Author Topic: Advice for the young guns...  (Read 5449 times)

Turtlemcshell

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Advice for the young guns...
« on: March 29, 2014, 04:35:53 PM »
Dear fellow mustachians,
             Hello! I am relatively new to this site and looking for some advice that i hope some fellow mustachians brothers or sisters can help me out with...

 Anyway, here is a bit about myself: I am 20 year old male, recently married and currently enlisted in the military (2 years in, E-4) stationed in Washington DC. I was overjoyed to find that this site confirmed that i wasn't the only one that was "crazy" to think that this way of living was a smart thing. I constantly see friends, acquaintances and co-workers in my age bracket constantly throwing money out the window, not thinking of the future or long term implications.

The frugal nature seems to be very misplaced in today's society and hard to come by. So my question to all of you is, is there any advice you have for your young aspiring mustachians like me? I realize making decisions and starting good habits early in my life can set me up for success for the rest of it.

My income is easy to look up, as you can search a military pay scale and see what everyone brings home. I also have a housing allowance and food allowance as part of that income. If there are any suggestions you have so i can try and implement these things into my daily life that would be much appreciated. Thanks!

griffin

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Re: Advice for the young guns...
« Reply #1 on: March 29, 2014, 07:01:45 PM »
Welcome to the forums! I'm pretty new to MMM myself, but here are the things that have helped me the most so far:
-Maximizing my 401(k) and setting up an investment account with Vanguard. This seems like it is pretty much the most important step, since you mentioned you aren't a spend-a-holic. I have no idea what retirement plans are like for the military, I think one of the users here (Nords?) has an in depth book or blog about FI for military members, it is probably worth checking out.
-Setting up an account with personal capital (www.personalcapital.com). It lets you track all of your finances and see exactly how much you are spending in each category. You may be surprised. I also find that it helps me limit my spending, since impulse purchases stick out pretty obviously when you log on.

My income is easy to look up, as you can search a military pay scale and see what everyone brings home. I also have a housing allowance and food allowance as part of that income. If there are any suggestions you have so i can try and implement these things into my daily life that would be much appreciated. Thanks!
Why not just post your income? :) I looked it up and it looked like something to the tune of $48,000 a year. It would be much easier to give advice if you posted your current spendings/debts/investment allocations, since there's no way of knowing what (if anything) needs improvement currently!
Cheers,
Griffin

TomTX

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Re: Advice for the young guns...
« Reply #2 on: March 29, 2014, 08:27:21 PM »
Sure.

Keep enough cash "outside" of things like the TSP for emergencies. I have the "backup" chunk of my emergency fund in an I-Bond (inflation-adjusted savings bond) - but a lot of the e-fund is just a high-yield savings account plus credit cards* to get me past the short term "major car repair" problems. Have had the I-bond for 5+ years, have not used it.

Enroll in USAA. Monday.

Sock away what you can manage into the TSP. Set it up Monday if you haven't already.

Take advantage of the many educational opportunities you have while on active duty. Pick up a useful degree or three.

When you get a pay bump, put most of it into the TSP.

Are you planning on your full 20? Think about getting qualified for the Enlisted to Officer program (or whatever they call it in your branch) - Officers get a lot more pay, and 4 years of Enlisted active duty actually gets you a pay bump as an O1-O3, apparently.

Stay frugal, get your 20 in and be totally financially independent at 38 - particularly if you can sock away a lot into the TSP.

*Always paid off in full every month, of course.

maryofdoom

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Re: Advice for the young guns...
« Reply #3 on: March 29, 2014, 08:29:19 PM »
Welcome to the forums! I think Nords's blog is the best place to start for the nitty-gritty tactics of what you need, so I'm just going to tell you one thing. I've only been married for five years, but I think the most important thing that you should keep in mind when you're setting yourself up for an awesome life is this: Make sure that you and your partner are on the same page about the things that are most important to you.

I attribute a great deal of my own personal success to having a very strong relationship with my husband, and being able to explicitly discuss what we want to do with our lives. It sounds like a simple thing, but I think a lot of people may have come to this forum because they and their partners are working toward disparate goals. Or they haven't even discussed their goals. If someone wants one thing and someone else wants another thing and they don't talk about what they want, that's a recipe for disaster.

Yes, invest for your retirement; yes, invest for income; yes, spend less and save more; but be sure you and your spouse are working toward the same goals. That goes a long way.

CarDude

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Re: Advice for the young guns...
« Reply #4 on: March 30, 2014, 08:30:21 AM »
Welcome to the forums! I think Nords's blog is the best place to start for the nitty-gritty tactics of what you need, so I'm just going to tell you one thing. I've only been married for five years, but I think the most important thing that you should keep in mind when you're setting yourself up for an awesome life is this: Make sure that you and your partner are on the same page about the things that are most important to you.

I attribute a great deal of my own personal success to having a very strong relationship with my husband, and being able to explicitly discuss what we want to do with our lives. It sounds like a simple thing, but I think a lot of people may have come to this forum because they and their partners are working toward disparate goals. Or they haven't even discussed their goals. If someone wants one thing and someone else wants another thing and they don't talk about what they want, that's a recipe for disaster.

Yes, invest for your retirement; yes, invest for income; yes, spend less and save more; but be sure you and your spouse are working toward the same goals. That goes a long way.

Everything Mary said. The right partner--and learning how to *be* the right partner--is one of the most powerful investments you can make.

DoubleDown

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Re: Advice for the young guns...
« Reply #5 on: March 30, 2014, 10:52:56 AM »
Good for you starting early. Do this, and you will almost certainly be wealthy by the time you are 30-40:

Start investing now, as much as you can with every paycheck. First max out your TSP (401k plan), then Roth IRA, then taxable accounts (a regular brokerage account with no tax advantages, like with Vanguard). Follow a healthy asset allocation, primarily in indexed stock funds. Avoid any kind of exotic financial instruments/schemes, whole life insurance, expensive or "loaded" mutual funds, individual stocks or day trading. Put all this investing on autopilot, so that it just comes out of each and every paycheck, and live on the rest.

Since you are currently getting a housing and food allowance, you should be able to invest a ton. If you can invest 50% or more of your total earnings each month, you will be wealthy in almost no time at all while you are still a very young man.

Optional: If you have or develop an interest in real estate, it is another great way to develop wealth, diversify your assets, and hedge against inflation and stock market downturns. Owning property(s) in a good market can lead to a lot of gains over time.

ender

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Re: Advice for the young guns...
« Reply #6 on: March 30, 2014, 12:44:11 PM »
Get used to contributing the maximum to your TSP (or 401k, for anyone else reading this who is).

It's considerably harder to increase this amount later in life once you get used to it.

Nords

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Re: Advice for the young guns...
« Reply #7 on: March 30, 2014, 03:00:37 PM »
Anyway, here is a bit about myself: I am 20 year old male, recently married and currently enlisted in the military (2 years in, E-4) stationed in Washington DC.
I can't improve on the advice you've been given, but I can offer my condolences for your being stationed in DC. 

I guess the good news is that you're getting plenty of examples of how not to live a Mustachian life...

CrochetStache

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Re: Advice for the young guns...
« Reply #8 on: March 30, 2014, 05:42:41 PM »
Learn the ins & outs of the military pay system. It's frustratingly complicated, those working in your pay office make mistakes. LOTS and LOTS of mistakes!! Not necessarily because they are bad employees, it's just that ridiculously convoluted.

Double check everything, know the jtr inside and out: http://www.defensetravel.dod.mil/site/travelreg.cfm

Little things can make a big difference such as a friend was pcsing from Japan back to the states but wanted to visit family in the midwest before checking into the new duty station in CA.
She was told they would only fly her to the new duty station, which makes sense.
However, it cost the gov't LESS money to fly her & the family to Chicago than the flight to CA and it was allowed within the regulations for the gov't to do so. But my friend had to find the exact section of the jtr and show them information that they should have already known.

Good Luck! I second what TomX stated in his post also.

Turtlemcshell

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Re: Advice for the young guns...
« Reply #9 on: March 30, 2014, 06:06:09 PM »
Thank you all for the inputs, they are all much appreciated. I plan on making the most of my investing in TSP and will continue to research other investing endeavors. Anybody have any other recommendations on investing?

zolotiyeruki

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Re: Advice for the young guns...
« Reply #10 on: March 30, 2014, 07:07:51 PM »
I don't have much advice regarding investing, but I'll contribute a few "what I wish I knew when I was 20" thoughts (I'm now 33):
1)  avoid lifestyle inflation.  At my first job, my wife and I found ourselves eating out WAY too often, for flimsy excuses.
2)  start budgeting right away.  That's how we figured out where we were hemorrhaging money.
3)  max out your IRA/Roth/401(k)/TSP contributions, if you can.
4)  Stick with the smallest home you find comfortable.  We did this right, and had four kids fairly comfortably in a 1500sqft house.  At the 6-year mark, we were about 1 year away from paying it off--the PITI was small enough that we were making triple PI payments because it was an inexpensive home.
5)  See #1.  We'd probably be 3-4 years closer to retirement had we stuck with #1 better (I'm just about to hit 9 years out of college)

Nords

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Re: Advice for the young guns...
« Reply #11 on: March 30, 2014, 09:12:47 PM »
Thank you all for the inputs, they are all much appreciated. I plan on making the most of my investing in TSP and will continue to research other investing endeavors. Anybody have any other recommendations on investing?
Read the Bogleheads wiki and get a good handle on your desired asset allocation:
http://www.bogleheads.org/wiki/Main_Page
There's also a section for military finances, particularly for investing if/when you deploy to a combat zone:
http://www.bogleheads.org/wiki/Military_finances

At your current rank (for now!) you're probably going to do most of your investing (if not all of it) in the Roth TSP and your Roth IRAs.  Try to max them out.  When you're promoted, try to put at least 80% of that promotion pay raise into the TSP and your IRAs.  While you're in the military (unlikely to be laid off) then invest in the C, S, and/or I funds.  If this feels too risky then pick a long-dated L fund.  No need (at this point) to invest directly in the F or G funds, although they do have advantages for much later in your career/life.

If you're planning to leave the military at the end of your obligation then start accumulating cash for the transition... generally 12-18 months before your last military paycheck.  If you're leaving active duty for the Reserves or National Guard then plan for 6-12 months without making any serious income from drills. 

At this point in your life, your biggest returns will come from investing in yourself.  Get good at being a team member. Get some leadership experience.  Get to the training schools.  Get promoted.  Get a degree.  If you're enjoying the military life then consider getting a commission.

EricL

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Re: Advice for the young guns...
« Reply #12 on: April 07, 2014, 04:53:17 PM »
Dillon J.

Ahh, E-4 - too senior to be given the crud jobs, too junior to take real responsibility.  A great rank indeed!  Having been a Specialist there are many things you can leverage to help your situation.  First, while E4 pay is indeed low, you have the amazing benefit of having the government pay for your quarters - either on base or an apartment.  People in your age group have to pay about 25-50% of their wages to rent an apartment.  So start by paying YOURSELF that money.  If you live on post, pay most of that "rent" to your TSP.  The TSP is awesome and charges even less than Vanguard Funds.  If you live off post, get the cheapest place you can feel comfortable in and pay most of the difference in your Basic Housing Allowance to your TSP.  Keep about equivelent of a month or two of paychecks in the bank.  That way you can be your own PayDay Lender (minus the criminal interest charges).  After a few years you may want to diversify so you'll have more money accessible, but that's a great start.

Do you go to the field or deploy?  Well that's a wonderful place to save money.  You can't shop at the mall when you're in the woods and shopping opportunities while deployed are simularly limited (though not always).  So invest 90% of your pay.  Keep the rest for the homecoming celebration whether that's a pizza or a vacation.

Your wife.  God I hope you didn't marry a stripper.  You can be as frugal as you want but if the spouse isn't you're wasting your time.  Convert her to the 'stache way of seeing things and she may help you more than anything.  Especially if she has or can get a job of her own.

Education: You can't always use your education benefits in the Army.  The OPTEMPO is just too extreme sometimes.  But if you can, go for it.  If you have the benefits and can knock out a 2 year degree on active duty you may avoid a lot of hassle later on.  Post 9/11 GI Bill Benefits can be transferred to your wife for HER education if that fits your financial needs.

Languages: Do you know the Army will actually pay you for each language you know?  It's as much as $1000 per month for multiple languages depending your proficiency and language.  Plus it may open doors to jobs in the Federal Government after the Army most troops can't get.  The Army's Ed Centers can point you to language learning resources.  For full details see AR 11-6, The Army Foreign Language Program, page 17.

Becoming an Officer: I know one poster here recommended it and they're right - the money is great.  But the aggravation can be extraordinary.  Check your priorities very carefully before you go there.  A mustachian NCO can still retire a millionaire - and that doesn't include the pension.

If you can help it, don't buy a car.  Not all military posts are pedestrian friendly and your family might need one.  But if your circumstances permit, don't buy a car.

The PX offers generic brands of common items - like $1.50 concentrated laundry detergent.  Use them. 

TDY: I've never understood why the Government payed out so much for travel.  It's like they expect you to get trapped on the side of the road and the only meal options are gourmet restaurants and the only hotels are five star joints.  So if you do go TDY, save the $. 

Another poster mentioned USAA and they're right.  Near as I can tell it's the only bank left in the US that bends over backwards to help the customer. 

If you do stay for an entire career or are thinking about it, buy Nords' book.

TomTX

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Re: Advice for the young guns...
« Reply #13 on: April 07, 2014, 08:13:03 PM »

Becoming an Officer: I know one poster here recommended it and they're right - the money is great.  But the aggravation can be extraordinary.  Check your priorities very carefully before you go there.  A mustachian NCO can still retire a millionaire - and that doesn't include the pension.

Another poster mentioned USAA and they're right.  Near as I can tell it's the only bank left in the US that bends over backwards to help the customer. 


It was the same poster ;)