C'mon guys, you could lighten up a little with all the dire warnings about the Reserves. My spouse and I were a dual-military couple for our entire careers, and having one of the couple in the Reserves/Guard is a whole heck of a lot better than having to toss the kids to Grandma on the way to the deployment.
Besides there's not enough money in today's defense budget to mobilize the Reserves as much as the last decade. There's barely enough to pay for fuel and drill weekends, let alone active duty.
Posted a few months ago about my budget, thanks to everyone who replied. The hubby and I are now debt free, down to one horse and in the process of getting out of them. (60k paid off in two years!) I have two questions below that I知 looking for feedback on.
Sounds like a good plan. I have never met a horse owner (dressage, Western) who has been able to retire early. However they seem very happy with being horse owners, so perhaps it's a lifestyle that you have to save up for.
I recently sold my horse trailer and am trying to figure out what to do with the money ($9K)for the next 4-5 years. The short-term plan is to deposit all of it into the Savings Deposit Program while he is deployed (10% guaranteed return). Afterwards, I want to move the money into an S&P index fund with Vanguard. Hubby wants to keep it sitting in the bank (in a savings acct no less!) as the beginning of our emergency fund. Given that he is contracted for 10+ years and I知 contracted for the next 2 years I知 not worried about having an immediate EM fund. (We also have 5k sitting in our savings acct.)
What do you recommend I do with the money?
Absolutely. The SDP is like having governmental permission to print your own money. Best deal in town, except for the part about being in a combat zone.
I'm sorry to hear that he's ended up in a 10+ year obligation, and I'd love to hear that story, but in the meantime his continued employment seems pretty good. From a financial aspect you should certainly save as much as you can in equity index funds while you're earning a steady/reliable income. Max out the Roth TSPs and your Roth IRAs. If the volatility interferes with sleeping at night then choose a TSP "L" fund.
From an emotional investor-psychology issue, there are a couple of other ways to assuage his concerns. One would be to compromise by putting half in his savings plan and half in your plan. Another option would be to figure out your bare-bones emergency-car-repairs-and-plane-tickets-to-visit-the-parents fund and save only that amount. A third option would be to figure out how much you'd spend each month if you were both unemployed, and then just put 2-3 months of that in an emergency fund.
But the reality is that you could also put the emergency expense on a credit card and pay it off from the next few paychecks, or talk to the command about a month of advance pay, or talk to your service's relief organization.
Now, I知 getting tired of my job and am interested in getting out to raise our daughter (with plans to have a second kid in the next year). But, I like the idea of going into the reserves ( I would get abt $800 on drill weekends) to earn a bit of extra money. While I raise our kids at home, I知 interested in opening an in-home day care to make up for the loss of my income. (We currently bring in 8k/month (after taxes), we池e working on trying to save 5k/month, but rent(1375/month)+child care (1100/month) are our biggest expenses.
Keep in mind that you may have commuting/lodging expenses for those drill weekends, as well as meals. You'd earn $800 but if you had to buy a plane ticket then you quickly find yourself rationalizing "Well, at least I'm earning points for retirement." Another advantage of a Reserve drill weekend is that you could put 92% of that pay into the TSP to accelerate your savings in the world's cheapest index funds. My spouse used to get Reserve pay of "$10.02" after TSP deductions.
Check with the Reserve unit in your area where you'll be getting out (or where your spouse will be stationed) to see what they offer for contracts. You may be able to move straight from active-duty to the Reserves with a contract guarantee that you will not deploy for the first year or two. If you get to the 12-18 month point and you're absolutely not willing to risk a deployment then you could transfer to the IRR and continue doing online correspondence courses or other duties (funeral honors guard) for enough points to have a "good year". Drilling for a bunch of cash is a nice benefit, but the long-term goal is to keep earning your good years so that you qualify for a Reserve/Guard pension.
Besides trying to save as much as possible in 2 years, what would you do/advise knowing that your income is going to drop by half so that you can stay home to raise 2 kids?
Develop a budget for the worst case: him on active duty (but no extra combat pay) and you unemployed with two kids and a bureaucratic hangup on your home childcare plans. Figure out how much money you'd like to have in savings to survive that period for 6-8 months. Then figure out when you'd need to cut back on your TSP & Roth IRA contributions in order to build up enough cash in taxable accounts to cover that new version of your emergency fund.
Another option would be to look at your Roth IRA contributions as your emergency fund. You can withdraw them anytime for any reason, but of course that also means you lose their retirement compounding power.
Finally I recommend that you read The-Military-Guide.com and look for the book at your base library or local community library. I'm always happy to have guest posts, too, and you could share your stories & advice as you go through the next couple years.
