses (mortgage, insurance, etc).
2. From that information, I figured out how much we spend each month and multiplied that by 3 to account for the summer months.
3. Then I subtracted DH’s salary for those three months.
4. Then I added a one month buffer for an emergency fund, just in case the university screwed something up with the summer salary or we had an emergency.  (They never screwed up his, but recently they totally screwed up mine two years in a row after they moved from decentralized grant administration to centralized.)
5. You could then divide that number by 9 to see how much you’d need to save each month not to feel a pinch during the summer. I didn’t do that, but instead looked at the whole number and put away the full amount– as soon as I got that amount I stopped putting money towards summer savings.

However, in my case we were making more than we were spending, which gave us an automatic buffer.  My calculations only told me how much money we could put away in extra retirement or (later) towards the mortgage.  You’re already spending almost exactly what you’re earning.  That doesn’t give you much room.  On top of that, it’s going to make cutting expenses in the summer especially difficult.  Instead of making little cuts throughout the school year, you risk being forced to eat rice and beans or carry a credit card balance (wasting money on interest) come August or September.  That’s not going to be pleasant, especially if you have to do any kind of back to school shopping.

So, what can you do?  One thing you can do is see if the university will prorate your salary to 12 months for free.  When they do that, they pay your 9 month salary as if it was a 12 month salary so you get the same amount each month.  That way you know exactly how much money you’re getting and it’s easier to force yourself to make those little cuts (so you don’t have to make big cuts later).  I think most places will do this if you ask.

You can also increase your earnings.  Even a temporary increase in earnings will allow you to put away extra money for summer.  You don’t have to put away the same amount each month so long as you have the full amount in May (or June or April, depending on when the last set of full paychecks comes).  You probably know better than we do how bringing in more income works in your situation.  Work more part-time hours, for example.  Your DH is probably submitting grants.  Perhaps you could babysit.  Etc.

And, of course, you can try cutting expenses.  A good place to start is to call up all your providers (cellphone, insurance, internet, etc.) and ask for discounts.  It’s amazing what just asking can cut off your monthly bills.  After that you may have to think about bigger cuts– where does your money go?  Setting up for a few months may help if you don’t know.  For us when we need to cut, it’s eating out that’s the first big variable expense.  For others it may be clothing or wasting food or vacations etc.  You’ll need to look and see what you’re able to cut and what you’re willing to cut.  If you’re still having trouble you may need to think about larger cuts– housing, transportation, etc.

To make sure you aren’t tempted to touch the summer money before summer, you may want to put it in a separate (possibly online) saving account or put it into laddered CDs that mature and deposit in your checking right when you need them.  Back when interest rates were higher, this was a way to make a little extra money, but now it would just be mainly of use as a commitment device.

Longer-term you’ll have better information about raises, your part-time hours, grants, and so on.  It’s difficult to think about what life will be like without the summer money four years from now if there’s a chance for you to replace it.  Still, you really should think about the worst case scenario– what happens if you lose the summer money but don’t make it up another way?  What will you do to increase income, cut expenses, or save now so you can spend down later?  The less you spend now, the smaller the change to your lifestyle will be if that happens.

Sidenote:  Once the kids are older, you’ll want to up that retirement savings.  13% is fine for now, but you probably have some catch-up savings to do from graduate school.  Think about IRAs once your income goes up.

#2 has never gotten summer salary (boo) but I have my university spread the 9 month salary over 12 months.  I figured it out once, and it cost me literally less than $12 in interest that I could theoretically have earned.  I’m willing to pay $12 in order to get the same amount every month.  Maybe one day I’ll hit the big-time on a grant.  No luck yet.

Gumpeteers, have you been in this situation before?  What do you do with 9 month salaries?  What do you do when you’ve gotten used to summer money?


13 Responses to “Ask the grumpies: How to deal with 9 month salaries?”

  1. Leah Says:

    It seems to me that she says they get more in the summer, not less (“plan on saving mostly in the summer since we get almost half or our income then”). I still think your tips are helpful, but I’d also encourage the family to save a lot of that summer money. Live at the same level as during the school year, and automate the savings so you’re not tempted by extra money in the bank account. I have a big chunk of my paycheck autowithdrawn every time so that I’m building up a big savings account while our expenses are low.

    • nicoleandmaggie Says:

      I think that’s the case for the first four years, but not after that? And she’s worried about after that? I read the get almost half our income then as they get almost half of a paycheck each month, but your interpretation also makes sense. In any case, they’re getting more for 4 years and then less after that.

      • Leah Says:

        In either case, I think your tips apply about living with less. If they do get more money in the summer than the school year, then I’d save that and not touch that extra at all four 4+ years. That could be a way to boost retirement savings or create the “summer money” fund you have in advance to help tide them over to higher earnings for her (as the kids age, perhaps) or more belt tightening. I would advocate belt tightening now and not waiting until the money stream dries up. No good to live beyond one’s future means.

  2. gwinne Says:

    My university recently STOPPED spreading our 9 month salary over 12 months. Some tax thing I don’t understand. Theoretically I put money away for summer, but it practical terms it rarely happens. Should be, uhh, interesting this summer…

  3. undinenotofgeneralinterest Says:

    I usually do what nicoleandmaggie do: figure expenses and put a set amount in a bank account in a separate bank.

    • Leah Says:

      That’s what I do. For us, it’s not summer money (we’re on a 12 month pay schedule), but it’s for future living expenses. We teach at a boarding school and thus have housing expenses completely paid. We may not stay here forever, so we put away a mortgage-sized amount+ every month. That way, we don’t get used to living off more than we would otherwise have.

      • nicoleandmaggie Says:

        When we did that in grad school (as RAs) we ended up with enough money for a house downpayment by the time we graduated! (The stock market was good to us.)

  4. Contingent Cassandra Says:

    When I’m able to live on my 9-month salary (which is not currently the case, and yes, I recognize that as a problem, which I’m working to solve), I simply split my take-home paycheck deposit 35%/65% between a savings account that holds summer money + money for unpredictable larger bills (e.g. car & household repairs) and a checking account for current expenses. The obvious thing missing is long-term savings (which, once again, I’m working on), but one could adjust the percentages and/or do a 3- or even 4-way split. Then I move money from the 25% portion of the savings account into the checking account during the summer at monthly or biweekly intervals, to replicate the term-time inflows from the 65% of my paycheck. As long as interest rates are low, there is, indeed, no real reason not to just take one’s salary over 12 months if that’s an option (of course, if you also need summer salary to make ends meet, then the 12-month plan won’t work). Well, no real reason except that in places the idea of state government shutdowns over budget impasses is beginning to enter the political conversation. If you’re working for a state institution in a state where that might happen (or, I suppose, a private institution in really rocky financial shape), there would be an argument for claiming as much as one’s salary as soon as possible. I suspect in such circumstances faculty would eventually be paid, because students have paid tuition and need to be taught or given refunds, but there might be a delay.

  5. plantingourpennies Says:

    I actually preferred 9 month salaries the 2 years I got them. It was a nice kick in the pants to have something to pick up some of the pay slack since emotionally I hated drawing down savings then since it was like a security blanked. I probably earned more because of the pay timeline than I would have if I had taken the 12-month option.

  6. SP Says:

    I’m read this as she is concerned about now, is it OK to mostly save in the summer when they get the “extra” income and have minimal savings the rest of the year. Admittedly, it isn’t clear.

    I didn’t write this question, but I probably could have! If I read it right, this is a small “problem” and I’m not sure what solutions would be offered. She could see if the university will pay the 9 mo. salary over 9 months. I don’t see any other options. After the summer salary is no longer promised, I suspect profs are probably able to get some if they can get their own funding. Just speculating.

    What I find most difficult in this case is figuring out withholdings using the IRS calculator. I think I’m going to have to do a simple spreadsheet, but it sure is annoying!

  7. Richard Says:

    I support my wife and 4 kids on an assistant professor’s salary (tenure-track, humanities). I have my paid dispersed over 12 months instead of nine. We are extremely frugal and manage to “get by.” It can be done.

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