I run across young Soldiers and senior NCOs all the time with the same things in common: they feel behind and nobody taught them about money. I totally get feeling “behind” because I was there too. I didn’t have much guidance with money growing up either, but that’s okay.
I’m still playing “catch-up” myself and learning as I go through experience and formal education. We all have to start somewhere.
I had no idea what the Thrift Savings Plan (TSP) was when I was younger. I’m sure they mentioned it at basic training, but does anyone remember everything they told you at basic? Nope, me neither.
Don’t Worry – You’re Only “Behind” Your Future Self
First, don’t worry. You can still achieve a great retirement and lifestyle. Who are you trying to catch up to anyway?
The only person you need to compete with is the person you saw in the mirror yesterday. As long as you continue to get better than who you were yesterday, you’ll get where you need to. Don’t worry about being behind until you actually figure out the what and the why.
What and Why are You Saving for?
Until you know what you want life to look like and nail down the bigger why, you’ll never get the motivation to keep on track. For me, I want to have the flexibility and the financial resources to be there to support my son no matter where he goes or what he does.
If he moves across the country, guess who’ll be flying out often to visit?
If he joins the military, I’ll be there to help move every PCS. I’ll be at every graduation. Every promotion. Everything.
He’ll probably be embarrassed or annoyed at times, but when I’m gone he’ll always know I was there for him – always.
That’s my why. You have to find yours.
Cover the Basics
Once you understand why you’re going to trudge through on this journey, you need to make sure you have all the basics covered. You need a solid foundation, and you need to plan for the worst-case scenarios like disability and death. But first, you need to record where you’re at so you can measure progress and tell your amazing Enlisted Success Stories later.
Calculate Net Worth
Net worth is not self-worth. I say again. Net worth is NOT self-worth. Over.
This is just a measure to see where you’re at. It’s just like taking a pt test or getting your yearly physical. It doesn’t tell you everything about your financial health, but it can give you an indication if what you’re doing is or isn’t working.
You can download the net worth tracker I use here (it’s free, no strings attached, no email needed either).
Emergency Funds, Life Insurance
I’m not going to say much here if you’re on active duty. I recommend keeping at least 1 months’ worth of pay to start at a minimum. Put it in a high-yield savings account in case you need it quick.
For Reservists and National Guardsmen, you’ll definitely want to come back to this sooner rather than later. At least have a couple months’ living expenses to start.
Life Insurance
I talk a little more about life insurance elsewhere. Once again, if you’re on active duty, this isn’t as big of a concern with your automatic SBP benefits and the SGLI. If you’re single on active duty, don’t even bother with much here at all.
Got Debts?
If you have debt you need to pay down, this is the next area you want to consider. Make a plan to start whittling away at the debt and get rid of all debts, even the home mortgage if you can.
Get Started Putting Something Away for Retirement
At a minimum, get your TSP match by putting 5% in. If you’re in the legacy system, still put at least 5% in. Once you get your debt under control and everything else established, you can start ratcheting this up over time.
I suggest adding a percentage or two with every raise you get. That should be automatic for you to go in and adjust your TSP withholding percentages in MyPay every time you get a raise. Keep doing this until you max out the TSP each year.
I always default to the Roth TSP. There’s a lot of reasons for this, but we can talk about that later.
Additional Retirement Accounts
If you can max a Roth IRA each year too, do it. If you’re married, you can do the same for your spouse. Regardless, the first chance you get, go ahead and open a Roth IRA for both you and your spouse if you have one. This starts the clock for the 5-year rule.
Start Getting Educated and Dialing in How Much You Really Need
Start getting educated on personal finances and keep refining as you go. You don’t have to get everything all at once. This is a long process – especially for us enlisted folks. And even hard for those of us with single-income households. There’s not going to be a ton of excess cash, but you can still build a life you’re proud of.
Later on, you can start calculating how much you need to be financially independent. Then you can set things on autopilot and just keep grinding and letting time do the rest.
You’ll be able to take advantage of other investing opportunities like real estate or starting your own business too. Once you have the solid foundation laid, your imagination and drive are the only things holding you back.
Good luck out there!