Over eighteen years ago I raised my right hand, took the oath, and signed on the dotted line. I had my 25th birthday in the Academy with a wife and two young children at home. My birthday was marked with the off-key singing of Happy Birthday by a chorus of 62 classmates who simultaneously shined their flashlights in my eyes as I sat beet red at the front of the classroom. My law enforcement career was in front of me and everything was awesome.
What I had signed up for wasn’t all about guns, badges, cruisers, and dispensing justice. It was also about taking care of my family with a pension. For me, that pension was a sure thing, a security blanket. If I did my 20 years I could retire at the age of 45 and make up for all the lost time with my wife and kids.
Psych!
Underdeveloped Brains
When you’re young, you’re dumb, that’s just the way it is. It’s not your fault, your brain just hasn’t fully developed yet. In the mind of a 24 year old everything will work out the way it’s supposed to, nothing will go wrong, and everything will be fine. Then time goes by, you go through some stuff, and things change. You grow up. You learn things the hard way.
As it turns out, people in power make promises and then break them. And the funny thing is, those in power will come and go, but you’re in it for the long haul. They don’t care about you or the scarred version of you with a bad back and a shortened lifespan 20 years later. They only care about the now.
Not Griping, I Swear
What happened? The politicians in their infinite wisdom played Calvinball¹ with my pension — they changed the rules in the middle of the game. They changed how many years I would have to work, how old I would have to be to retire, and how they would calculate the amount of my pension. In short, they pulled the rug right out from under me and thousands of other police officers in my state. Frankly, it’s disgusting. And if it can happen to me in my state, in can happen to you in yours.
But I’m not here to gripe. I want to challenge some of your thinking so when it comes time to pull the pin, you can retire with plenty of money without having to rely solely on a piddly pension that you gave the best years of your life to earn.
1. Avoid Debt
Debt has become the norm in our culture and includes things that you might not even think of as debt like credit cards, student loans, home equity lines of credit, and borrowing against your retirement savings. It has become normal to buy now and pay later on everything from flat screen TVs to boats and cars. We have lost the art and the discipline of delaying gratification. We want what we want and we want it now. Wait has become a four-letter word. Having money later means not spending it all now. I wish it were more complicated or intelligent sounding, but it’s not.
I know it doesn’t sound sexy, but telling yourself no when you don’t have the cash for your next want is the adult thing to do. The truth is that a new humungous truck does not make you any better looking or one inch taller, and driving it off a car lot with an $800 a month payment is a stupid idea. Wait, save up, and then buy it. You’ll still be short and ugly, but at least you won’t be stupid.
A balance sheet only has two sides: assets and liabilities. If something is not an asset — or not paid for — then it is a liability, and liabilities equal risk. When the SWAT team draws up a plan to hit a house at zero-dark-thirty, that planning involves not just information gathering, but risk mitigation. When they go to serve that warrant, they know there is risk on the other side of the door. They don’t just walk up to it in shorts and a t-shirt with a badge around their neck and knock. That would be dumb. That’s the same reason we wear bullet proof vests, carry a gun and a flashlight, and use sound tactics every day. We do that to lower our risk and we should be doing the same kind of thing with our money.
When you avoid debt, you avoid risk. If you don’t owe anyone anything, then they can’t take it from you. You are not their slave. Giving less of your hard-earned money away to the banks means you have more to save and invest. That’s how you say thank you to your future retired self for all the crap you put up with day in and day out humping calls and saving lives.
2. Live Below Your Means
Having a budget and sticking to it will help you live below your means. A budget is just a spending plan; like an operations order for your money. An operations order lays out a plan for the mission and gives everyone an assignment and accounts for contingencies. Your budget won’t be much different. Spend your money on paper and on purpose before the month begins and then stick to the plan. When the money is gone, it’s gone, no more swiping or borrowing to bail yourself out.
Your financial resources are not infinite, unlike the propaganda all the lenders are selling you with their celebrity endorsers. It’s time to start viewing money as finite — it does run out — so you will need to have a plan for each and every dollar you make. A spending plan will keep you on track week after week, month after month. It is the tiny discipline that will have biggest impact on the future you.
3. Save For Retirement Outside Your Pension
My grandfather was a Washington DC Metro police officer for over 30 years. He was married and had two kids, my dad being one of them. My grandfather was injured on the job and had some long-term health complications but he made sure he took care of his family by saving and investing outside of his retirement. Even though he lived for decades after retiring from police work and predeceased my grandmother by about 15 years, she never had to worry about money. Not only that, she still had money left over that she was able to leave as an inheritance. That was no accident.
When you invest outside of your pension you control what your money is invested in, not some bureaucrats or pencil-pushing pension board. And when you die your money goes to your heirs, not back into the pension fund. Plus, after the age of 59 1/2 you have access to the entire amount for large purchases and are not limited to a fixed monthly disbursement.
Your Future, Your Responsibility
Pensions aren’t evil, they’re just heavily regulated, and they’re not under your control. They are the asset of the company, or the city, state, or federal government that you work for. Saving for retirement outside of your pension gives you the control, the freedom, and when invested properly, better returns that will last you a lifetime and beyond.
My biggest financial regret is blindly placing my hope in a pension system to take care of me and not personally taking responsibility for my future. My second biggest regret is getting started way too late. Don’t be like me. Stay out of debt, live on less than you make, and start investing outside of your pension. Your future self is counting on you.
__________________________
- Are you exposing yourself to financial risk?
- Is your future in your hands or your pension’s?
- Will you create an operations order for your money?
- Why put it off?
__________________________
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1. Calvinball is a game invented and played by the iconic comic characters Calvin and Hobbes, written and illustrated by Bill Watterson. Calvinball has no rules — the players make it up is they go along and is never played the same way twice. Not familiar? Get yourself a book at your local bookstore or online and you can thank me later.
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