Looking for Advice

[izrafeli]

New O-1 here who recently got interested in finances and I am looking for any advice or critiques.

Here are my current standings:

Making basic 0-1 pay. I have approximately 4-5 months' pay in savings. I have zero debt and my car is paid off.

I am putting approximately 20% base pay into my savings account each month.

Putting 15% of base pay into the TSP, C Fund.

The next step I am considering is using a Vanguard Roth IRA brokerage account and investing about 15% of my pay into that.

Is there anything else I can do to set myself up for the future? Thank you in advance.

Edit: also interesting in putting some or all of my savings into a HYSA. Is it recommended to put all savings into a HYSA or only a portion?

 

[kenzixett]

@izrafeli Where is the 4-5 months pay in savings in? It should be in a HYSA. Once you build your emergency fund which is 3-6 months of monthly expenses you should stop saving. Unless you have a goal of saving for a down payment on a house or saving for a car. But otherwise max out your TSP and open up a Roth IRA and max that out too. There’s not many reasons to just continue to save an astronomical amount with no goal in mind.

 

[izrafeli]

@kenzixett My savings is in a regular savings account earning next to nothing, which I only recently realized is pretty stupid. My vehicle has a lot of life left in it and I am not currently saving for a down payment since I plan on renting at my first duty station. Thanks for the advice!

 

[mustbebornagain]

@izrafeli Amex HYSA, baby! 4.25% right meow. There are likely better options, but that’s just my preference now since I already had accounts with them.

 

[izrafeli]

@mustbebornagain Was actually just looking into this since I already have accounts with them as well. Too bad the link it leads me to is down right now.

 

[kenzixett]

@izrafeli The bulk of your savings should be in a HYSA. I have navy federal and I use their savings account which gives you like a .5% APR. It’s trash but I use it for little expenses. For example I know every 6 months I have to pay my car insurance so I put $120 away monthly in my navy fed savings account knowing in 6 months it’ll be gone and it’s easy to pay the credit card immediately as soon as the car insurance payment is taken out.

But for a good HYSA I recommend Wealthfront. 4.8% best in the game

 

[shanewatson25]

@izrafeli Most money should be in investments. Savings is losing value compared to inflation. And money not in an investment could be used in consumption. Just food for thought.

I max out my TSP then vanguard - than pay myself.

Also when you hit O-2 stay at your O-1 lifestyle

 

[izrafeli]

@shanewatson25 I appreciate the advice, pretty much confirmed what I thought.

Even as an O-1 I'm stilling living as if I'm a broke college student lol. Going to try and keep up that trend for as long as possible.

 

[shanewatson25]

@izrafeli A couple books when you get the time:

The military money manual

The psychology of money

And millionaire next door

The last book talks about how the average person spends 4 hours a month analyzing their finances and most millionaires spend 2-3x times that, so you’re already ahead of most ppl.

 

[izrafeli]

@shanewatson25 I will absolutely look into those. My friend just ordered me a copy of "The Little Book of Common-Sense Investing" so that's first on the list.

 

[navyreb]

@izrafeli

"The Little Book of Common-Sense Investing"

that's the only book you really ever need for FIRE or pretty much anything else. the rest is just trying too hard which for regular people not warren buffets is generally bad. and it applies to TSP, IRAs, and your own personal financial accounts. some people like to buy up properties and that's great but really depends on your service and duty stations. you aren't going to be buying up san diego properties but you might be able to in oklahoma. I always wanted the flexibility to not worry about property markets and getting rent from folks in my 40s. so i went straight investments approach and always if i could save 30-50% off my bah and invested that in market.

as a 19 year O-5. The biggest thing you have to decide over the next 5-8 years is if you want to do the whole ride. If you do that comes at consequences, but for a lot of us benefits outweigh the negatives. Do your research. I'm part of the old pension. The new pension system is actually decent, wouldn't trade mine for it, but only if you play the game right most of your 20+ not the last stretch.

 

[izrafeli]

@navyreb I am somewhat interested in buying properties at my duty stations but that's not in the foreseeable future. I currently just want to get used to the military life and get on my feet.

Right now, I don't know if I'll stay in for 20 years but I am investing/savings as if I am not.

 

[nothinges]

@izrafeli As a newly minted O1, you have far too much in savings for an emergency fund. It's not bad, but there are better options to grow your net wealth.

Unless you engage in self destructive behavior (don't), you have no chance of losing your job and therefore don't need 3-6 months of living expenses. You need like $3k just so you don't worry about a computer glitch messing up your bills (yes to putting it in a HYSA). You get allowances every month for your living expenses. Live under that.

I'd recommend cranking your TSP contributions and living off your savings until you get down to under $5k. Make sure it's Roth and just put it in C or 80 / 20 C / S.

Also max out your Roth IRA if you haven't already.

A good goal as an O1 is $12-15k toward retirement, then maxing $29k as an O2. If you can get to $150,000-200,000 invested by age 30, your retirement is funded with no further contributions. Then you can worry about paying for grown up things like mortgage, children, spouse, etc. Of course, still contribute any matching because that's free money.

The year before you separate, turn down the retirement to 15% and put the rest into a HYSA for your "get out of jail" money.

 

[izrafeli]

@nothinges This is awesome advice. I really appreciate the details. This is exactly the confirmation I needed to go through with what I was thinking.

 

[nothinges]

@izrafeli One more thing: If I were starting out today, I would probably pick Capital One as my bank / credit card because I like one stop shops for all my accounts. USAA and NFCU lack HYSA options.

USAA isn't automatically the cheapest insurance, although I get so many longevity discounts I haven't found anyone to beat them.

 

[liahna]

@nothinges Well done advice, I wish I had started this as an O-1. I finally corrected about the 10 year TIS mark but it’s important OP realizes time in the market>timing the market. The more money you invest early in your career, the sooner you’ll be able to relax and enjoy the compounding returns. If you’re on Facebook, the Military FIRE Facebook group is great.

Priorities:
1. Emergency fund in HYSA
2. Roth TSP max
3. Roth IRA
4. Taxable brokerage accounts from same company as your IRA (to simplify things).