Home > Insights > Financial Planning > Get Your Financial House in Order

Get Your Financial House in Order

January 2, 2023
Young couple sitting at kitchen table with lots of papers, calculator and laptop

8 Tips to Organize Your Finances as a Law Enforcement Officer

The new year is a great opportunity to start fresh, both in life and with your finances. Having an organized financial life is an important first step in achieving your financial goals. If you’ve been feeling a bit unorganized lately, the following tips can help you get back on track.

#1 – Understand your spending habits.

Begin by gaining an understanding of where your money goes each month. Take a month or two to thoroughly track your spending habits, and classify each expense into one of two categories:

Fixed expenses – The expenses you must pay each month, such as:

  • Rent/mortgage
  • Minimum credit card payments
  • Car payments
  • Insurance premiums
  • Utility bills
  • Cell phone bills

Discretionary expenses – The optional expenses you choose to take on that aren’t essential for daily living, such as:

  • Eating out
  • Movie and concert tickets
  • Streaming subscriptions
  • Gifts
  • Vacations

#2 – Create a budget.

Once you have an idea of your monthly spending total, compare that amount to the amount of income you bring in after taxes and withholdings. Your budget should allow you to have money left over after paying your fixed expenses. If it doesn’t, it may be time to cut back.

To do so, refer back to your list of discretionary expenses to identify money-saving changes. Maybe you decide to eat out just once per week, or perhaps you can take this year’s vacation closer to home and save on airline tickets. While these types of decisions involve short-term sacrifice, they have the potential to pay off over the long term.

#3 – Pay down debt.

If you carry any high-interest-rate debt, such as a credit card balance, now’s the time to get serious about paying it off. It’s incredibly difficult to get ahead financially if you’re paying interest and late fees on outstanding debt.

Two effective strategies for paying off debt include:

  • The snowball method – This involves paying off your smallest debt balance as quickly as possible, then moving on to the next-smallest debt. The benefit of this approach is it can help you gain a sense of accomplishment as you knock out one loan after another.
  • The avalanche method – Using this method, you begin paying on whatever loan has the highest interest rate. Once that is paid off, you move on to the loan with the next-highest interest rate until all loans are paid off. This approach allows you to pick up speed as your go, because each payment saves you more money than the one before.

If you receive supplemental pay, such as comp time, overtime or shift differential pay for nights and weekends, consider putting this “extra” income toward paying down debt as quickly as possible. The sooner you eliminate your debt, the sooner you can work to achieve financial freedom.

#4 – Establish an emergency fund.

Once you’ve tracked your spending, established a budget and begun paying down debt, it’s time to start saving in an emergency fund. You should have at least three to six months of living expenses saved in a liquid account that you can quickly access should something unexpected happen.

This is especially important for law enforcement officers, who face an increased risk of being injured on the job and becoming unable to work. While workers’ compensation can help cover your medical bills and expenses following an injury, it’s important to have cash on hand for other unexpected expenses.

#5 – Rebalance your portfolio.

When was the last time you reviewed your investment allocation? If it’s a been a while, it might be time to rebalance. Rebalancing to your original (or an updated) asset allocation helps lock in possible gains from top-performing sectors and helps to ensure your portfolio remains in line with your investment objectives and risk tolerance.

Your wealth manager can help you review your portfolio and make updates to account for any changes in your situation or goals.

#6 – Protect your loved ones.

As a law enforcement officer, you put your safety on the line every day. You likely knew when you joined the force that there was a chance you could become injured or lose your life on the job, but have you considered the financial ramifications to your family if the unexpected were to occur? If you don’t have the proper insurance and estate planning documents in place, you could be putting yourself and your loved ones at risk.

Regardless of whether you have children, you should, at a minimum, have the following:

  • Disability insurance – Replaces lost earnings in the event you’re unable to work due to a disability
  • Home/renters’ insurance – Protects your primary residence
  • Auto insurance – Protects you and other drivers in an auto accident
  • An umbrella policy – Protects your savings and investments against personal liability claims

If you have children, there are two additional items you should immediately address:

Your wealth manager can help review your insurance policies and estate plan to identify any missing coverage or documents.

#7 – Save for retirement.

When it comes to saving for retirement, the sooner you start, the better. One of the easiest ways to get started is by contributing to your employer-sponsored retirement plan. Most law enforcement officers are eligible to participate in a 457(b) plan, a defined contribution plan typically offered to state and local government employees. Make sure you contribute at a high enough rate to take full advantage of any available matching contributions. For example, say your police force matches 50% of contributions up to 6% of your deferral. If you’re not contributing at least 6% of your paycheck to the plan, you’re walking away from free money.

If you don’t have access to an employer-sponsored retirement plan (or if you do and want to save more), consider establishing an individual retirement account (IRA). Based on your specific financial situation and goals for the future, your wealth manager can help you determine whether it’s more advantageous to establish a traditional IRA (pre-tax savings) or a Roth IRA (after-tax savings).

#8 – Plan for major purchases.

If you anticipate making any major purchases (such as a house, car or college education), a bit of advanced planning can help ensure your purchase doesn’t derail your other long-term goals. The following steps can help.

  • Start by estimating how much you’ll need and how long you have to save.
  • Establish a separate account for your earmarked savings. This offers you the benefit of seeing your assets grow while also helping you resist the temptation to spend your savings on other expenses. Depending on your timeframe, invest these assets in either a high-yield savings account or a certificate of deposit (CD) that will pay you a bit of interest.
  • Set up automatic deposits from your paycheck. This is the easiest way to ensure you’re consistently adding to your savings.

Could you use some help getting your financial house in order as a law enforcement officer? Don’t worry; Creative Planning Law Enforcement is here for you. Our experienced professionals understand the unique challenges faced by law enforcement officers and work to ensure every aspect of your financial life is organized, well cared for and working to help you achieve your long-term goals. Schedule a call to learn more.

This commentary is provided for general information purposes only, should not be construed as investment, tax or legal advice, and does not constitute an attorney/client relationship. Past performance of any market results is no assurance of future performance. The information contained herein has been obtained from sources deemed reliable but is not guaranteed.

Ready to Get Started?

Meet with a wealth advisor near you to see if your money could be working harder for you. Receive a free, no-obligation consultation.


Prefer to discuss over the phone?