Like many of us these days, Diane Birdwell, a 10th-grade world history teacher in Dallas, is worried about money. In the wake of a massive deficit in the fall, her district laid off hundreds of teachers, and she is now working without a contract.

“None of us knows if we will have jobs next year,” says Birdwell, who is 48 and single, “so I am penny-pinching now to make sure I am as debt free as possible if the worst happens.”

A summer vacation is out of the question, says Birdwell. “I thought, I won’t be rich as a teacher, but I’ll be taken care of. But now there is nothing I can count on.” She loves her job in a tough urban school but asserts, “I should be able to serve my community and make a living at the same time.”

Rocky economic times are taking a toll on the pocketbooks of the nation’s teachers. For some of you, there will be no raises this year. Others, like Birdwell, may face layoffs. Many of you are watching your hard-earned money evaporate as savings and retirement accounts plummet. Some are burdened by debt from student loans or from overextending yourselves to make ends meet.

In such a gloomy financial environment, it’s tempting to bury one’s head in the sand—especially if you are pressed for time, as teachers always are. However, experts suggest this is the time to get on top of your finances: track where your money is going, curb spending, and pay down debt. Once you set financial goals and stick with a spending and savings plan, you’ll be rewarded with some peace of mind to get you through the volatile times ahead.

Salaries Losing Ground
What makes the recent economic slump difficult is that many teachers already live on modest salaries that have been relatively flat for years. Over the past 10 years, teacher pay has increased 1.3% a year when adjusted for inflation, according to Bill Raabe, head of collective bargaining for the National Education Association.

“States and school districts are facing budget crunches and our individual members are facing personal budget crunches,” says Raabe. “These are people who have been underpaid for a long time. Now the budget crunch will have an even bigger impact because they won’t be able to keep up with inflation.”

While there is wide regional variation, 2006-2007 surveys from the NEA show the average teacher salary nationwide is $50,816. New teachers entering the profession in 2008 make an average of $34,935, according to the National Association of Colleges and Employers.

The NEA advocates minimum starting salaries of $40,000 and maximum salaries double that of beginning pay. About 14% of the NEA’s 14,000 locals now have starting salaries of $40,000—twice the percentage of two years ago.

The current economic downturn makes the climate for salary improvement clearly troublesome, concedes Raabe. The real implications of school underfunding may not be felt until the school year winds down this spring and plans are being made for the 2009-2010 school year. Despite the challenge, Raabe maintains that education is one of the best investments the country can make to help stimulate the economy.

What You Can Do
In the current climate, people are struggling for answers, says Gail Cunningham, marketing and communications director for the National Foundation for Credit Counseling (NFCC). “They feel as though they have lost control of their financial destiny,” she says. “They feel duped.” Many bought a home and invested in 401(k) plans, only to see values decrease.

The situation is difficult to navigate, especially since many Americans aren’t very savvy about money, according to the financial literacy survey of the NFCC. A majority of the public does not have a safety net of 3-6 months of income saved, and only 42% of Americans have a budget and keep close track of where their monthly expenses go, the 2008 survey found. The following tips can help you keep your head above water.

Take control where you can. “Having a written financial plan is crucial to getting ahead in tough economic times. It’s your blueprint,” says Lynnette Khalfani-Cox, a personal finance expert known as “The Money Coach” and author of “Zero Debt: The Ultimate Guide to Financial Freedom.”

Set Up a Good Filing System
This type of organization can be a challenge for time-strapped teachers, but it’s important to keep an inventory of your assets and debts. “While in the professional world, teachers may have it together, in their personal lives they may be running ragged,” says Khalfani-Cox. When possible, auto-pay bills electronically and have automatic deductions for savings.

Track your expenses for 30 days. Each time you or a member of your family makes a purchase, record the cost and place it in its respective category. For example, if you dine out, place the cost under “food.” After 30 days, you should be able to notice your spending trends in each category. Keep receipts as a reference if needed.

Review your spending. Have a family meeting to discuss places to cut back, such as eating out less or paring back on cable service. Prioritize where you need to save. Then track for another 30 days to see how much you go over or under in each category compared to the previous month. While many dislike budgeting, a spending plan can help you through tough times and bring predictability to your finances.

Tame Debt, Preserve Credit
If your income is tight, it’s tempting to put more purchases on credit. But NFCC’s Cunningham warns this is not the time to pile on new debt. Live within your means and handle your debt in one of two ways: tackle your highest loan or knock off a small debt for a sense of accomplishment.

“A lot of our members are in debt up to their noses,” says Gary Phoebus, president and chief executive officer of NEA Member Benefits. Some are fresh out of college and have significant loans. Others are in debt from trying to put their own children through school. And still others are affluent, but highly credit-leveraged.

Teachers Eric Luedtke, 26, and Emily Luedtke, 27, of Burtonsville, Maryland, are trying to be thrifty. When their son, Colin, was born, they bought a crib and changing table on Craigslist.com. They want to set up a college savings account, but there just isn’t money.

“We are just barely surfing by. We hoped to have more breathing room with this year’s salary increase, but that isn’t going to happen,” says Eric.

The Luedtkes have $40,000 in student loan debt and car payments, and owe more on their house than it is worth—having bought it a year and a half ago before housing prices fell. “Teaching isn’t a job you get into because of the money,” says Eric. “Teachers are idealists. But it doesn’t make it any less fun not to have money.”

The Luedtkes recently consolidated their debt and are trying to keep their credit ratings up. That’s a good idea since credit is harder to obtain, Cunningham says. “People who have existing credit need to treat it responsibly—not paying late or skipping a payment,” she says. To look good in the eyes of creditors, don’t charge more than 30% of the available credit.

How to Boost Pay
With money tight, teachers are looking to add to their salaries through moonlighting and backup savings vehicles. Many earn money from extracurricular activities in their school system, and about 16% have jobs outside of school, according to the 2003-2004 Schools and Staffing Survey by the National Center for Education Statistics.

Eric Luedtke makes extra money writing curriculum for the county. Someday, Emily may start her own after-care for kids with special needs, in part for the flexibility and the money.

The fear surrounding the economy will likely propel more teachers into taking on second jobs, but for many, the time pressures of teaching during the academic year make it difficult.

“A professional teacher working with students on a regular basis—with the kind of wealth [the U.S. has]—shouldn’t have to have a second job,” says the NEA’s Raabe. “Those we entrust with our children should be paid at a level where they shouldn’t have to have a second job to make ends meet. It says a whole lot about our priorities.”

A plus for many teachers is having a defined benefit retirement plan. “It’s one of the best hedges to have against really turbulent times,” says Phoebus of the NEA. Still, experts suggest having a diverse retirement plan that includes individual retirement accounts and 403(b) accounts, in which contributions and earnings of the plan are not taxed until withdrawn from the account.

Sometimes it takes outside expertise to get on track with your money. About 36% of Americans have received professional advice on finances; 64% have not, according to the NFCC financial literacy survey. Too often people don’t learn about personal finance, from their parents or in college. If you’re having financial trouble, don’t be ashamed to admit it. “When you delay seeking help, nothing can be gained. Delaying only limits your resolutions,” says Cunningham.

From the January/February 2009 issue of Scholastic Instructor. Reprinted with permission of Scholastic, Inc. TM ® & © 2009-1996 Scholastic, Inc. All Rights Reserved.