How am I doing? (23 y/o, O-1)

[nenab]

I've posted here before but now that I'm a few months in, I thought I'd repost.

I'm a new O-1 and at my current duty station I make 4945 a month before taxes. After taxes, MGIB, and my TSP, I'm left with 3825. My TSP is invested in the L2050 fund.

I contribute 15% to the Roth TSP every month ($479). Other expenses are 675 for rent/utilities/internet, about $100 for phone, and $100 for car insurance. I have no car payment or student loans. I usually spend between $1500 and $2000 on my card every month. I know this is pretty high, I drive a lot and gas/tolls are expensive, and I enjoy eating out as opposed to cooking for myself. I always pay it off.

My current bank account has $16,000 in a savings account and my checking floats between 3,000 and 5,000. I have a bit of a nest egg from my grandparents, it's a T Rowe Price Blue Chip account and the balance is around $40,000. I'm usually able to put at least 1k in cash into savings every month. I have no debt and my card is paid in full every month. Anything I should be doing with all the cash in my savings?

I'm moving to a new duty station to start flight school and will only be getting about $4450 before taxes (much lower BAH) and after taxes/retirement/MGIB I'll be left with $3500 before expenditures. I'm looking at an apartment for $1250, is this too much for my budget?

 

[resjudicata]

@nenab You spend $2000 a month on food and gas?

 

[nenab]

@resjudicata Food, gas, tolls, eating out, going to bars with the lieutenant mafia, date nights, and clothes and other random stuff. I know I can probably cut back.

 

[doran]

@nenab

lieutenant mafia

Unrelated, but I love this.

 

[nenab]

@doran We’re making lieutenant mafia patches to iron on the inside of our uniforms lol

 

[japerezwire]

@nenab Grow a pair and slap that shit on your flight suit. You’re aircrew...no one will tell you you’re out of regs. And if someone does, blow them off...because, well...you’re aircrew.

 

[intelligentthinking]

@japerezwire Not until they graduate...

 

[johmars]

@nenab I spend that on a family of 5 as a 32 yr old E-7.

If you are genuinely posting this looking for advice and not just a self brag, that is killing you potential. Even eating out 1-2 nights a week less could save you close to 2k a year.

Up your TSP that amount or invest in an index fund and you will be mind blown how much your retirement will grow.

 

[resjudicata]

@nenab Haha. In that case....carry on.

 

[spreading_the_gospel]

@nenab

1. Raise that TSP. Max that shit out. (19k)
2. Get a traditional or Roth IRA max that out. (6k)
3. Get a place with a friend, lower that rent.
4. Continue to save for other wants, the M3.

 

[david90]

@nenab You're doing fine.

Personally, I would change your TSP allocation to something a little more aggressive. But I'm less risk averse than most.

For your extra cash, you can either increase your TSP allocations or start an IRA. The TSP is easier since you're just changing the percentage, but if you go IRA you could get in to, for example, Vanguard for their index funds. It's up to you whether the increased fund options at other firms is worth the increase (however small) in expense ratios.

In either case, $16k is probably a bit excessive of an emergency fund for someone in the military and you may want to divert some of that.

Rent at a third of your take home is kinda pricey, but manageable IMO. Depends on the area.

 

[nenab]

@david90 What would be a good way to get more aggressive? I was under the impression that the L funds are automatically more aggressive for the further-out ones

Edit: the area is going to be Columbus, Mississippi. There are a bunch of beautiful newly renovated lofts and the rest of the area's housing is a bit rough. .

 

[david90]

@nenab I mixture of C, S, and I funds. That's all the L funds are, mixtures of the various funds the TSP offers. They are more aggressive the farther out you go, but they always include some % of bonds and they don't tend to put much in International.

 

[cbc8171]

@david90 Have some % of bonds is generally a good thing, even for young investors.

 

[bartgroot96]

@david90 I have 50% S, 50% C personally, I think the I fund isn't too great because it doesn't invest in a lot of the markets with a lot of upcoming growth potential like Africa.

 

[cbc8171]

@nenab Just keep the L fund for another year and then throw it in the new 2055 or 2060 that comes out next year.

 

[markwp]

@nenab You’ll save a ton of money simply because this town is tiny and there’s nothing fun to do without driving 1-2 hours away.

 

[intelligentthinking]

@nenab There’s plenty of nice enough houses and townhomes in the area, just gotta find some roomies to help bring coats down. Know a guy who lived by himself in an apartment no problem.

 

[liahna]

@nenab If you want to be more aggressive (totally reasonable at your age/career point), take it out of Lifecycles and split it between C/S. You can check out the individual funds past track record, but after I did lifecycles for 10+ years I wish I had managed my own fund split and not the lazy man Lifecycles. I didn’t need any money sitting in G/F funds when it could be growing while I’m in my 20s/30s, etc.

Your cash emergency fund is crazy high (good job), but it’s not making you any money. Drop 6k of that to fund your Roth IRA for the year (not through USAA, high fees), in a total market fund or something similar through Vanguard, Fidelity’s etc then put whatever you think is reasonable for an emergency fund. Otherwise start saving for your car.

Aim to be completely maxing your TSP by the time you put on your wings and start pulling flight pay and you’ll be in a good place.

 

[cbc8171]

@liahna This is poor advice, as it's based entirely on hindsight bias. There was no way of knowing for sure that the C/S funds would dominate over the past decade. If you go back just one more decade, you'll see they returned 0% and it was the I fund that dominated. The F fund is a great addition to portfolios. The L Funds are built for the long run and have a much better expected risk-adjusted return than an C/S allocation.

Stick with the L funds, just shift to 2055 or 2060 next year when they become available if you want.