Setting my self up financially as an E-1. Am I right or Wrong?

[aedituus]

@samuel53 Also look and plan ahead, E-1 ot E-3 you will go up in rank very quickly. I know by the time I finished boot camp and A school I was already E2, and E-3 the following year. Also there will be a big difference in your pay depending on where you are stationed at. There is a pay called COLA (cost of living). I was stationed in Hawaii and my pay was about 50% higher than someone that lived in Illinois.

What you have planned in great and I wish I did that, but I am saying understand that you pay will change a lot by gaining rank and depending on where you are stationed.

 

[demo]

@samuel53 Shoot for these three things:

1) Contribute a reasonable amount per month to your TSP. You won't be able to swing the full 19.5k, so start somewhere like 8-10% of your base pay.

2) Establish your own retirement fund somewhere like Betterment (collection of ETFs/index funds). Put something in here each month - again, slow and steady, don't go broke just stashing away money.

3) Work towards saving up the equivalent of 1 month's pay in savings, then work towards 3 months, then 6 months.

 

[bett]

@samuel53 Thinking about investing is a great step! You're ahead of your peers. However do not get too far ahead of yourself. Ensure you have an emergency fund that is minimum 3 months salary. This will come in handy when large unexpected expenses happen like a major car repair or something. It will save your ass. Open a high yield savings account to store it in, or place it in a money market account that will make good interest, but will still be easily accessible in an emergency. It will take a while to save up, but this should be a priority over investing.

 

[resjudicata]

@samuel53 If you’re looking to keep it simple:
1. Contribute 5% to your TSP so you get full matching. Traditional or Roth doesn’t really matter, but pick one and stick with it. I do Roth personally.
2. Invest however much you are comfortable with in an S&P 500 Index fund or ETF (such as $FXAIX or $SPY). Make regular deposits every month; treat it like a bill, and don’t worry about the price on any given day. You ideally shouldn’t touch this money for a very long time.

Reasoning:
1. People will tell you to max out your TSP but that’s stupid. Your TSP is essentially an IRA, and your contributions are being invested into index funds anyway. The Lifecycle funds spread it around a couple different funds (diversification = good) automatically, but you can’t touch that money until you’re 59 1/2 y/o (kinda bad). If you invest more money into a large-cap index fund or ETF such as the ones I listed, you can withdraw that money if you need it for something (car, house, etc) but leave it invested unless you really, really need it.
2. Don’t handpick stocks unless it’s your fulltime job. It’s near impossible to consistently beat the market over a long period of time (10+ years).

Talk to a financial advisor at your base, they’ll have more information and guidance and they are free (thanks DoD!).

 

[resjudicata]

Calling the fact that some people max out their TSP stupid makes you seem arrogant and ignorant. You failed to mention that when putting your money into a non-retirement account, you are taxed when you make the money and you are also taxed on the capital gains at 15%-20% maximum as of right now. Most of the individuals that advise someone to maximize their TSP also advise them to create a emergency fund and budget a portion of their savings to specifically start a fund for a house. The whole purpose of putting money into a retirement account is so you never touch it until you retire. It's supposed to be hard to liquidate because it's not supposed to be used as a down payment for a house or a car.

I actually side with you for not investing into a retirement account, but for different reasons. However, for most individuals maxing out a retirement account is the best thing for them to do. Everyone has different goals.