Hampton’s new career isn’t much different from the auto industry when it comes to future job prospects. Detroit public schools have been in financial turmoil for several years. Former Michigan Gov. Jennifer Granholm hired an emergency financial manager in March 2009 to fix the district’s $305 million deficit. State education officials took further measures to address budget woes in February, ordering 70 schools to be closed, while boosting class sizes to more than 60 students by 2013.
Hampton is committed to his new path, but his decision to join the teaching profession will reduce his income by another $23,000, which means that once again, he must put his finances under a microscope.
Now, he’ll need to calculate the true cost of pursuing his passion, especially since he plans to get engaged within the next month.
• Adhere to a strict budget. Hampton has done a good job of initiating budget cuts and has consistently allocated 10% of his paycheck to his 401(k). However, he needs to establish an emergency fund of between six and eight months of living expenses. He should use the $2,000 financial fitness winnings to start his cash cushion. For the next seven months (while he is still at his current job), Hampton has the potential to save about $350 per month. If he does so, this will add about $2,450 to his savings for a total of $4,450. He should put this money in a high-yield savings account. Hampton also needs to pay off his consumer debt. He should use his expected $1,000 tax refund to pay off his $500 credit card balance. The remaining $500 can go into his emergency fund. After he begins his teaching job, “it’s going to be very, very tight,” Fulbright says. After paying his mortgage and student loan bills each month, Hampton won’t have any extra cash to contribute to savings. But given the high demand for African American male teachers, especially in math, Hampton should look into working with afterschool programs or tutoring positions. The additional work after school, and during the summer months, can generate additional income and help Hampton build up his cash reserves. On average math tutors with Hampton’s experience and education can make $19.39 an hour, according to Payscale.com, a compensation data firm.
• Stay put. Hampton should stay in his current home until the economy improves. Selling it now would be costly. Moreover, if he adheres to this new budget he should be able to afford his mortgage payments. Hampton has a three-bedroom home and should consider renting out the extra two rooms to help offset the mortgage until he gets married and can benefit from being part of a dual-income family. If Hampton rents each room out for $586 per month, he can cover his monthly mortgage payment of $1,172. Since his home’s value has dropped significantly, refinancing or modifying his existing loan is most likely not an option.