Congratulations, you have just been hired by a fire department and you’re now set for life, right? Wrong! Sorry to burst your bubble, but there are only a few things in life that are guaranteed, one being death and the other is having to pay taxes. Well I guess paying taxes is not necessarily guaranteed, meaning you don’t have to pay them if you don’t want to. However choosing not to pay taxes will have consequences, most if not all of which you won’t enjoy.
This article will focus on financial tips, something the average future or even current firefighter doesn’t spend much time thinking about, for whatever reason. The focus of this article is to actually not be negative, but to be positive and to ensure you set yourself up for success in the long run, which means not just during your career, but also well into your retirement.
This is not just an issue that is about the fire service. Look at professional sports; it’s not uncommon to see professional athletes signing multi-million dollar contracts one day and then being bankrupt five or 10 years later, while they are still in their 20s or even 30s, because of their poor financial management skills.
I will be upfront by saying that some of these things I suggest may go against the culture of not only the average firefighter, but also the average person taking up residence in the United States. I say that because many people living in the United States are living above their means, living paycheck to paycheck, have large credit card debt, going through bankruptcy, losing their houses due to foreclosure, and unable to or choosing not to, make solid financial decisions to save their life if they had to. And, in the fire service, it is not uncommon to have many fire service personnel of all ranks also living above their means. How could that be you may wonder? Fire service personnel who do not make good financial decisions? Say it isn’t so! Well, think about it, whom do we hire? We hire people; everyday people, just like any other industry does.
Some of the suggestions I offer were shared with me prior to getting hired as a firefighter and some after I got hired as a firefighter. Some of these suggestions were from wise individuals of all ranks in the fire service as well as outside of the fire service.
Financial tips for the future or current firefighter, in no specific order:
Save, save, and save your money for the future—If you are a future firefighter, you will need financial resources to be able to apply for some fire departments that may charge a fee just to apply. Even if they don’t charge a fee to participate in the various events of the hiring process (application filing, written test, or physical ability being the most common phases being charged for), you will have to travel to get there, usually on multiple occasions. Save your money knowing you will need to cover travel costs to apply for different departments. Find others you can share the travel costs with, as well as gain friendships and build relationships that may last a long time. Choose your friends carefully though to ensure the relationship is relatively equal, meaning someone isn’t taking advantage of you. So in short, you will need money to apply for different fire departments, to pay for education and training, to pay for clothing or equipment to participate in education or training, not to mention the fact you need to live and survive.
If you are a current firefighter, don’t start buying all the "toys" (jet skis, nice cars, nice trucks, water vehicles, land vehicles...you get the drift), before you buy your property. Yes, I said property meaning your primary residence. It’s harder to get a home loan if you have a lot of outstanding loans for your toys. It’s easier to get loans for the toys once you have your home loan. I’m not necessarily advocating taking out loans to live your life because you don’t want to get too far in debt. I’m just trying to have you prioritize. As for renting or buying a residence, there are pros and cons to all. Do your homework to see what is best for you. Also, if you’re in your 20s, don’t try to think like you’re in your 20s. Think like you’re in your 40s or 50s, meaning look long term and big picture so you don’t sell yourself short in the long run. Talk to those that have some life experience (those who have been on the job for at least 10 or more years), to see what best suggestions they can offer, based on their good and not-so-good experiences.
Don’t rely on your retirement benefits (pension) to fully cover you in retirement—This is a mistake many make. They figure they will work a full career, and then enjoy a maximum retirement benefit that will set them for life. Well, news flash: very few things in life go according to plan. For example, I’ve seen many firefighters retire in their 40s or 50s and say they get $5,000 per month as their retirement benefit for the rest of their life. I know in some parts of the United States that number may seem high or even low, but work with me on this. That $5,000 a month may seem awesome, but you may live 30, 40 or even 50 more years (yes, people are living longer in today’s world, even firefighters) and that $5,000 that seems awesome today won’t seem like much in 10, 20 or even 30 years once you kick in the fact of inflation and cost of living increases. Many retired fire service personnel who retired say 20 years ago are virtually in the poor house because inflation has kicked their butt and they did not properly take that into account when they were preparing for retirement, spending away without a care in the world.
Additionally, what you think will be there in 20 or even 40 years from now when you retire may not be there, for some reasons out of your control (the state of the economy being a major reason). I love it when others say those benefits have to be there because that is what was negotiated and that nobody can take those benefits away from them. Well, I hate to be the bearer of bad news, but if the economy is so bad and your city goes bankrupt (such as Detroit, or Stockton and San Bernardino, CA), and the city or the retirement system cannot afford to pay those retirement benefits to the large number of retirees who are no longer paying into the retirement system and relying on the current and future pensioners that are still working (or not yet working), then those benefits may be reduced. If you don’t believe me, do some Internet research on what the retirees of the Detroit Fire Department were faced with after their city went bankrupt.
If your pension is there when you retire, you will still need additional forms of incomes in many cases, such as money from your deferred compensation program (mentioned below), money from a significant other’s source of income, and even possibly another job for yourself.
Take full advantage of your deferred compensation program—This is something many don’t do or put off until later which is contradictory to the power of how dollars can multiply with the basic knowledge of how interest compounds. The best advice someone ever told me was to always maximize your deferred compensation plan every paycheck so you don’t spend it. Squirrel that money away so you don’t have the temptation to spend it, and so that it starts compounding interest. Over the course of a 20- or 30-year career, that money you put in upon getting hired, can really grow to a respectable sum when you are ready to retire. If you haven’t figured it out by now, retirement is not cheap, especially when you realize the average retiree will also have more medical bills to pay for, not to mention the higher cost of living that will naturally occur.
Another reason it’s best to start maxing out your deferred compensation program is because you start out typically at a lower wage upon hire and then get more money in the future through step raises, promotions, cost of living raises, etc. For example, most departments have a step raise system, meaning every year for the first five or so years in a new position you will get a 5% step raise, going from step 1 at hire, to step 2 after one year on the job (or in your promoted new position), to step 3 after two years on the job, to step 4 after three years on the job, to step 5 or top step after four years on the job. Think about that system—you started out at say $5,000 a month upon hire, but within four years, you’ll have received 4 step raises, each at 5 percent for a total of 20 percent. This doesn’t take into account any cost of living raises that may be say 2 percent or 4 percent a year. Also in many departments, if you are an EMT or paramedic, you may get an additional 5 or 10 percent differential on top of that. If you start maximizing your deferred compensation plan from day one, every time you get a raise (usually once a year), you’ll slowly start to earn more money and not miss it as much as you did on day one. However, waiting too long to start putting money into deferred compensation will really force you to miss that money since you’re not used to seeing it go.
Don’t budget your lifestyle relying on overtime—Overtime is a privilege, not a right, can come and go, and should not be relied on to make ends meet. I have seen too many personnel than I care to mention rely on working so many overtime shifts every month just to pay their bills. When the overtime was reduced or eliminated due to budgetary reasons or additional hires that no longer required the need to staff positions with overtime, you should have seen the emotional reactions of those that couldn’t live without the overtime. Anger, resentment, frustration, bitterness, threats to file grievances or class-action lawsuits; and the list goes on. If you cannot pay your mortgage with your base salary and maybe a portion of your significant other’s salary, not including your overtime, you probably have bought something above your means. Overtime ebbs and flows, and can be reduced at a moment’s notice. It’s a bonus if it happens, but shouldn’t be the end of the world if it doesn’t happen. If you have a second job, that is ok. Just remember who your primary employer is, the fire department.
If your significant other has the ability to work, strongly consider they do so—Two incomes are always better than one. Now don’t get me wrong, if you have children that are of school age, that is the time to be with them, as opposed to hiring a babysitter or nanny that you have to pay for anyway. Your kids will only be that age once; enjoy that time with them. But maybe if you don’t have kids or if they are out of high school, if your significant other has a job, it can definitely assist the household income to ensure you’re not just relying on your fire department salary as the sole household salary. I know this may be an interesting conversation to have to bring up in a household where one person is not working, so I will let you figure out how to go about doing that.
Don’t forget these are your golden years—I’m not saying you shouldn’t have fun or do things you enjoy; by all means live a full and enjoyable life! Just try to live within your means. So many put things off until tomorrow or even say “I’ll go there someday” or they figure they will do a lot of travel when they retire. Well, not everyone is fortunate enough to let that happen as sometimes life throws us all curve balls that we may not be able to hit. Face it, as we get older, our health does not usually get better; it only gets worse, which means we may not be able to travel as much as we want to, nor even do the things we want to do outside of travel. Live smart, but don’t put off what until tomorrow what you can do today!
While I realize you may think this stuff doesn’t matter to me as a future firefighter or even a newly or recently hired firefighter, but I encourage you to not think that way. The best time to prepare for your retirement and your long-term financial success is when you are young in your life and your career, if at all possible. Granted, it’s never too late to start saving or properly planning for the future. However, the longer you wait, the harder it is to play catch up. Please note I am not a financial advisor, just someone who cares about others and wants to see others not make the same mistakes many have had over the course of their career and their life.
STEVE PRZIBOROWSKI, a Firehouse Contributing Editor, has over 20 years of fire service experience, currently serving as a deputy chief for the Santa Clara County Fire Department. He is also an instructor for the Fire Technology Program at Chabot College in Hayward, CA, and is a former president of the Northern California Training Officers Association. Steve was named the 2008 California Fire Instructor of the Year. He has earned a master's degree in Emergency Services Administration, a bachelor's degree in Criminal Justice, and an associate's degree in Fire Technology. Steve has completed the Executive Fire Officer Program at the National Fire Academy, and received Chief Fire Officer Designation through the Commission on Professional Credentialing. He is a regular speaker and presenter at fire service events and conferences across the country and recently published three books: How to Excel at Fire Department Promotional Exams, Reach for the Firefighter Badge, and The Future Firefighter's Preparation Guide, all of which are available on his websites: www.chabotfire.com and www.code3firetraining.com.