A respected senior officer looks back at his early years and offers some hard-earned advice.
Dear Younger Self,
It is I, Your Older Self. I want to let you know that you turned out all right – that you have now served over twenty years in the military and are still going strong.
Your successes, your failures, your good habits and bad… I know them all. So I decided to write you and give you some advice from the future – some advice that I hope you will take because I wish you had set me up better.
I know, just the kind of thing you want to read, right? Well, yes it is. I know because I am you and trust me – we need this.
At the center of it is why you joined the military in the first place. Of course, the structure, the idea of knowing expectations, and the desire to challenge yourself all drew you in.
You also needed a job.
Fair compensation for the quality labor you provide, right? So here you go. I am going to outline some financial things you did well, and some things you could have done much better. You will be better off for it, as will I.
First off, although you took a fifty percent pay reduction coming in from the civilian world to the military world, you saved twice as much your first year. Nicely done! What you needed to do was have a budget. People treat “budget” like a dirty word, or like a “New Year’s resolution”, something they have great intentions but never quite get going.
Do not do that. Treat the word “budget” as if it is one of the more powerful things you will ever use. It is like a shepherd for your money. Without a budget, your dollars that you worked so hard for will just run off wherever they want. With a budget, you will tell every dollar exactly where you want it to go. Do that. Do that as if it is a part time job. I promise you, it will make YEARS of difference to your financial freedom.
It is not that hard. Start a spreadsheet. Plug in some numbers, they do not have to be perfect – just get something in there. Start telling your dollars where you want them to go. While you are at it, save as many as possible for me, okay?
Honestly, you do not need to spend that much. Budget some for food, some for entertainment and going out with friends. Make sure you get the details in there when you can, such as insurance, phone, tithing or donations, cloud storage, streaming service, those type things.
While you are getting this budget going, open up an account. Actually, open up several. Most people don’t think of opening several accounts, but it’s no big deal. In fact, it’s quite easy to do. A good place for this is credit unions. Most financial advisors will say that if you have access to a credit union – take it. They will always have better rates than a traditional bank.
Of the accounts you open, one will be your main checking account, where your paycheck goes. Two others will be checking accounts with a debit card. Each week, have an automatic deposit go to those two. One is for food; and one is for any “discretionary”, or fun – but not necessary – purchases you might make. Having separate accounts for travel savings and gift savings is a good idea too. Also, have a savings account that you can use but not too easily. There you will put your emergency money. That one is important and I will get back to that in a moment.
Before I talk about emergency funds, let me tell you where you really screwed up – you did not fund that account first. You wanted to make it big off stocks and mutual funds.
Not yet, slick. Look at some methods to financial freedom first, and try one of those models. Once you get your emergency fund up to 3-6 months of expenses, then you can start to get all fancy pants.
First, however, you should take a step back and realize what you have done. You have just covered yourself in case you get into financial trouble… Say, for instance, your car needs a major repair, or someone in your family needs a medical treatment not covered by insurance, or your pay does not go into your account at the regular interval. These things can and do happen to people. Make sure you have a safety net with an emergency fund.
In addition, it will give you some money for down the road if you want to buy a house. I know you think the VA benefits are great to help you buy a house, and they can be. Nevertheless, do not buy a house with 100% financing. Always put a down payment. The math is a little complex for this writing, but you can trust me – I am you.
Once you have that 3-6 month cushion, now the real fun starts. You can invest 15% or more in savings. Just do not trust friends with investment advice. Go with somebody sound, like a certified financial planner or at least a financial advisor. Once I found a reputable financial advisor, I was able to achieve over $100,000 in emergency, investment, retirement, and college savings (for the kids… yea, you had two of those). That said, I am going to need quite a bit more to achieve financial peace, and that is where you come in.
I feel like there is so much to say and so little time, but this will get you started. I hope you are listening, because I am depending on it.
A TRACEN staff member
Disclaimer: This is written as an unofficial columnist and is not intended to conjure or imply any endorsement of any company, service, or person.
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