X-Post from r/personalfinance: 20 y/o, Military, Career/Financial Advice Requested

[kita_q]

This was a post from /r/personalfinance. So the audience there didn't have the same type of military knowledge as I'd suspect this sub does. That is why I had to explain certain things in more depth than I would have to to people who are in the same boat. So pardon me if I come off like I'm talking to people who aren't in the military, because I originally was!

DISCLAIMER: I'm the type of person who doesn't know how to "half-ass" something. So, that being said, excuse my post if it is unnecessarily long and drawn out. I just don't know how to not be thorough. I apologize in advance if you know my entire life story by the end of this post.

I'm a 20 year old serving in the U.S. military. I'm single, and have no kids. I'm currently deployed, so I am making a bit more [tax free] money than I would be if I was in garrison. This opportunity has allowed me to save more money per month than usual. I am not completely ignorant when it comes to personal finance, saving, investing, etc. However, I'm at a point in life where decisions need to be made, and I want to make sure I'm making the best choices I can [reasonably] make.

That being said, let me start getting to what everything here is all about: The numbers.

I am currently making ~$2600 per month (tax free) and I am expecting to get a promotion in the next 1-2 months which would adjust my monthly income to ~$3000 (tax free). Being in the military, and being single without kids, an income like that is more lucrative than it would be for someone who wasn't in the military (I pay no rent/mortgage, food is provided, medical/dental, other benefits/allowances).

I had a solid emergency fund that took care of expenses (which include a car loan, and GP spending) for at least 6 months. It was $4000, but I really could have lived on $2500 for the 6 months. I recently had a family emergency and had to tap into that fund, bringing it down to $1400 currently. I know my first step is to build that back up to at least the $2500 I need, but preferably the $4000 it was at.

Outside of my emergency fund, I am pretty broke. I have about $1200 in my checking account, but I'm not spending much. I think I'm being smart with my money, I just don't have much to show for it. I am trying to pay off my car loan ($16000 left) so I frequently make additional payments on that, ($100-$500 here and there when I have the extra money so I don't blow it on nonsense).

My monthly income will drop in the next few months, however, when my unit is redeployed and no longer in a combat zone. I estimate I'll be bringing in somewhere around $2200 per month (~$26000/yr) at that point (taxable). So the amount of money that I can put towards savings and investments, will go down, and my ability to spend the money (being in an environment where I won't be wearing a uniform 24/7, will have the weekends off, etc...) will go up. Naturally, I'll need to adjust my finances.

So my financial situation isn't ideal. I don't have an inheritance or a trust fund with my name on it; but I'm an average 20 year old, so my situation isn't exactly bad either. I will still be able to consistently save, I have plenty of room for future promotions, and in the military, even putting promotions aside, we can expect frequent raises (slight annual inflation raises, as well as time in service raises which occur ever year or two). What I'm saying is, I'm comfortable now, and I can expect to consistently make more money than I'm making now. Not much more, but it's more.

That brings me to my fork in the road. It's not entirely a financial advice question, it's also a life/career advice question (I told you this was going to happen).
I don't mean to come off as arrogant, but I'm somewhat overqualified for the position I'm in in the military. My GT score (calculated by the ASVAB) is 132, which usually when I tell people, they give me a confused look, and ask me why I joined the military. So in a nutshell: I'm intelligent. Like I said, I don't mean to come off as arrogant, but it's something that needs to be considered when I'm talking about making life decisions. I know I could get accepted to some university somewhere, get a degree in 4 years, get a decent job making a pretty good salary that would outperform my benefits and income combined and blah blah blah... Fact of the matter is, I AM in the military. I enjoy what I do. I'm not here for the money. However, I wouldn't want to waste the potential to give myself a better living if an opportunity presented itself and still allowed me to be in the military. Well, an opportunity HAS presented itself. A recruiter from the United States Military Academy (West Point) sent me an email saying that they are interested in me after reviewing my line scores on the ASVAB. I am extremely interested in the offer and have already taken preliminary action to start the process. However, this sparked a fork in the road for me when I took a step back and truly grasped the bigger picture. If I were to get [theoretically] accepted into West Point, having already served 3 years at the time I enroll, add the 4 years it takes to graduate, and then add the 8 year commitment as an officer upon graduation. That's 15 years of service miniumum that I'm looking at. At that point, it would be stupid to get out and not do the extra 5 years to hit 20 be able to retire from the military and start receiving my pension while I persue another career. I'll 38, and plenty young enough to enter another career in the civilian sector, take advantage of my GI bill, continue to further my education, make myself more valuable, etc...

So, my real question is, is there enough financial value in going this route, knowing that I could get out sooner and potentially make more sooner, but lose out on the pension and other benefits of being in the military? What would you do?

I also know that saving and investing in my future now, while I'm young, is exponentially more beneficial than starting in say, 10 years. However, is it worth it to save less now, as a lower ranking enlisted serviceman, and gradually being able to save and invest more as my rank and time (and income, respectively) grows in the military, OR does it seem more beneficial to get out and get into a high-paying career and be at a place where I can start saving more in 5-6 years compared to where I'd be in the military at that time? The fact that I'll be making double the amount I'm making now upon becoming an officer in potentially 5 years is obviously an attractive offer. But am I being ignorant to the amount I could be making in 5 years if I got out altogether? I hope I'm still making sense, it's just a really important decision I need to make, and any input you have to offer would be greatly appreciated.

 

[resjudicata]

@kita_q Make a budget that includes:

• Max out TSP. Learn what it is, learn what it does. Now might be the only and best time in his career he can put the full 50 in.

• Pay down as much as possible on car. Pay extra. Pay a set amount of extra so you can budget it in, or based off a date that you want to pay off the car. Mint.com can set this up automatically with it's "Goals" option. I believe deployment orders can be used like PCS orders to get any loan reduced to 6% through the SCRA

• Throw what you can afford—a set amount per month—into your savings account. Make sure it’s in the type of account that gets good interest and it’s not just sitting there

Get educated (and/or hire-able).

• Make sure your AARTS and/or JST (Army transcripts) are up to date and give them to someone, anyone.

• Take some classes. If you do get out, you’ll be amazed how far you got by taking a couple a year—which is far better than most.

• Pay attention in ACAP. Get every benefit. All of them. Go to any school, re-update JST/AARTS when you do

• Look into Voc Rehab, aka VR&E, aka Chapter 31 benefits as opposed to your Post 9-11 GI Bill when you get out and go to school, unless you plan on using Unemployment Insurance, which you probably won’t be eligible for—it depends, state to state—unless you get medically discharged

• Go to West Point if it’s your dream other than that. It’s pointless. A college degree in Post-Modern Russian Literature gets you the same commission in the Army. Try Green-to-Gold

Don’t wait to save or make yourself marketable. You are NOT viable as a 38-year-old high ranking enlisted retiree. Get out and get a career IF you get out. I often bullshit with a bunch of retired SFCs and 1SGs…that drive Unit shuttles or work for the landscaping crew.

Also, it’s never too early to save. When I first joined I was putting something like 3% or 5% into my TSP. In three years it was like $6000. And even if you're putting $10 a month into savings, that $120 a year, which is better than the $0 most people have at the next paycheck.

 

[mashral]

@resjudicata

V D Q J M E D I C A L L Y A C C O U N T 
C D E G R A H C S I D B U L L S H I T M 
O L I T E R A T U R E L P A Y C H E C K 
L Y L R A E H L A N D S C A P I N G A T 
L E L P O E P A S E L T T U H S Q D T F 
E U J Z R B G M U X E D U C A T E D B M 
G S V E M A D L O T T P R O B A B L Y Y 
E H T I O A T L K N O E C N A R U S N I 
T P T S T B R N O P T M Y R E T P A H C 
S O N T R E G K E R O H A O U Z C U P S 
E I E A A N Y R E M A S — T U S V E I O 
R N M T N E K E E T Y E T I I ’ S J V M 
E T Y E S F J E A E A O Y M N C L I P E 
T L O — C I O V R R N B L 8 O T A L A O 
N E L U R T I E E X — T L P 3 D O L I N 
I S P N I S N R D V O W O E M K E F L E 
A S E L P C E Y U G R O H G U E F R U Y 
J K D E T U D V C A F H W I O U N Z N B 
R R X S S S O M E T H I N G C L Q U A X 
M Z U S R E U P D A T E E H A H D S A D

Find the words:

AUTOMATICALLY UNEMPLOYMENT STATE—UNLESS TRANSCRIPTS LANDSCAPING GREENTOGOLD MARKETABLE LITERATURE DISCHARGED MONTH—INTO DEPLOYMENT POSTMODERN YEAR—WHICH SOMETHING MEDICALLY INSURANCE 38YEAROLD POINTLESS BULLSHIT BENEFITS EDUCATED SHUTTLES INTEREST REUPDATE PROBABLY PAYCHECK RUSSIAN REDUCED SOMEONE CHAPTER COLLEGE ACCOUNT JOINED YOU’LL PEOPLE THERE EARLY EVERY

 

[playingforthelord]

@kita_q First, (I know this isn't one of your questions), I will ask what kind of car do you have? If you owe $16k, how much is it worth? That is a huge commitment. If you got out of the military (or were injured and was forced out), how would you pay for it?

Anyways, back to the point of your post. The first thing you need to do is figure out how you would do on the SAT/ACT. That will determine what doors are open for you. There are other options other than West Point. In the navy they have the seaman to admiral program, and I assume the Army has the same/similar programs. This would basically allow you to go to any school of your choice, similar to ROTC. Typically, you will only have a 4 year commitment when you are done, giving you more flexibility.

You could also finish up your contract while taking college courses online paid for with tuition assistance, then get out, get accepted to U of Wherever and do their ROTC program, then come back in as an officer, do the minimum of 4 years (longer if you become a pilot), then have complete freedom to do what you want.

Yes, you could potentially make more money in the civilian world if you went to college (using you GI bill), and then got a good paying job, the question is what would you rather be doing? Working in an office for $50k a year (assuming you get that much after college), working your way up the corporate hierarchy, or being a soldier/sailor/airman/marine getting deployed and travelling around the world? To each his own, I personally prefer the latter, hence why I am making less than half what I could be making in the civilian sector.

Is there a job in the civilian world you would really want to do? Is there something you would want to major in for college. It's hard to say what would be best for you unless you really know what you want to do in the future. The nice thing about being in the military is that you could always get out and change to a different career when your commitment is up.

 

[jim48]

@kita_q FYI - Academy service time does not count towards your 20 years of service for a pension, so you need to factor an additional 4 years of service into your equations.

 

[playingforthelord]

@jim48 I think that is partially correct. I thought it doesn't count toward 20, but when you hit 20, it then counts, making your time in jump to 24. I know that is how it works for the program I signed up for (HPSP).

 

[jim48]

@playingforthelord I am not sure about HPSP but I don't think that's correct for service academies.

 

[cubcadetlover]

@jim48 Actually, it does since he's prior. That's how it is for the Air Force at least.

 

[jim48]

@cubcadetlover Read that and glossed right over it. You are right; I stand corrected.

 

[quinn1995]

@kita_q You ask a lot of questions, which is good. You appear to have your head on straight so this shouldn't be too damn hard for you.

• First, make a budget of everything you will be spending money on when you get home. Cell phone, Internet, Cable, whatever it is. Remember, after a few years they typically make us go live on the economy so the next lucky boy and girl can live on base. Be ready for that. People never remember shit like utilities when they are figuring out where they'll live.
• Pop the savings up to where you feel comfortable. $16K on the car is a lot and I realize that you are paying more in than you should each month. Have you gone to like USAA or anywhere to get auto loan quotes for less years? Typically they'll give you a better interest rate if it is lower. Obviously don't handcuff yourself, but if you can afford even an extra $100 each month, that is $1200 extra a year. Get that sucker paid off.
• Be realistic with what you put into your TSP. Everyone is always saying to max it out. Honestly, if you plan on getting out that is probably a good thing to do. But if you plan on going commissioned at some point, then make sure you are at least getting the max match for what you are doing, I believe that is 5%.
• If you plan on getting out in say 5 years, what is stopping you from going Reserve/Guard when you do? I tell you the benefits certainly outweigh the negatives in these aspects. You still will have a job for money if you get out and don't find something right away. Say you get out at E-5, that is about $360 before things like SGLI and even Tricare (albeit it isn't that great) if you decide to go that route for insurances. Take your GI Bill and find a good college and get your learn on with the housing allowance coming your way. And if you do get a job on the outside, the money you get from the military can go straight to the same TSP you're using now (and NOW you can max it out) or put it into your own IRA and call it day.

Looking at my Reserve W2 (after 6 years of AD and at 10 year mark), I made just shy of $10K between my Annual Tour, Drill pay, and my Bonus. That is $10K that goes straight to my TSP and IRA and I don't ever see a dime of it. I continue this for another 10 years at that level and you can do the Math on how much I have saved without ever touching my full time employments paychecks.