Academics and teachers are often on 9 month contracts rather than 12 month. That means that there’s often not a paycheck coming in for 3 months out of the year. For folks used to budgeting the 9 month paychecks as if they were 12 month, that can be a problem.
There are a number of different ways that people deal with the summer months.
Let the school do the math
Perhaps the easiest (though not economically optimal) is to ask the school to prorate the 9 month salary and pay it over 12 months. Not all schools offer this option, though some offer it as the default (it is very common for K-12 teachers, for example). The benefit to doing this is that no planning needs to go into this option. The negative is that you get three months worth of income later than you would have otherwise, which means you miss out on debt repayment savings or investment gains while you wait. Back when she was an academic, #2 chose this option. She calculated the interest she could earn on the extra money if she got it over 9 months, and it was something like $11. She decided it was worth $11 to her in order to get the same amount of money every month.
Get more $
An attractive option is to earn additional summer money, although this requires extra work. Summer money can come in the form of teaching summer classes, taking on additional administrative roles, or getting summer money through grants. For people who do not have university options, it is possible to take on another job or make some additional money via consulting. #1 loves getting grant money, but it doesn’t happen every year.
Another attractive option is to be married to someone who makes enough money to live on during the summer without having to save, although this requires either luck in love or sacrifice. This option requires not lifestyle inflating to the point where you cannot live on the spouse’s salary alone for three months. This summer #1 is sort of doing that, but with a hefty back-up emergency fund that she’s been saving to refill after our most recent car purchase.
Save when you’re paid
For many of us, saving is the best (or only) option. There are different ways to save.
If you generally make a lot more than your expenses, you can just save what you don’t spend and then figure out what to do with the leftover money in the Fall when you get your first paycheck of the new school year. This method requires you to be putting away more than your required summer expenses during the school year and to be able to moderate your optional expenses based on how much you have in the bank. This method is basically what we did the first few years when we were living like graduate students on professor salaries. That additional money would end up going into IRAs every October. Ironically, this is how we handled money when we didn’t have as much money because we also didn’t have enough of an emergency fund to have many luxuries built into our budget. As our savings and income grew, we were able to take more risks with spending (ex. eating out once or twice a week), and our monthly spending has become more predictable.
If your gap between income and spending isn’t that large, then you’ll need to do some math. You can figure out the expenses needed for 3 months, by taking your annual expenses, dividing by 12 and multiplying by 3, though if any big bills come due in the summer (property taxes, life insurance, etc.) those will also need to be taken into consideration. Then you can save up until you hit that target number. Alternatively, you can divide the total amount needed by 9 and put the same amount away every month, possibly via an auto-deposit. #1 saves up to the Target number and then pads it with some additional emergency fund (the emergency fund part is larger when her DH is unemployed than when he is employed– likely this summer most of that money will just roll over to next year).
If you have the resources or have problems with impulse control, you can put money in CDs or Termshares that come due when you need the money in the summer. Some credit unions also allow “Christmas clubs,” where they automatically deduct money from your account that you can’t touch until a pre-determined date, that are more general than just saving for Christmas, though they generally charge you money rather than giving you interest for the option. Back in grad school when #1 got paid 2x/year, she put a significant portion of her first paycheck into a CD due 9 months later so that we’d have money to live on during the summer (interests rates were high and my income was low, so the $200 or so that we got in interest via doing that was highly welcome).
If you have a lot of resources, you can undrip dividends from stocks during unpaid months, though it’s not clear this would be optimal unless you have a lot of wealth but not a lot of income (maybe if you’re one of those mythical trust-fund humanities profs that people on the Chronicle forums loved to complain about).
Sometimes it is just hard to save money when you have it. When that happens, it is likely that the summer will be leaner than it should be. There are a few ways to trick yourself into spending necessary money when you have it so you don’t have to pay it when it runs out. For example, you can prepay required summer expenses like insurance or summer camps during the paid months. Another thing #1 used to do when money was tighter was to put off getting reimbursements for things like daycare or credit card rewards until Summer– those little credit card rewards were really helpful when checking got low near the end. Another trick is to put reimbursements and other “found” money in a bank account that is separate from your main one and then only tap it when you need it or make regular transfers from it in the summer. #1 is a big fan of hiding money from herself in online savings accounts as a way to decrease unnecessary spending.
Those of you on 9 or 10 month contracts, give or take, how do you handle the unpaid months?
May 21, 2018 at 8:53 am
I used to keep a really strict budget, and put 1/3 of my take home into a paper account (that is, I kept it separate on paper only, but it was in my regular savings account). Summer can be more expensive than the school year if you want to travel or do things (or need to, for research).
But at some point, I realized how privileged I was to have the money to do that. It requires having a back up of some sort, whether it’s previous savings, parents who can lend money, or a larger paycheck than you need to live on.
I have colleagues who come from much poorer families, whose families need help themselves, who have lots of education debt, and so forth. It’s MUCH harder then. It would help a lot if our school would at least offer the option of paying over 12 months.
May 21, 2018 at 9:14 am
Summer can also be more expensive if you have kids in K-12– public school is a lot cheaper than camp!
May 21, 2018 at 11:59 am
Camp is SO EXPENSIVE and as I live in the middle of nowhere it’s not even POSSIBLE to send your kids to camp for an entire summer. I am the summer childcare, which is not always awesome.
May 21, 2018 at 12:04 pm
Luckily for us we have several summer camp options for say, K-4 (minus the July 4th week and another week in August), including one run by the school district. For older than that there seems to be pretty much nothing in August and everything else is pretty scattered.
May 21, 2018 at 9:06 am
believer in spreading the 12 month income that arrives in 9 months but is spent in 12 months out on spread sheet with all the 12 months expenses and then under spending each and every month with any ‘found or extra money or earnings’ being held totally as spare savings. When I had a bonus I put all of it into savings/emergency funds (no pension only self funded retirement money)…… live like a grad student when no longer one. IF married, ALWAYS live on the income of only one person and spread the income equally between the two people for savings, while ensuring if the richer income person died /left the remaining person would be financially able to continue with insurance/savings etc.
PS: IF said life insurance exists, require married or divorced that the second person be notified before policy is cancelled for lack of payment or if beneficiary is changed(keep the children covered! That needs to be in divorce agreement too!!!!!!!!
May 21, 2018 at 9:08 am
Our university gives us no choice—the 9-month salary is paid out over 12 months (in a weird way, such that some of the summer month’s pay is for future work, and needs to be repaid if you quit). Summer salary support results in extra paychecks at full salary, so for many science and engineering faculty, summer months are at 7/3 the normal paycheck: (1+3/4)/(3/4). I rarely had summer pay—when I had research grants I stretched out how long I could pay grad students, rather than enriching myself.
If the university hadn’t spread out the pay checks, I would have lived off of savings during the summer (which I did the first summer I worked for the university, because no one told me where to get my paychecks, and the admin assistant just collected them in her desk for 3 months).
May 21, 2018 at 9:16 am
It’s interesting how different schools make different choices about the 12 month payout– whether it’s the default, required, optional, or not available (as with Bardiac below).
My school recently made some changes about how it deals with the summer months, which make it harder for people who aren’t able to budget well for whatever reason.
May 21, 2018 at 10:11 am
We get paid over 12 months, and that’s fairly standard for public schools in my area too. My only frustration with the public perception; there’s the image that we’re getting paid for 12 months while only working 9 (well, 10 in my case with lots of breaks in the middle).
When I was in grad school, they actually gave us our department support as a lump sum at the start of the summer. During the school year, you just got your RA/TA pay. I think that was smart of the department. The lump sum meant, tho, that you had to survive from May until October, because you didn’t get RA/TA pay until after your first month. We were paid monthly in grad school. I loved monthly pay because it was so easy for budgeting, and I found the summer money great too. This leads me to think that I’d do similar to you; I’d save part of each paycheck and dole out money to pay myself over the summer.
May 21, 2018 at 11:47 am
There are benefits to the big lump– you can, for example, buy a mattress at the beginning of the year instead of having to save up for it, but it can get difficult near the end (or you’re forced to oversave in case of emergency). All of these things are much easier once you’ve got a reasonable emergency fund.
May 21, 2018 at 10:50 am
I’ve worked in 9-month positions @ colleges/universities that paid over 12 months that were set up in different ways — some delayed payment (first check comes in September, last in August, work starts late August and runs through early May) others prepaid (first check comes in July and last in June, same basic work calendar). The former seems silly to me — at the margins, it must save the institution little money, and it makes it difficult for junior faculty (or anyone with little saved) to come to your institution (and relatively easier for them to leave). Of course, in today’s job markets (not to mention those I was hired in), that may matter little, but all the same.
May 21, 2018 at 10:57 am
When I started they gave me a month of summer salary in August before I began because that was the only way to guarantee health insurance Sept 1st! (Remember the bad old days of health insurance where insurance gaps could keep you from getting coverage?) They don’t need to do that anymore, so now our new faculty usually don’t get a paycheck until October.
May 21, 2018 at 11:42 am
When my parents were on the faculty sometimes they taught Summer School classes, in which case they got paid in Summer. Years when they didn’t plan on teaching Summer School they usually had the University spread the payments over 12 months.
May 21, 2018 at 11:58 am
The spouse’s school pays everyone on a 12 month calendar. I’m not sure they even *let* anyone be paid on a 9-month calendar. I’m paid on a 9 month (for reasons) but my income is allocated to child care, college accounts, mutual funds, and teavel, plus we always know how much it will be.
Interestingly, at spouse’s school, summer research stuff is all paid in the summer but as an extra lump sum. This year the spouse gets a $19,000 lump sum next month from a grant.
New faculty here are paid starting August 1, which helps broke new grads some.
May 21, 2018 at 12:49 pm
My U’s default is a 12-month pay schedule, and I’ve been lucky enough to have summer salary in addition to that, so my summer paychecks are whoa, bonus! time. The U will allow us to get paid over 9 months, but only if we jump through several hoops, and there are administrative complications to it. I like the whoa, bonus! so I keep it set to default.
May 21, 2018 at 1:02 pm
When I get summer money from grants it doesn’t have my extra retirement or DDA or insurance stuff taken out, so they’re also bigger checks, but not 2x bigger. Mmm money.
What do you do when you get a windfall like that? Is it targeted, or does it just go with all the rest of the household money?
May 21, 2018 at 3:06 pm
We’re less structured than (one of) you are. Last summer we handed back the TDI, so the cash flow helped pay for its replacement. Mostly it just goes with the rest of the surplus into taxable savings (we already max the other stuff).
In vague terms the summer salary / extra taxable will likely eventually go towards housing — sabbatical housing, or possibly trading houses at some point because Spouse is unhappy with the leaf-blower noise level in our current nabe, or just paying down the mortgage if the SALT deduction situation stays what it is (but our rate is 3.4% fixed, so not a huge load). And we’re in an overall place that (one of) you is familiar with, where Spouse is earning startup bank right now but that’s not a forever situation, so that taxable may eventually make up for my 403b contributions at some point when we’re just on my income.
One nice thing at my U is that our summer salary is based on our “new” (post-raise) salary for each year, and this year I get the tenure bump (stealth bragging here).
May 21, 2018 at 3:22 pm
May 30, 2018 at 8:11 am
We have a similar scenario, and I use it to fill up the savings account I use for property taxes (for starters). That is mostly for ease of ignoring prop taxes the rest of the year, which are due in two lump sums throughout the year. Cash flow early in the year tends to be light since I like to front load my retirement – it is nice to just have the tax money waiting. Then we use the excess for mortgage pre-payments, generally. I also top of our targeted savings if needed.
So far, it has been grant money for husband in the summers. If that wasn’t available in the future, it would be my salary. I’d just have to plan for property taxes differently.
May 30, 2018 at 8:16 am
I wonder how difficult it would be to front-load my retirement (our forms are kind of a PITA and it is easy to take out the same amount each month, but not easy to vary it) and if it would be worth doing or not. That would definitely be another way to adjust for saving for the summer. It would make October-January (and maybe even February) tough though. I will probably stick to having the same amount taken out each month mainly because I’m lazy.
May 22, 2018 at 8:06 am
We aren’t even given the choice of anything but being paid over 12 months for our contracts. So decision made for us. And I took the job (partially) because I make more as a 10 month faculty librarian than I did as a 12 month staff librarian where I was before, so I’m used to the pay. Add in the strange way our summer is scheduled and there’s almost no way to use the time to pick up a summer job of some sort. When I’ve finished my second masters maybe I could adjunct a class theoretically?
July 30, 2018 at 1:14 am
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