11 ways to invest a lateral transfer bonus
Before you let those lateral transfer dollars burn a hole in your pocket, consider how to best invest in your financial security, on-duty safety or well-being
Law enforcement officers regularly tell Police1 it is a tough time to be a cop. But it’s also a great time to be a police officer if you are interested in making a lateral transfer to another agency. Departments across the country are going big with creative pitches, like Fort Worth’s Officer Big B, and digging deep into the budget to offer lucrative signing bonuses for experienced officers to join the ranks. If there is an upper limit on how many thousands of dollars departments are willing to offer a lateral transfer, I don’t think we’ve reached it.
States are also getting in on the action to lure police officers willing to move. In addition to a bonus for new recruits, Florida is offering a bonus and help with relocation expenses for experienced officers. The Florida program also increases funding for college scholarships for the children of police officers and cash benefits for LEOs who adopt a child with special needs.
Before you jump the fence
If you are considering a move to another department, make sure you read 12 important considerations before moving to 'greener pastures' by Lt. Dan Marcou. Certainly, a department’s wages, benefits and lateral transfer bonus should be considered, but go deeper before restarting your career someplace else. Lt. Dan outlines the importance of assessing a community’s support for police, the department’s culture, and the opportunities for your spouse and children.
As lateral transfer bonuses increase to $10,000, $15,000, or more, it’s natural to daydream about how you’ll spend the money – even before the department has acknowledged receiving your application. Here are some ideas on how to invest the money to increase your financial security, improve your on-duty safety or help reduce the stress that comes from your important work serving your community.
Invest in financial security
Before you sign the contract make sure you understand the payout schedule for the lateral transfer bonus. It’s unlikely that you’ll receive a single lump sum on your first day of work. Rather, the employer will distribute the bonus in two or more payments, such as half when you begin working and the second half at the start of your second year on the job. Other employers might offer the bonus as five equal payments distributed over your first five years on the job.
Cash bonuses are usually treated like other taxable income and may be subject to local, state and federal income taxes. Talk with a tax professional about how much you should expect to pay in taxes on any bonus income.
With the payment schedule and taxes in mind, here are four ideas to use a lateral transfer bonus to increase your financial security:
- Create a $1,000 emergency fund. If you haven’t already, set up a $1,000 emergency fund for unanticipated expenses like car repairs, appliance replacement, or sudden illness. It might not be enough to cover the full expense, but it will help out.
- Stash away 3 to 6 months of living expenses. Your work is dangerous and unpredictable and if you’re the newest officer at an employment-at-will department you could be the first to go if budget cuts hit the police department. Many experts recommend setting aside at least 3 months of money to cover living expenses if you’re suddenly out of work.
- Pay down debt. Credit card debt, education loans and auto loans come with you to your new department. Use a portion of your bonus to pay down personal debt. It’s usually best to start with the highest-interest debt, even if the balance is smaller than other debt.
- Increase your retirement contribution. If you have an emergency fund and no personal debt, boosting your retirement contribution is a great way to invest in your financial security. Talk to a financial advisor to determine your options, which might include a department retirement plan, a Roth IRA or an individual IRA.
Invest in your on-duty safety
Ideally, you are transferring to a department that is offering better duty gear, as well as more frequent and better training than the department you are leaving. Nonetheless, what you are getting is the floor not the ceiling for readiness and professional development. Here are three ideas to invest in your safety and effectiveness as a police officer:
- Get a college degree. The return on investment of college is high, especially if your new department offers full- or partial-tuition reimbursement and differential pay for having an associate degree, bachelor’s degree or higher.
- Enroll in professional training courses. There is a near-limitless opportunity for specialized training in law enforcement. After exhausting department-paid training courses, continue to expand your knowledge and capabilities with additional professional training. Specialized training might improve your promotion chances or open doors for a side hustle as a trainer or consultant.
- Purchase duty gear or a backup gun. The retirement gold watch is a symbol of career transition, but the transition into a new department is a significant new beginning that can be recognized with a piece of equipment that memorializes your new career and has everyday application. A new smartwatch, back-up gun, or uniform component, depending on your new department’s guidelines all have utility and can mark the career transition you’ve made.
Invest in your off-duty health and wellness
Changing departments and cashing a big lateral transfer check won't give you more time, but they might help you have experiences that make memories and strengthen relationships. As you allocate your lateral transfer bonus to some of the above expenses, make sure to set some aside to celebrate with your spouse, significant other, children, if you have them, and close friends.
Avoid spending your bonus on things that don’t increase in value, like a truck, car or boat. Instead:
- Build memories. Take a trip.
- Invest in your home life. Improve a room in your house.
- Prioritize fitness. Buy a gym membership or workout gear.
- Take time to decompress. Purchase gear for a hobby that brings you joy.
Do you have a childhood memory of a parent or grandparent handing you a crisp $20 with the advice to “not spend it all at once”? I sure do. Their advice is just as sound for $10,000 as it is for $20. Don’t let that bonus money burn a hole in your pocket. Let it sit for a few weeks or months as you decide how to best invest it in a way that will be lasting and meaningful for you.