Which pair of bills would you rather have in your wallet—the two bearing the image of Abe Lincoln, or the two with the face of Ulysses S. Grant?Image courtesy of Doug Wyllie.
All too often police officers—particularly young officers just coming on the job—tend to get a little loose with their money, putting themselves in debt. The temptation to buy a new ATV, fishing boat, motorcycle, or other extravagance can be all-but unbearable when a rookie officer—whose only other job experience might be working at a retail store during college—sees those first few paychecks roll in.
All too often, officers find themselves working second jobs out of necessity, or snapping up every available overtime shift just so they can pay the bills. Still others find that they've arrived at the moment when they can pull the pin and enter "retirement" only to find that retirement only means working a second career.
Earlier this week, I spent some time with my friend Jason Hoschouer. When he's not out on motor patrol, Jason helps first responders from all three disciplines—police, fire, and EMS—with financial coaching.
Jason has been trained by Dave Ramsey's Team at Financial Coach Master Series and has taken additional classes to earn the title Independent Dave Ramsey Finance Coach.
He's even written a book on the subject, titled Badges & Budgets.
Over a cold adult beverage, he and I talked this week about three simple things he tells clients to help them get into a better place financially.
Be advised that there's a very important distinction between simple and easy.
Simple is a lack of complexity.
Easy is a lack of required effort.
Be advised that all three of these things require effort.
1. Create a Budget
"Ugh. Do I have to?" you ask.
No. You don't have to—but you'll be happier and wealthier if you do.
"Won't that put me in a little box? Won't I be totally limited in what I can and cannot do with my money?" you ask.
No—quite the opposite.
"One of the most liberating things I learned how to do was to create a budget, which is antithesis of what people typically think of a budget," Jason says. "They think it's restrictive—like a straitjacket. It's not. It's your plan. If you don't like it, change it. It's very, very simple."
Jason says, "A budget is simply telling your money where to go instead of wondering where it went. It is a proactive financial plan instead of a reactive financial plan."
Think of it this way. Go back in your bank statements for a few months and tally up how you've been spending your money. You'll find a trend. Generally speaking, there will be some pretty consistent numbers—so much for mortgage, insurance, groceries, and so on.
Now ask yourself—do those amounts of money make sense?
If not, make adjustments.
Jason says, "If you overspend in this category—insert category here—okay, adjust. It's not that big of a deal. Now, if you're overspending by thousands of dollars there may be other issues at play and we can address those. But if you're consistently under budgeting with your grocery bill... adjust. But here's the key. You have to find another category to take from. Your paycheck is finite."
Jason cautions that you won't get your budget "right" the first time. It takes time.
Further, your budget is a living, breathing document that will change over time.
Jason created an online course that will help you get started.
2. Build Your Savings
This is the single most impactful piece of advice Jason has given me. Years ago, I had nothing in savings. If something had gone completely sideways, I would have been in very deep trouble.
I was lucky. I'd hoped for the best but failed to plan for the worst and I came through it unscathed.
However, luck is not a strategy and hope is not a tactic.
Jason coaches that there are three types of savings, each separate from the other.
"Step one is what I call the rookie emergency fund and that's $1,000 in the bank—a thousand dollars cash that is put aside. It is just hanging out—waiting for your transmission to go, waiting for your dishwasher to die," he says.
"Step two is what I call the outstanding warrant list—getting out of debt. These are all the people you want to get rid of," he says.
Once again, simple, but not easy—and Hoschouer knows this from firsthand experience.
The Hoschouer household found itself $77,232.88 in debt. Jason worked like a madman for 28 months, snapping up overtime whenever he could, and devoted all that extra income to paying down that debt. He says now that he has not worked a day of overtime out of necessity in eight years.
"Once you complete that, then you've got your veteran emergency fund. This is not your new couch fund—this is not the Hawaii vacation fund. This is, 'Hey, if something bad happens I need to be able to float my family for three to six months' fund."
3. Plan for Retirement
You've finished your thirty and want to begin a second career—that's fantastic!
If you started in LE at around 22-24 years old, you'd be eligible to start collecting your pension in your mid-fifties, so there's plenty of tread left on your tires to continue to work for a good long time.
But you don't want to have to do that—you want that to be of your own volition.
Do you want to play golf? Do you want to travel the world? Have you dreamed about the abovementioned fishing boat since you were a boot?
Further, can you afford to live in the same place as you do now, or will you need to move to a more affordable home? Do you even need all five of those bedrooms with all three of your kids out of college and living elsewhere?
Jason coaches his clients to create a retirement plan together with your spouse.
"It comes down to communicating with your spouse—you have to be on the same page. The number one cause of divorce in this country is money fights. It ain't domestics, folks—it's money fights."
Jason says, "Get that plan together—dream together. As a society I really feel like we have forgotten how to dream. And there's nothing wrong with dreams— but plan for them. Write down what you want and then write down an action plan of how you're going to achieve it. If you're not contributing to your deferred comp, start. If that's not enough, if you want to do something different, if you don't think the returns you're getting on that are enough, look into a Roth IRA," he says.
It's generally accepted that 15% of your income should go toward your retirement. That may seem like a tough pill to swallow, but you'll be happy for that inoculation down the road.
Keys 4, 5, and 6
In our conversation, Jason and I focused in on these three steps to help cops better manage their money. But I know Jason a little bit—we've been friends for a few years—and I know there's more wisdom between his ears that merits mention in this space. Here are three other items he teaches.
- Save for your kids' college education.
- Pay off your home mortgage early.
- Build wealth and give to charity.
Jason's final advice: "Start managing your money—and stop chasing more."
