Three of the Biggest Money Mistakes Made by New Officers

Oct 28, 2022
young police officers

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When you work in a demanding occupation with long hours and a high degree of stress as well as personal risks, it’s understandable if your instinctive reaction to those pressures has at some point involved extravagant spending or otherwise less than healthy financial habits. But if you know the common mistakes young law enforcement officers make, and catch them early, you can avoid the traps that can all too easily eat away at your financial security and opportunities to grow your wealth. Set yourself on a course of financial strength that will benefit you now, and in decades to come, by avoiding these common mistakes we’ve often witnessed many new officers make:

Not getting sufficient life insurance coverage

According to the law enforcement platform Outside the Badge, about four in 10 adults have no life insurance. This can be problematic enough for individuals in any line of work who have loved ones that depend on their income. But as someone who puts your life and personal safety on the line in order to protect and serve, an investment in adequate life insurance can be a critical strategy to safeguard your family’s financial security and provide you with valuable peace of mind.

A life insurance policy will pay out a tax-free lump sum payment to your beneficiaries if you die unexpectedly, but it can also provide important benefits to you while you’re alive if you invest in a plan with coverage for certain contingencies. For instance, you might add on an option that provides a monthly stipend if you become unable to work due to a disability, or one that pays for expenses related to long-term care needs.

Most individuals in law enforcement are able to purchase some form of life insurance as part of their benefits package, and it’s a good idea to take advantage of an employer-sponsored group plan first, since it offers some coverage for no cost or for very little money. But it’s important to recognize that group coverage is usually much more limited than that which an individual policy can provide. In most cases, benefits from a group policy will max out at one to four times the amount of the insured person’s salary.

To protect your family from financial hardship in the event of an untimely death, it’s wise to fully explore what’s available in your employer-sponsored plan, and consider whether it makes sense to supplement with an individual policy. Police officers generally have access to the same life insurance options as those in other occupations, and not all providers will charge higher premiums for this line of work. You can get up to speed on this topic at

And if an individual policy makes sense for you, The Police Credit Union can help. Our partnership with trustworthy providers enables us to offer excellent coverage with multiple options for various budgets. In addition, keep in mind that our “End of Watch Debt Forgiveness Benefit” provides a valuable protection exclusively for active, full-time sworn peace officers and reserve officers throughout California. Find details regarding eligibility for this complimentary benefit here. Those who qualify can enroll by speaking to a Loan Officer when opening an eligible loan.

Neglecting to build an emergency savings fund

As you likely know, financial advice experts recommend that households establish cash reserves of three to six months’ worth of living expenses that are kept in an account that is accessible, but separate from one used for daily purchases and for paying bills. This fund is intended to offer peace of mind as a safety net for unanticipated events or expenses, such as a job loss, major home or auto repair, an illness, major injury, critical travel, etc. With a financial cushion like this in place, you can avoid much of the debilitating stress, cycles of debt and other major setbacks that might otherwise occur under these circumstances.

However, data has continually shown that only a fraction of Americans have a rainy day fund to cover six months of expenses, and many reports indicate that more than half have no emergency fund at all. But with the risks and physical demands of policing, it only makes sense to be prepared. Fully funding an emergency savings account can take time, but even savings of $500 can help prevent you from going into debt and serve as a foundation for building your savings over time.

According to Lexipol, a good strategy is to save $500 to $1,000 as an initial goal, and then focus on paying down any non-mortgage debt. Once you’ve cleared your debt, you should start putting any extra money into your emergency account. For a painless way to build emergency savings, set up automatic transfers from your checking account to an emergency account, and/or use direct deposit to divide your paycheck so that a portion of it goes into savings. The Police Credit Union offers multiple solutions that provide both flexibility and a competitive rate of return, including our Savings Account with no monthly fee and a low minimum balance required to earn dividends. Find information on our various savings options here.

Delaying plans to invest for retirement

The failure to understand the exponential function has been cited as one of the greatest shortcomings of humanity. But when it comes to investing, it’s really pretty simple to grasp the concept. The earlier in your life that you invest in a retirement fund, the more time the exponential factor works in your favor as your returns compound and grow. As the independent personal finance website The Ways to Wealth has pointed out, you don’t need to invest a massive lump sum in order to substantially grow your net worth when you’re dealing with a long-term time horizon. A powerful strategy for building wealth and protecting your future spending power from inflation is to invest on a regular basis as early as it is possible, and keep these funds in the market over many years. To illustrate, if you invested $844 per month over 30 years in a retirement account with an 11% return, that could grow to a nest egg worth approximately $2.37 million.

Retirement plans for law enforcement professionals vary depending on the department or agency, and while some employers still offer a pension, it may not be enough to meet all of your retirement needs. For most officers, the best approach is to meet with a trusted advisor who can guide you toward the right options to ensure that you’re on track for a comfortable retirement. You’ll also want to fully investigate the defined benefit plan you have. If your employer matches contributions, at the very least, invest enough to claim the full match, as this is essentially free money.

A good general guideline is to aim for investing 15% of your gross income in a tax-favored retirement account each month once you’ve paid off non-mortgage debt and have fully funded your emergency account. If you want to bolster your retirement savings, you might consider investing in additional tax-advantaged asset(s). But be aware that there are limits to what you can contribute on an annual basis to qualified retirement accounts.

In the final analysis, there is little substitute for working with a certified professional who can offer a holistic approach to your financial planning based on your goals, personal situation and tax-planning needs. Through our partnership with LPL Financial (LPL), The Police Credit Union provides comprehensive Wealth Management services, and can create a retirement portfolio tailored to your life and the one you envision for your future. To learn more, visit our Wealth Management Services webpage at

Chris Breault and Kevin Chew are financial advisors with, and securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker-dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. The Police Credit Union and The Police Wealth Management Services are not registered as broker-dealer or investment advisor.  Registered representatives of LPL offer products and services using The Police Wealth Management Services, and may also be employees of The Police Credit Union.  These products and services are being offered through LPL or its affiliates, which are separate entities from, and not affiliates of, The Police Credit Union or The Police Wealth Management Services.  Securities and insurance offered through LPL or its affiliates are:

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