The Real Cost of a Latte

We all know cops don't become cops to get rich. Some agencies pay better than others do, but none of us is planning the purchase of our next private jet. Most of us live modestly, sometimes even paycheck to paycheck. So finding a few bucks to invest in retirement seems impossible. But you don't have to find big money to invest comfortably; it might be as simple as changing some habits.

We all have habits, some good and some not so good. It could be cigarettes, or a nice cigar. However, in our job, with its odd hours and unpredictable schedule, a common habit is spending money at work. We buy coffee or snacks; we eat out. While this last habit has health consequences as well, all of these can have retirement consequences.

Sure, spending $5 or $10 a day does not seem like a big deal. If you took that money and invested it for retirement, you could be well on your way to being a millionaire.

Simple Spending

Coffee is a staple of police work. Between shift work, court time and family commitments, sometimes it seems like the only way to keep going is to grab a nice cup of joe. Some people don't like coffee, but rely instead on energy drinks. Dropping $3 on one of these beverages of necessity does not seem like a big deal. For most of us, it isn't.

We also have trouble planning for lunch (lunch being that mid-shift meal, regardless of whether you eat it at 1100, 2300 or 0500), so we figure we'll just buy something. Eating out may also be a chance to connect with coworkers as a busy shift winds down. Of course, eating out can be a road to health problems... the increased fat, salt and calories all take a toll on our bodies. But, hey, it's only $7, right? It's not that big a deal, right? Wrong.

The Power of Compound Interest

Spending $3 on your mocha-choca-latte and $7 on the mongo-baconburger adds up over time. If you work 4 days a week and 49 weeks a year, you are spending $1960 a year on these habits. If you set that money aside in a glass jar, you would accumulate $58,800 over the course of a 30-year career. That is not exactly chump-change, but it may not be enough to entice you to rethink your spending habits.

That's where compound interest comes into play. Compound interest is the idea that an investment earns money every year, making your original investment grow as well as the prior years' earnings. How powerful is compound interest? If you took that $1960 a year and invested it in a mutual fund averaging 8% per year, in 30 years you will have roughly $240,000. Yes, you read that right... you would have nearly a quarter-million dollars.

So, if you join the PD at age 25 and save $1960 a year through a 30-year career, you can retire with a quarter-million dollars in the bank plus your pension. Now that coffee and burger habit is a little more expensive than you thought, isn't it? Wait, it gets better.

Say you are willing to wait 10 more years to actually quit working, opting to teach from age 55 to 65. And say you keep stashing $1960 a year into your mutual funds. Yes, you still have your pension. But then when you retire for good, your retirement account will be worth over $548,000. That's right, over a half-million dollars.


Spending money is easy; in police work, it is really easy because we have all sorts of daily habits that drain a few dollars here and a few dollars there. That money does add up over time, but not enough to make us change our ways. But if you consider how compound interest can work in your favor, giving up that cup of coffee and meal out can become a real wealth-builder. Most of us figure $10 a day is no big deal; but it could be costing you a half-million dollars towards retirement.

I don't know about you, but I have never had a cup of coffee or a hamburger worth a half-million dollars.