Now, for the moment I have been waiting for—I am writing the article that I wish I read before I joined the military. When I joined the Marine Corps in 1999, I had no concept of money. I didn’t know the value of reinvesting your money to make more money. In fact, it took me 20 years in the military to figure it out.
So, here it is, my article to myself. I will keep this article direct and straightforward to function as a good starting point for young people to take action. I would love to get into the weeds of not buying cars, side-stepping loans, avoiding credit cards, and preventing lifestyle inflation. However, if I can give you the broad tools of success, you can wield them to your advantage.
I will break this article down into four sections, which will correspond to your timeline in the military. The four sections are financial education, military finance, multiple streams of income, and the bigger picture.
Do I Need Lots of Money to Start Investing?
Financial Education. Man, why is it so hard to read books as a young person? If a young person can start reading books by age 18, they could probably institute their own country by age 38. Reading is the most powerful tool in the arsenal of education. These are the two books I recommend to every single person seeking financial independence.
“I Will Teach You to be Rich,” by Ramit Sethi, is a step-by-step guide to winning your financial independence. This book is the first step I took on my journey to financial freedom. After reading this book and taking action, I was motivated to learn more. My next book was:
“Rich Dad, Poor Dad” by Robert Kiyosaki, began my love for Mr. Kiyosaki’s books. This book will bend your mind and make you reevaluate how you view money, wealth, rich people, jobs, college, and your personal residence.
These two books will arm you with the financial mindset and actionable steps to build your path forward. You should be in control of your finances after reading these books. Even if you are an E-3 or E-4, you can still start saving, investing, and learning about wealth. Rich people are wealthy long before they have money.
Run a Profitable Dog Park, on Your Property
Your financial education doesn’t have to stop there. I have 40 more books that I have read, and they are all excellent places to continue your education. You can find them in these articles: “20 Books that Will Make You Rich” and “20 (more) Books that Will Make You Rich.”
Military Finance. The military can take care of you financially and set you up for a wonderful life post-military. However, you have to understand the tools available to you. Knowing your benefits will help you decide if the military will be a 20+ career for you. Let’s take a look at some of the perks.
Thrift Savings Plan. TSP is the military 401k program. I recommend you max this out and receive any matching benefits the military offers. It’s free money. Do this from day one.
Military Pension. Although the military pension was cut a little because of matching TSP benefits, it is still the best retirement in America. After 20 years of service, as early as 38 years old, you could be drawing a retirement check for 40% of your salary.
Should You Buy Property in a Small City?
Most people do not truly understand how much this retirement equates to in passive income dollars. If you are a dividend investor, you probably strive to receive a 4% yield on your investment portfolio. If your military pension were $3,000/month, you would need $900,000 in an investment portfolio to match that pension amount. Plus, keep in mind, you would still have your TSP account growing.
So, if you are thinking about getting out of the military early, do the math. Let’s say you get out at age 22. Can you build a dividend portfolio of $900,000 and a TSP of probably $300,000 by the time you reach 38 years old? That would be tough—extremely tough. That military pension is solid!
Healthcare and other perks. Some people say military retirement is worth it just for the healthcare benefits. I would tend to agree. If you retire, you will also get access to commissary, base hotels, campsites, free gym, free pool, military specials, etc. There are lots of benefits to retiring from the military. Take your time and do the math; it is tough to match perks in the civilian sector.
Multiple Streams of Income. I just learned about various streams of income, and I am kicking myself in the behind. If I started creating different income streams earlier, I would be benefiting from them now. That’s okay; I will pass on my love for income streams to you. My article “20 Creative Way to Make Money from Home” (and the book) is a great place to start.
From -$77,000 to +$150,000 in 22 Months
Creating multiple income streams is the best thing that you can do to make yourself rich early in life. The typical millionaire has seven streams of income. I like to spread my income streams across five asset classes: military pay and other employment, investing, cryptocurrencies, real estate, and business.
Military pay and other employment. Your military payment is a given. Ensure you prevent lifestyle inflation by living on a strict budget. You can also get other earned income jobs, but I don’t recommend holding them for too long. If you need to pay off debt, this could be a quick fix, but we do not like to exchange time for money. There are far superior ways to make money.
Investment income. Dividend-paying stocks and interest-paying bonds are ways to build up your income streams. They take a while to get going, but they will start to perform well because of compounding.
Cryptocurrency income. Most people invest in crypto for capital gains, but there is a passive income element. You can use staking and farming to passively earn coins that you can also appreciate. Always invest in passive income.
How We Plan to Retire on Dividends
Real Estate income. You may not be able to invest in a house early on, but there are many other ways to earn passive income from real estate. These ways include tax liens, buying raw land, or getting a roommate. With the VA Loan, you might be able to get into your house soon, especially with the help of your family.
Business income. Early in your career, I would recommend royalties as your passive income from a business. Creating royalties from music, books, or videos is portable and can move with you from duty station to duty station. As you settle in, you can move into a larger business structure. You will also gain a large amount of management experience from your military career.
The Bigger Picture. Putting everything together, the military is a fantastic place to get rich. Your paychecks are steady, you can map out promotions, and the pension is impressive.
I recommend that you incorporate multiple income streams as early as possible. If you can survive the first five years without lots of debt, you are well on your way to financial success.
Boring Investing is Good Investing
The bigger picture is that you can set yourself up to be fully retired at your 20-year retirement date if you can grasp these concepts early on. Early retirement could be age 38. When you are young, it may sound like it is common for people to retire at this age fully, but it is not. The standard person is working until 65 years old, at least.
To fully retire at 38, I recommend a few things:
-Maximize the TSP matching incentive.
-Get promoted (duh!)
-Figure out the passive income number (i.e., $7,000/month) to be comfortable
-Build multiple streams of income to combine with your pension, to set you free
An example of your passive income number can be $7,000/month. Let’s say that after running your future retirement plans through the calculator, you will be at $3,000/month. You then can create passive income to match that number by retirement.
In this case, you have a $4,000/month deficit. You can add a couple of rental properties that bring in $1,500/month. $1,500/month for dividends and $1,000/month for YouTube. Now you have a $7,000/month passive income retirement by age 38.
When you see these numbers start to add up in real life, you will be amazed by how easy it was. The hardest part is getting your mindset in a position to see this path. This path is not standard by any means. So you will have to decide if financial freedom is right for you. You will always have a nice government contract job waiting for you if you take the standard route.
Me, I choose to be home with my family. I am doing all the work upfront to relax and spend time with my family, as my money comes in passively. My way takes a great deal of financial education, but in the end, it is worth it for me.
How about you? Do you want to do 20 years in the military and become a government contractor for 20 years? It is not a bad life. These decisions are ones that only you can make. Hopefully, I have given you enough tools to start your decision-making process. Good Luck!
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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