When It’s Time To Pull The Pin

Who wants to be a millionaire? If you said, I do! and then realized, Oh, wait, I forgot, I’m a cop, that’s impossible! then this article is for you.

As a police officer, I’m just as cynical as you are, so I understand why you just rolled your eyes and blew off that opening sentence. You don’t think it’s possible.  But before you go anywhere, give me a few minutes to explain.

First, I’m not selling anything. Actually, that’s not true. I do sell some sweet swag in our online store that includes the most comfortable t-shirts I’ve ever worn. But since I wouldn’t shamelessly self-promote, let’s move on. What I should have said is that I’m not selling you any financial products or crazy get-rich-quick schemes. Nope. The only thing I’m going to do is share some actual facts with you along with a proven plan that I personally use that has set me on a course for millionaire status.

Second, what the heck is a millionaire anyway? It’s not someone who has a million dollars in the bank or who makes a million dollars in income per year. The correct definition of a millionaire is someone who’s net worth is a million dollars or greater. Simply put, your net worth is calculated by subtracting what you owe from what you own. Just add up your home’s value, your retirement accounts, savings, etc. and then subtract anything you owe like your mortgage balance, student loans, and what you still owe on your cars and the like. What’s left over is your net worth. Easy. Now just for fun, go calculate your net worth and see where you’re at. I’ll wait.

Where We Go From Here

Now that we know I’m not selling you anything, what a millionaire is, and what your net worth is, where do we go from here? Well, if we want to be super high-speed little Johnny Tacticals, then we go and learn from people who are super high-speed. If we want to be millionaires, then we ought to go and learn from actual millionaires and not from crazy Uncle Eddy, our route partner, or the guy sitting in the next cubicle.

In a 2018 survey of over 10,000 millionaires, the study revealed some key practices of what those millionaires actually did and what we can do to achieve millionaire status, too. Even as horribly overworked and underpaid police officers, I believe we can retire as millionaires if we learn from the people who have already done it. Here’s what the millionaires did:

Live On Less Than You Make

Shocking, I know. This is 1920’s stuff. It’s never been easier and more socially acceptable to have all kinds of things that we don’t own. Our American lifestyles have gotten out of control and it’s become totally normal to overspend month after month to keep up with the Joneses, whoever they are. Lawn mowers, mattresses, pick-up trucks, campers, Suzy’s braces, and just about anything at Home Depot can all be financed. We need to stop buying things on credit that we can’t afford! And by afford I mean to actually pay for with money that we have. Once we stop the bleeding of cash by overspending and start living on less than we make, then we can get out of debt.

Get The Right Kind Of Insurance

To protect what we own we need the right kind of insurance. There’s a ton of gimmick insurance out there that we ought to avoid. Insurance is simply a transfer of risk. You pay the insurance company a premium to take the risk of damage or loss. Having insurance protects the things that you own that either grow in value or make you money that you can’t write a check to replace. For the sake of brevity, here’s the types of insurance that you, as a police officer, ought to have:

– Health
– Homeowners or Renters
– Auto
– Term Life
– Long-term Disability

Meet with an insurance broker to shop for the best prices and to determine the amount of coverage that meets your needs. And one quick word of advice: don’t mix your insurance and your investments together — get your insurance from an insurance broker and manage your investments with an investment advisor. Keep them separate.

Get Out Of Consumer Debt

Owing people money sucks. Been there, done that, got the t-shirt. I did it, and I hated it. I hated late payment notices, phone calls from bill collectors, and the constant juggling of accounts from various creditors. It makes life so complicated. Getting out of debt is simple, but not easy. And when you do, your life will be so much cleaner and a whole lot less stressful. Trust me. Once you get past this point, this money thing gets pretty fun.

Have A Rainy Day Fund

Sometimes it rains, sometimes it pours, but either way, it’s going to rain. Once you’re out of debt it’s time to save for that rainy day when something goes wrong. Having an emergency fund prevents you from going into panic mode and using a credit card or taking out a loan, or worse, taking an early withdrawal from a retirement account to cover the expense. An emergency fund is simply a cushion between your butt and Murphy’s boot. Save up three to six months worth of expenses, set it aside in a separate account, and don’t touch it except for an actual emergency.

Invest For Retirement

When I got hired and learned about the State pension, I thought I was all set and wouldn’t have to worry. And then our elected officials in their infinite wisdom changed the system mid-stream and really messed it up. Now I’m not so sure. I don’t know what the pension looks like in your state or how secure it is, so there are a couple of ways to skin this cat.

The main thing to remember is wherever you invest for retirement, whether it’s in a pension, 401K, IRA, or some other retirement account, set aside 15% of your income to go toward retirement. Some of you may think that’s a lot and would rather cut back. The question you should ask yourself is, how rich do I want to be? The more you invest, the more money you will have when you retire. It’s not personal, it’s just math.

But if your pension or retirement system is as sucky as mine, you may need to consider some other options. I also invest outside of my pension in a Roth IRA, which grows tax free. I haven’t decided how I’m going to handle my pension when it comes time to retire — meaning I could take it in a lump sum or take the monthly disbursement. Since my pension has been invested so poorly, I am currently leaning toward taking the lump sum and then rolling into an IRA where I can control the investments so my hard-earned money is out of the State’s stupid hands. When it comes time to pull the pin, I plan on meeting with my Financial Planner to crunch the numbers, and so should you.  Every situation is different and expert advice is a must.

But, for the sake of argument, if I retire with $300,000.00 in my pension, take the lump sum, and roll it into an IRA that earns 10% on average, then it will double roughly every seven years. That means if I retired at age 50, then by the time I was 57 I’d have $600,000.00, and by 64 I’d have $1,200,000.00. Boom. Millionaire. I like the sound of that.

Save For Your Kid’s College

Once you’ve set aside money for your retirement, you can think about the kids. Depending on where you are in your financial journey and the age of your kids if you have them, the amount you have to save will vary. The point is, you need to think about saving and have a plan for college.

I got married young, had kids young, and did a lot of dumb things with money during that time. By the time I learned how to handle money, college was right around the corner. My oldest worked her way through college and paid cash, with minimal help from my wife and I. My middle child just finished his freshman year and paid cash for it with money he earned. He’s already got enough saved for next year, too.

Paying cash for college is possible, but the first step is to take debt off the table and figure out a way to do it — whether through scholarships, school choice,  good old fashioned hard work, or all three. Starting early is your first, best option.

Pay Off Your House Early

Paying our house off is what my wife and I are working on now. I can’t wait till we own this thing outright! That same 2018 study found that 67% of the millionaires surveyed had paid-for homes. Imagine having no mortgage to pay and what you could use all that money for that you used to send to the bank. Imagine the sense of peace and safety you’d have if you got injured, lost all or part of your income, or if there was some crazy crisis going on in the world (#2020). You wouldn’t have to worry about foreclosure because the bank doesn’t own it, you do. That’s what I want and that’s where I’m heading.

Slow And Steady Wins The Race

Get rich quick schemes are nothing new, sometimes they just take on new and different forms. No-money-down real estate, cryptocurrency, and single stocks are just some of the high-risk plays that were avoided by the vast majority of the millionaires studied. If they avoided them, then so should we.

So what did they do?

They lived on less than they made, they got out of debt and stayed out, they invested steadily in their retirement plan, they had money saved for a rainy day, and paid their homes off early. All the while they protected what they worked for with quality insurance policies.

Slow and steady wins the race. Be the tortoise, not the hare.

For more details and a proven plan for getting out of debt, building wealth, and the millionaire study, check out these books:

The Total Money Makeover
Everyday Millionaires: How Ordinary People Built Extraordinary Wealth And How You Can Too
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