You Can’t Count On Overtime …and other financial management advice for new law enforcement officers! DISCLAIMER I’m not a financial professional, and I don’t even pretend to play one on TV. I’m just some guy who used to be a cop, and isn’t anymore, and who likes to write stuff. This guidebook is strictly my own thoughts and opinions, and you’re welcome to follow it if you wish. If you don’t, no one will probably ever know the difference, so no big loss! This guidebook is my own creation, and it is FREE to download for your use. If you think it might help someone you know, feel free to pass it along, but please give credit where credit is due. The only thing I ask I ask is that if you feel that this guidebook is useful, please take a moment to follow my personal blog, like my author page on Facebook, or follow me on Twitter. Thanks! Working as a law enforcement officer is one of the most challenging jobs available today. Between the long, rotating shifts, and the risk of physical danger around every corner, it takes a certain person to be willing to put their life on the line for their fellow man. This is particularly true when you consider that law enforcement is generally one of the lowest paying professions out there. In a way, the low salaries of entry level police officers can actually be a good thing. The lack of money discourages people from choosing this line of work for the wrong reasons. A person who is motivated primarily by money is probably not the person you want watching your back on the graveyard shift. Also, the initial salary is often offset by longer-term benefits, such as a defined-benefit pension plan and long-term job stability. For these reasons, law enforcement tends to attract career-minded individuals, rather than people seeking just another job to make ends meet. It’s normal to get a kind of “sticker shock” when you’re confronted by the initial amount of money that you’ll be making as a new LEO, but you should know that it is possible to live a comfortable lifestyle while doing the work that you love. In fact, I’d say that money management is one of the most important skills for a young police officer to learn. Having a solid financial footing will certainly increase the enjoyment you get from your job, and will help you avoid some of the most common pitfalls that sabotage a law enforcement career. With that in mind, I put together this short guide to help you get started on your financial management plan. It’s far from comprehensive, and I certainly don’t claim to be a financial guru, but it does contain advice geared specifically towards new LEOs. This is the kind of stuff I wish I’d understood when I started my career so many years ago, and hopefully you’ll use it to get off on the right foot! YES, you need a budget, and here’s why! It’s been said that that when you fail to plan, you plan to fail. It doesn’t matter if you have the best of intentions, failing to keep a budget is a guaranteed way to have you scratching your head at the end of every month, wondering just where all your money has gone. While budgeting might seem like a painful process at first, it will quickly become a habit after your first few months on the job. For beginners, it’s a good idea to keep a spiral notebook with you to make a note of every time you spend money. This will give you a clear picture of just how much cash you’re spending from day to day, and will show you where you need to make improvements. Take a look around the internet for sample budget plans as well, since these might help you get started even quicker. Before your first day on the job, try to find out exactly how much money you’ll be taking home AFTER TAXES. Don’t commit to any recurring expenses such as rent, car payments, gym memberships, etc., until you know exactly how much cash you’ll actually have available to you. One of the most important things to remember is that you should never plan for any extra cash (such as overtime) to be included in your monthly budget. Working extra shifts is great, and I encourage everyone to take advantage of this income whenever it’s available, but you just can’t depend on anything besides your base salary. Departments’ overtime budgets have a way of drying up just when you need them most, so don’t plan for them. Set that extra cash aside for your vacations or entertainment expenses instead. Cut your expenses to the bone…and then keep cutting! Sometimes one of the hardest things for young police officers to do is to live within their means. When you might only have one day a week off, it’s normal to want to splurge and treat yourself to everything in a short period of time. If you want to make the most out of your money, though, here are a few things you can do to help save some of that money you’ve worked so hard for: -Get a roommate to cut down the cost of your housing expenses. If you already own a house, try renting out one of the bedrooms. Bigger departments always have an influx of young officers who will need a place to stay until they get settled, so you can cut your costs while helping out your new partners. Having another cop as a roommate is usually preferable to bringing in a civilian, since you’ll rarely be in each other’s way if you’re both working rotating shifts. -Work an overtime shift every other week. Get in the habit early of taking on extra work when it becomes available, then tucking that money aside from your regular budget. You can use this money for entertainment expenses, so an occasional wild night on the town won’t wreck your regular budget. -Get in the habit of shopping for secondhand stuff. Check out EBay or Craigslist for good deals on clothing, cars, and furniture. Retail prices are for suckers, and there’s no need to outfit your first apartment with brand new stuff. For your evenings off, Groupon and Living Social are good ways to get nearly half-off the regular price at local restaurants. -Seek out freebies whenever they come up. Cops can qualify for a lot of discounts on everything from gym memberships to apartment rentals. As long as your department allows it, you could work as a “courtesy officer” for your apartment complex and provide additional security in exchange for reduced rent. -Go easy when buying new gear for work. If you really need a piece of equipment for work, your department will probably issue it to you, and don’t feel like you need to have every new piece of gear that hits the market. There’s nothing wrong with being a “gear guy,” but remember you have your entire twenty- or thirty-year career to build up your arsenal. Also, you can usually get good deals on secondhand equipment when people change assignments or move between agencies. -Start packing a bag lunch. Picking up a small cooler and packing a couple of sandwiches is a great way to keep from having to buy lunch during every shift. Also, you’ll be well prepared for those times when you get stuck babysitting a prisoner for hours on end! Wipe out debt before it sinks your career! Most young law enforcement officers will be carrying some level of debt at the beginning of their careers, but it’s important to get rid of it as soon as possible. With the possible exception of a home mortgage, debt does you absolutely no favors. It can even ruin your chances of moving upwards in your career, since most federal LEO positions require security clearance, and failing to manage your finances is the primary reason why clearances are denied. Besides costing you upward mobility in your career, getting behind on your debt can lead to some embarrassing situations. You don’t want to go down in history as the guy who got his car repossessed from the department’s parking lot! Also, officers experiencing money problems are much more likely to put themselves in tough situations, such as accepting bribes from criminals, or even committing timecard fraud by tacking on a few extra hours of overtime. The best way to avoid these situations, which could easily cost you your career, is to get out of debt as soon as possible. Paying down your student loans or your car note are much better uses of overtime cash than blowing your wad at the local bar, so take the opportunity to get ahead whenever it presents itself. Do you really need a brand-new Corvette? I’ve heard a lot of cops complain about welfare queens who park their brand-new Mercedes in front of their project apartments, but a lot of rookie cops are almost as bad! It seems to be a rite of passage among young cops, especially males, that they go deeply into debt on their first new car just as soon as those regular paychecks start rolling in. With that in mind, here are some tips you can use to cut your transportation expenses: -If your department assigns take-home vehicles, maximize the use of them. Obviously you might not be able to put a baby seat inside your prisoner cage, but why not take your cruiser to the gym or the grocery store to avoid burning your own gas? Since departmental policies vary widely, be sure to know yours and adhere to them strictly. -If you have to buy a personal car, get a used one. New cars lose a lot of their value as soon as you drive them off the lot, and you probably won’t have very much time off to enjoy it anyway. Stick to something you can easily afford, and you won’t be staring resentfully at that brand-new car that never leaves your driveway. -Choose a boring sedan over a sports car. Try to plan ahead for a few years down the road, when your family might grow a little larger. Yes, Ford Mustangs might look cool, but it’s nearly impossible to squeeze a baby seat into the back of a sports coupe. -Ask yourself if you really even need a car! Public transportation might be available in bigger cities, or you could work out a ride share system with your buddies. Don’t forget to budget for the expenses associated with owning a car, such as gas, maintenance, and parking. Start saving early and often! Once you’ve established a basic budget and cut your expenses down to the bone, your next step should be to start building a cushion of savings in case of unforeseen events. Start with a goal of three months’ living expenses, then build up from there. Don’t touch this money unless it’s a serious emergency! Having a rainy day savings fund is especially important for police officers, since an at-work injury could take you off your feet for months. Worker’s compensation should cover most of your expenses in the event of a short-term disability, but if something like that happens, the last thing you’ll want to worry about is whether you have enough money to make ends meet. Planning ahead will greatly reduce your stress. There are a lot of different opinions about just how much money you need to keep on hand, but it’s basically your decision. How much money do you need set aside to feel comfortable about unplanned events? I like to keep several months’ worth of cash in savings accounts, and then a few thousand dollars in a checking account for car breakdowns, small medical issues, and other expenses that seem to pop up on short notice. If you’re just getting started on saving, start by setting a goal for yourself to work towards. Start thinking towards retirement! Sometimes it’s hard for new LEOs to even contemplate what life will be like in 20 or 25 years, but it’s important to at least try to picture yourself at retirement age. Very few law enforcement agencies offer pensions large enough to cover all of your living expenses after you finally pull the plug, so it’s important to get an idea of what you’ll be working with, and the sooner the better! -First, find out what type of retirement system you fall under. Does it take 20, 25, or even 30 years before you’re eligible to retire with a pension? Is there any difference in benefits if you serve for a longer period of time beyond the minimum retirement age? -Next, start getting familiar with the concept of vesting. This refers to the number of years you have to work before you’re eligible for any kind of pension. For example, some states offer 5 year vesting, which means that you’ll have to serve for at least that long to see any kind of (small) pension when you retire. If you quit the job after 4 years and 9 months, you won’t qualify for any kind of monthly payout when you’re older. Know what’s offered in your state so you can map your career and take full advantage! -If you’re a prior service veteran, find out if your state allows you to “buy back” your military time. This is an easy way to add your military time to your state retirement, either to increase your total years of retirement, or to cut down the amount of time you actually stay on the job. In most cases, it’s as simple as contacting your state retirement board and providing them with a copy of your DD-214 discharge papers. From there, they’ll let you know the amount of money you’ll need to pay to “buy” the extra years back, either through a lump sum or payroll deductions. This is a great option for vets, but it’s important for you to find out exactly how the process works in your state. -Last, but most certainly not least, one of the first things you should do is to enroll in your agency’s 401k plan (called a Thrift Savings Plan/TSP for federal employees). These plans allow you to deduct a percentage of your savings before any taxes come out, and send them directly to a retirement savings account that uses mutual funds as investments. Try to contribute around 10% of your salary to start, and increase the amount as often as you get pay raises. This makes savings painless, since you won’t even miss the money that you never see, and it’ll help give you a nice cushion to supplement your pension. Check your insurance! You can’t always plan for every situation, which is the entire point of having insurance. Consider it a must for all phases of your career. Think about it: you wouldn’t let some motorist cruise down the road without having a valid proof of vehicle insurance, right? So why would you expose yourself to unnecessary risk? -If you have a family, or anyone at all depending on you, a basic term life insurance policy is a must. Start with ten times your base salary, payable to your dependents in the event something happens to you. For example, if you make $50,000 a year, look for a policy with a $500,000 benefit. You might be able to get discounted rates through the Fraternal Order of Police or some other work association, so be sure to shop around. The peace of mind will be worth the yearly premium. -Next, be sure to pick up a basic renter’s insurance policy for your place. Most apartment complexes won’t cover your valuables in the event of theft or damage, even if the property owner is partially responsible for what happened. If you already own a home, you probably already have homeowner’s insurance as a condition of your mortgage, so you should be good to go. -Professional liability insurance can’t hurt either, especially when you consider how easily you could become the target of a lawsuit or even criminal charges. Many law enforcement associations offer discounts on these policies, so it’s a good idea to do some research in this area. Sometimes just having that extra peace of mind is worth the cost. -Finally, make sure that you’re familiar with the medical and dental insurance that’s provided through your agency. If you know what types of treatments are covered and what’s not, you can seriously cut down your medical expenses. When in doubt, call the insurance provider’s customer service line before you schedule any treatments. You should be able to work with your doctor to get an estimate of the total cost, in order to plan ahead for the expense. Take full advantage of your benefits! It’s no secret that law enforcement is not exactly the highest paying job out there, and it always kills me whenever I see guys who don’t take full advantage of their benefits. Whether it’s things like paid time off or just a simple discount on stuff you might use everyday like childcare or gym memberships, find out what’s out there for you, and take advantage of it! If your department offers any kind of tuition reimbursement and you’re not currently going back to school, you’ve got no one to blame but yourself! -Be sure to learn how your department’s policies work for time off, and use them to the full extent possible. Always burn any “comp” time first, since you’ll probably never get paid any actual money for this. Use your sick time for any pre-planned doctor’s visits so you won’t have to waste your valuable days off. -Always use your vacation time as a last resort, especially during your first year on the job. Most places have an annual limit of how many hours you can carry over, so if you have enough time on the books, you’ll be able to make the argument that if you don’t take time off now, you’ll lose your hours. Trust me, you’ll be thanking me when the Christmas holidays roll around! Also, if you ever leave your job, most departments will give you a cash payout for your unused vacation (but not sick!) time. -At the very least, be sure to get regular dental cleanings and annual physicals. These are almost always covered by basic health care plans, so you can take decent care of yourself with a minimum expense. You should also know about the Family Medical Leave Act (FMLA), which allows you to take up to 12 weeks off to take care of a family member. This comes in very handy if you’re planning on having a baby or taking care of an elderly parent. Start growing your career! One of the best ways to make more money is to get in the habit of continually increasing your professional skillset. Never pass up an opportunity for training, even if it’s not a subject that you’re entirely thrilled about at first. Over time, you’ll find yourself taking on different roles in your career, and having experience with a wide range of duties will make you much more competitive for promotions and advancement opportunities. -If you don’t already have a resume, spend a few hours making one, if only to get in the habit. Download a free template from an online site, then plug your experience into a chronological format. Get in the habit of updating it every six months with whatever new accomplishments you’ve had or any training classes you’ve attended. And always, ALWAYS, save the original copies of your training certificates! -Whenever you get the opportunity to travel out of town for training, jump on it! Most agencies will provide a daily stipend (“per diem”) for meals, so stretch this as far as possible by booking a hotel that offers a free breakfast. Stick to Subway for lunches and dinners, and you’ll probably come home with a whole lot of extra cash. -If your agency if experiencing budget trouble and just can’t come up with the cash to send you away for training, spend some time seeking out free or low-cost options. There are loads of free LEO training courses available online or through distance learning, and even your hometown community college might be a good way to score a couple extra credit hours. Plan for the future! Sometimes it’s hard for younger people to think more than thirty days in advance, but planning ahead is a great way to set yourself up financially. For example, where do you want to be in five years’ time? Ten years? Very few people would say that they want to be broke, working midnight shifts, and living in a tiny apartment. With that in mind, here are two basic life scenarios you should consider whenever you get the urge to blow your wad on a new car: -Raising a family is expensive! No matter how much you enjoy the single life, there’s at least a possibility that you’ll get married and have children at some point in your life. Managing your money and living within your means will cut down a lot of your stress, which will make it easier for you to concentrate on what’s really important to you. Also, have you seen the price of diapers lately?? Getting in the habit of saving will make it that much easier to adapt to upcoming changes in your life. -No matter how much your love your job now, you’ll probably quit! These days, very few people stay at the same job until retirement age, and police officers are no different. You might want to jump between agencies at some point, or even relocate to a different part of the country. When this happens, it becomes vitally important to understand how your retirement benefits will be affected. Is it worth it to quit your job before you’re fully vested in your state’s retirement system? Will your previous years of service count at your new agency? Will you be able to roll your 401(k) plan over to your new employer? Only you can decide what choices are best for your life and your career, but having the right information will help you make better financial choices for both you and your family. Pay your damn taxes! I’m always amazed at how many supposedly honest LEOs see nothing wrong with filing shady tax returns every year! Yes, you can write off your dry cleaning bills for uniforms, but writing off your water bill because your job requires you to wash your uniforms and shave every day is probably going a little too far. Filing a fraudulent tax return is actually considered a crime nowadays, and even though there’s only a small chance you’ll get caught, that might be all it takes to tank your career. When you look at the big picture, it’s probably not worth the risk. But while you are required to pay your taxes, there’s absolutely nothing that says you have to pay more than what you owe. Be sure to save any receipts for work-related items such as dry cleaning, equipment, or training courses, since you can write these off as job-related expenses. Also, be sure that you’re claiming the correct number of deductions on your W-4 withholding form. Yes, it’s nice to have a fat refund check every year, but taking fewer deductions means that you’ll have more money to work with every payday. SAVE YOUR MONEY! Law enforcement is a challenging occupation to begin with, and you really don’t need any extra stress on the job. Managing your money and living within your means will eliminate one of the major distractions that police officers experience, which should allow you to focus more on your career, your family, and your life outside of work. Police work is a tough enough profession….so protect your money like you protect yourself! . You Can’t Count On Overtime …and other financial management advice for new law enforcement officers! DISCLAIMER I’m not a financial professional, and I don’t even pretend to play. Also, you’ll be well prepared for those times when you get stuck babysitting a prisoner for hours on end! Wipe out debt before it sinks your career! Most young law enforcement officers will be. most common pitfalls that sabotage a law enforcement career. With that in mind, I put together this short guide to help you get started on your financial management plan. It’s far from comprehensive,