New to the Military: 5 Financial Tips They Won’t Teach you in Basic Training

Joining the military can be a scary experience.  No, not because of the yelling drill sergeants, but for many, this is the first time you are out in the world.  As such, you are now responsible for your personal finances.

I wish I could tell you that you will be taught everything you need to know about personal finance upon entering the military.  Unfortunately, the military is lacking in this regard.  It’s not their fault, those who don’t join the military are getting the same education you will receive in regards to your finances; which is none.

As you progress in your military career, you will see numerous Service Members who do not have a grasp on what it means to be fiscally responsible.  They may have the nicest cars, designer clothes, newest gaming systems.  But at the end of the day, they are completely broke.

Even if you are not new to the military, it is never too late to change your habits with money.  

It is my hope that you not only read these five tips, but you execute the actions steps needed to secure your financial future.  No one will secure it for you.

By following these simple steps, you will have the tools necessary to become a millionaire with just your military pay check.  This includes those of you in the enlisted ranks as well.  If a janitor can make over $8 million dollars, you too can secure your financial future.

Related Article:
The Millionaire Janitor: How a Soldier Turned Janitor made $8 Million Dollars

1. Contribute to the Thrift Savings Plan (TSP)

Starting in 2018, everyone who joins the military will be under the Blended Retirement System (BRS). Like the previous retirement system, called High-3, if you stay to 20 or more years under BRS, you will receive a pension. Unlike High-3, the amount of your pension will be a little lower.

I can hear your disbelief that you were cheated out of a better pension because you decided to go to college or work prior to joining the military. But hold on, BRS is about to get really good for you.

Are you ready for it? BRS matches your contributions toward a retirement account. I know you are jumping up and down in excitement, so please let me explain what this means.

In corporate America, there is a retirement benefit called a 401(k). People put money into this, and their employer also puts some money into the 401(k) which called a match. The amount of the match goes up with the more money the person puts in until a cap is met.

Would you pass up on a chance to increase your pay by 4%?

With BRS, the U.S. Government is giving you a match for the money that you put into your own retirement account.  The cap on matching for BRS is 5%.  So, you invest 5% of your paycheck into your future and the U.S. Government will also give you 5%.  Since the first 1% of matching from the U.S. Government is free, you are getting a 4% pay raise on day one of being in the military for doing nothing else than planning for your future.

Would you like to have a retirement fund with money from the U.S. Government when you decide to leave the military?

The next benefit is that no matter when you leave the military, the money is yours to take with you. This might not seem that great so let me break this down for you. I am so close to retirement that I feel like I can reach out and touch it. But what if something were to happen and my employment with Uncle Sam is cut off early?

Under the High-3 plan, I would have nothing toward a retirement from the U.S. Government to my name. With BRS, you can serve 3 years or 30 years and when you leave the military, all of the money you received in matching is yours to keep.

What is the easiest step to becoming a Millionaire in the military?

So how much should you contribute to TSP?  Well, the absolute minimum is 5%.  If you didn’t catch why, just scroll back up a few paragraphs.  The ideal minimum is 15%.  This post isn’t going to get into the details on why 15%, but if you start the habit of at least 15% now, you will easily be a millionaire come the time you want to retire.  Using TSP is the single easiest way to become an Automatic Millionaire for a anyone in the military.

When I started out as a Private, 15% felt like a lot of money.  But an amazing thing happened after a couple of months; I forgot about it.  Since TSP takes your contribution from your paycheck prior to the money hitting your bank account, you will never notice it is gone.

Then as my pay increased with the raises every January, raises for longevity, or promotions, I also increased my retirement contributions.  As I was already accustomed to living without the new income, it was easy for me to increase the contributions to my future retirement.

If you would like to see the growth of contributing 15%, I would highly recommend this link for you to review as well:

Contribution Calculator: What Will Contributing 15% into TSP Look Like

– Create a TSP Account (Even if your aren’t participating in BRS!)
– Setup your contributions in myPay to be 15%

Related Articles:
 TSP: Beginner’s Guide on How to Setup Your Account

2. Invest your TSP Contributions

Making a TSP account and setting up your contributions is a great first step. But now we need to tell the money within our TSP account to go to work with us.

Once you receive the login information for your TSP account, jump on in there. The biggest thing you are looking for is setting up your account’s allocations. This means telling TSP how to invest your money.

Investing, I know, it is a scary thing. It is quite possible at this point in your life that no one has explained investing to you at all. If this is the case, don’t worry, TSP is made specifically for you. Instead of having access to every stock, fund, and bond like a normal brokerage account, TSP has 5 funds. Three of them are stock-based funds and two are bond funds.

You can set your allocation in any way you want. With investing there is a risk to reward analysis you need to do. Some people get tempted by going heavy in the G Fund because it doesn’t lose value; so there is no risk. But at the same time, it doesn’t gain any value; so there is no reward. If you are investing for your retirement, which may be 40 years away, you can afford the risk of going into the stock funds.

If you are completely lost, TSP has created the Lifecycle Funds. These funds are spread across all five of the TSP funds. As you get closer to the target date of the fund, the risk is reduced. This means if you are five years from retirement, the risk of losing on a bad market is lower compared to if you are 40 years away.

For more information on the five TSP Funds, I would recommend you read this article:

Thrift Savings Plan: TSP Funds Explained for Beginners

– Log into your TSP account and see what the site has to offer.
– Research the TSP Funds and decide how to invest your money.
– Set up your contribution allocation.


3. Don’t Waste Your Money

It never stops amazing me how much money the exchanges make off of Service Members. For those of you who have not joined the military yet, an exchange is nothing more than a store on the military installation. Be it something like the military’s version of a WalMart or something like your local gas station. They come in all shapes and sizes.

The exchanges spread around post are conveniently placed to take your money away from you. Don’t fall victim to them. But more importantly, don’t let your friends and co-workers pressure you into giving your money to the exchange.

A Service Member could easily spend $30 a day on snacks and coffee in the morning, lunch in the afternoon, a pack of cigarettes, and energy drinks throughout the day. Remember how earlier you thought investing 15% of your paycheck toward your future was too much? Well living out of the exchange will cost you far more. In fact, the exchange could easily take all of your paycheck if you let it.

One more thing, don’t fall victim to the exchange’s credit cards. They offer them to new Service Members as a great way to get your credit up, give discounts to buy food at their fast food chains and all of these other benefits. But, to receive these “benefits,” you have to give them more of your money. How about instead you keep your money and they keep their benefits.

If you are finding that you are living “paycheck to paycheck,” you may need to write down all of your expenses throughout the week. This will help shine a light on where your money is going. It may surprise you that you are literally eating your retirement.

Related Article:
Stop Eating Your Retirement:  How you can Become a Millionaire with your Current Income

–  Bring a packed lunch to work, or if the cafeteria is free, eat there.
–  Learn to brew your own coffee, or participate in your Unit’s coffee program.
–  Avoid snacks and energy drinks; you don’t need them anyway.
–  If you smoke or use other tobacco products, quit.  Free classes, medications, and even hypnotherapy are available for those in the military.
–  Don’t get an exchange credit card.


4. Don’t Buy a New Car

One of the greatest status symbols for an American is their car.  The bigger, the faster, and the more obnoxious, the more of a status symbol it creates.  Unfortunately, those who have these cars are probably the most troubled with financial problems.

For many that are joining the military, this is their first job.  While you are in training, your bank account is swelling with money that is just asking to be spent at the first chance.  As soon as the Service Member arrives at their first duty station, one of their first stops is to the car dealership to get the newest thing out there.  And for those of you who are stationed overseas, the exchange strikes again as they are there to provide you with the car of your dreams.

For those who have personally asked me for financial advice, I have always told them that the only difference between a rich American and a poor American is a car payment.

Soldiers are so focused on getting a car that they don’t pause to think about the impact the loan will have on their finances.  Just take a look at all of the used car dealerships that are immediately outside of the military installations if you don’t believe me.  There wouldn’t be used cars for sale if the Soldiers could afford them.

Please don’t think that I am advocating against car ownership.  I am a proud car owner.  Instead, I am advocating against buying a new car.  It seems everyone knows a new car loses value as soon as it leaves the lot.  So why do people buy new cars knowing they will lose value?  Instead, had you bought a car that was a couple of years old you would have let someone else lose out on the depreciation.

One more thing on car loans.  You can live a life without them.  Trust me; I haven’t had a car loan in over a decade.  But strangely enough, as soon as people get their car paid off, instead of enjoying the car that is owned free and clear, they are instead going back to the dealership to trade the car in so they can have yet another car payment.

Additionally, you can buy a car with the money in your bank account.  You don’t need a loan.  Instead of paying interest to a bank on the loan, the bank will pay you interest on the money you are saving up to buy the car.  Paying cash for a used car will save you a considerable amount of money compared to buying a new car on a loan.

–  If you already have a car loan, pay it off and don’t trade in your car.
–  If you don’t have a car, begin saving money now into a high-interest savings account.
–  If you need a car, research consumer reports for reliable used cars.
–  If you need a car, shop around at reliable dealerships for the used cars you want.

5. Always Be Learning

When you were in high school, I bet none of your classes involved personal finances. If you went to college, unless your degree was in finance, you probably weren’t taught anything about personal finance. So, guess what, while you are in your initial entry training for the military, no one will probably teach you about your finances.

So, when were you supposed to learn all of this stuff? The answer is now. Visiting this blog and reading this post was a great start, but don’t let this be the end. You are adult enough to serve in the military, that means you are adult enough to seek out education in areas you lack.

Where should you go to get this knowledge? Great question. For those who are new to the world of personal finances; either because you just moved out of your parent’s house for the first or fourth time, or you are completely upside down in debt, the following books are for you.

1. Total Money Makeover
2. The Automatic Millionaire
3. The Richest Man in Babylon
4. The Millionaire Next Door
5. Your Money or Your Life

Click here for a summary of each of these books.

Simply reading just one of these books will place you far beyond the knowledge of personal finance compared the typical service member. 

But, If you are facepalming yourself right now because you can’t even afford a book to help get your life on track, I got you covered. On the military installations is a library which offers free books for you to borrow.

And for a bonus, especially for you stationed on an Army installation, the Moral Welfare and Recreation (MWR) Library can get you an account for the application called Overdrive. Overdrive is similar to Kindle in that you can read e-books and listen to audio books. The only difference is that it is linked to the library so everything is available for a great price, free.

You have no excuse now to pick up with your financial learning where this post leaves off.

– Visit your on-post library.
– Obtain an Overdrive account from the library.
– Read the recommended books.
– Continue your financial education.

The Bottom Line:

Throughout your entire life, no one has taught you or anyone around you how to take care of your finances. I have heard far too many people say that they realize the mistakes of their financial life only after many years have passed.

The sooner you put these tips into practice, the sooner you will put yourself on not just the path of financial freedom, but also on the path to becoming a Millionaire from your military income regardless if you are an Enlisted Soldier or a Commissioned Officer.

If you don’t believe me that an Enlisted Service Member can become a Millionaire, then you really need to read the story of Ronald Read, who I call the Millionaire Janitor. After leaving the military, he became a janitor. But, at the time of his death, his investments grew to over $8 million in value.

Investing with TSP will automate your financial life to an incredibly funded retirement. With the power of compounding interest though, you need to start now. Delaying even a couple of years could have a devastating impact on your future retirement account. If you have been in the military for years and haven’t started investing in your future, then start today.

There will be temptations along the way to divert you from your path to wealth. Learn to recognize those temptations for what they are so that you can ignore them.

This post has contained just the first 5 critical lessons every Service Member should know regarding their money upon entering the military. There is so much more financial advice you need to learn to build upon these foundational tips. Continue your financial education with the recommended books.

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