Becoming a firefighter is a dream job. We all jump through hoops and hurdles to get into this profession. From FF1 academies, EMT school, fire science classes, paramedic school, applying to as many departments we can, taking test all throughout the state, going through interviews, failing interviews, going through backgrounds, getting a conditional job offer, getting a final job offer, passing the academy and finally passing probation. Wow, there’s a lot there that happened. So, when we finally get our dream job and pass probation, we feel like we owe ourselves a treat. And many firefighters treat themselves to a brand-new vehicle. Now there is nothing wrong with treating yourself, and in many cases, it is deserved because of the hard work. But in this article, I’m going to go into detail about why buying that brand new vehicle should wait until you get your financial foundation in place first. Firefighters in California, hired after 2013 are now PEPRA employees. This means newer firefighters are expected to work longer careers, with less money in retirement compared to classic members. So, it is even more important for newer firefighters to make investing a priority in their budget. There’s a lot of investment vehicles out there to help newer firefighters set their foundation. These vehicles are 457b, Roth 457b, Roth IRA, and HSA’s.
The average price of a new vehicle in Dec 2022 was close to $50,000. The majority of new firefighters will spend more than half of their salary on a new vehicle. They will do this also while neglecting to start saving for retirement. The priority for new firefighters should be to max our their 457b deferred compensation plan. The max for 2023 is $22,500. Another concept which everyone should try to avoid is “lifestyle inflation”. This is the basic concept of as our income goes up so do our expenses. We get a raise or pay bump, so we use that increase expenses which in return we purchase more liabilities. I understand, we have worked so hard to achieve our life goal of becoming a firefighter, but prioritizing investing into assets instead of liabilities will allow us to have happier and shorter career. After all, that should be the goal of every firefighter. To have a great career, but also a better retirement. Attached is a chart, which shows what $50,000 invested at a 10% interest rate will grow to over a 30-year career. This is the power of compound interest, and the power of spending money on income producing assets, instead of depreciating liabilities.
