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Note: I am not a financial advisor. I’m just a blogger sharing what has worked for me. This article contains personal opinions for your consideration, not professional financial advice.
Do you all know about FIRE? No, not the burning kind- the money kind. FIRE stands for Financial Independence Retire Early.
So what does this have to do with international teaching you might ask? International schools don’t always have pension plans that you get vested in. At many places, you have to plan for your own retirement! Then there are also many schools that use shady investment companies that end up costing teachers more (Andrew Hallam talks about this in his books in great detail). You need to at least learn the basics of financial planning if you ever plan on retiring.
As a first-generation college graduate, I have always aspired to earn financial independence so that I would be able to help my family. The retire early part always seemed a bit far-fetched as a teacher, but before going overseas in 2010 for my first international teaching job, I had read about financial independence and opened an account with Vanguard. I highly recommend you open your brokerage account before moving overseas! Even while I was paying off the student loans for my master’s degree, I was investing in low-cost index funds with Vanguard. Thanks to compounding interest, I’m on the path to being able to retire before 55!
The retiring early part wasn’t really on my radar until I paid off all of my student loans while teaching in Venezuela. I had been reading Mr. Money Mustache, which inspired me to be pretty frugal, and that combined with deliberately choosing countries where I had more disposable income due to a low cost of living really helped me invest more. Then, I suddenly realized, wow, if I am not throwing huge chunks of money at my student loans I will have a lot more money to invest!
The general math says you can retire once you have reached 25 times the amount you spend each year to live. Then once you retire, you can withdraw about 4% of your portfolio. This is commonly referred to as the 4% rule. I love to use a few online calculators to keep track of my progress and do the math for me. This one is a fun and more basic one you can use if you are just getting started.
As a solo parent, the retire early part got pushed back a bit because I need to fund a 529 college savings plan for my son. I use the Utah one since I am not in Oregon to earn any tax benefits with that one. A 529 can be used at most accredited colleges and universities for qualified educational expenses- and even at some universities overseas as well. I always figure, if my son doesn’t want to go to college when he is older I will enroll in some university courses myself because I am just that big of a nerd. I almost minored in Spanish in uni so perhaps I would have enough to attend school in Spain and get one there if my son didn’t need the 529!
All of this to say, if you aren’t saving for retirement then you should start. Especially if you are like my brother who works a very physically demanding job that pays well now, but you can’t do it forever. Start investing an automatic amount every month so you don’t need to think about it. I think you can invest as little as $100 a month with Vanguard. Then, once you are getting better at budgeting and saving, start putting away more money. Play with the calculators and you will usually find that if you can save about half of whatever you are making each month that your years to retirement are really not that out of reach.