Common Financial Mistakes Among Police Officers
Everyone makes some financial mistakes, big or small, at some point in their career. Knowing the most common financial mistakes in your line of work can help you improve your own financial habits. For police officers specifically, below are the most common financial mistakes we have seen made.
Eating Out When Working
Most police officers sit in their patrol cars for the majority of their day. Their cars are their offices, which makes it difficult to pack a lunch. This is why many police officers opt to eat out or get coffee when they are working. Although spending a few dollars per day on food when working doesn’t seem like much, it can add up. If you work five days per week and spend eight dollars per day on lunch and coffee, that equates to $40 per week. If you continue to spend that amount for 50 weeks (which excludes your two-week paid time off), you will spend $2,000 per year. This is money that can be put towards credit card debt, student loans, or an investment that can be used to grow your wealth. If you are in the habit of getting lunch or dinner out during a shift, this may not be the most effective way to spend money. Try packing a meal three to four times per week- this could help you save $1,000 or more per year.
Not Planning for Retirement
Typically, police officers retire after 25 years of service. In the state of New York, police officers are subject to a pension of around $50,0001 per year after they retire. Despite this being a comfortable income for retirees, it still may be a good idea to invest and prepare for retirement. New York State has a deferred compensation plan2 for state employees, including police officers. With this retirement plan, you contribute automatically from your paycheck. Then, your savings collect interest. If for some reason you don’t want to invest in a state-issued retirement plan, you may want to consider investing in things such as real estate or stocks.
Not Setting Aside an Emergency Fund
Being a police officer is a risky job and officers can be subject to injuries. Hopefully, the injury would be nothing serious, but they do happen as policing is a physically demanding job. Sometimes, injuries can put you out of work for up to six months. Although health insurance will likely cover your medical expenses if you are injured on duty, you still won’t be able to work. This means you won’t be getting paid as you normally would. To cover your bills if you do get unexpectedly injured, it is a great idea to have an emergency fund. Setting aside about six months of living expenses will help you feel more secure and confident in your finances. Then, you can focus on healing, rather than worrying about paying your bills.
Many police officers prefer to work with a financial professional to help them plan for their careers and retirements. Financial professionals can help people in all jobs and industries to address their bad financial habits. If you would like some assistance with your financial planning, please contact us. Our team would love to help you set up a personalized plan and provide you with advice on investments.
1 “Pensions for state and local governments in New York” Anonymous Newsday, Mar 5th 2019
2 “About NYSDCP” Anonymous nysdcp.com, Jul 9th 2019