Financial Steps to Take Early In Your Military Career
Set Yourself Up for Financial Success Early in Your Military Career
If you are a young or new service member, not only do you have your whole career in front of you, you also have the benefit of having time on your side. It’s important to make smart financial moves now that you’re young, while your money has time to grow. Not only will you learn how to become fiscally responsible, but developing these money-saving habits now will greatly help you in the long-run.
Here are a couple of steps you can take to help set yourself up for long-term financial success.
Contribute to your Thrift Savings Plan (TSP)
Most people have heard of a retirement plan or a 401(k). But for service members, retirement plans look and sound a little different. Members of the military can contribute to the Thrift Savings Plan which is a plan that allows you to invest in a tax-advantaged account for retirement.
So, how does it work? There are 5 different fund options you can choose from including the following:
- Government Securities Investment (G) Fund
- Fixed Income Index Investment (F) Fund,
- Common Stock Index Investment (C) Fund
- Small Capitalization Stock Index (S) Fund
- International Stock Index Investment (I) Fund
How To Manage TSP Funds
One can either choose to invest in:
- Any of the 5 individual investment funds
- In a Lifecycle fund – a fund that has a pre-selected ratio of these five individual funds.
TSP will match up to 5% of contribution.
If you’re not sold on opting into your TSP yet, the numbers speak for themselves. For example, let’s say you choose to contribute roughly $100 / month from the beginning of your service at age 18. Over the course of 42 years, you will contribute roughly $77,000, with a 10% annual return, the growth of your contributions will be roughly a little over one million dollars. This is for illustrative purposes only. You should seek information from a financial professional for your own situation.
- Contribution – $100/ mo
- Total Contribution – $50,400 (42 years until age 60)
- Return – 10% annually (S&P 500 has returned 9-11% historically)
- TSP Matching – up to 5%
- Total Savings – approx. $1.55 million dollars!!
This of course assumes you don’t take any TSP loans. If you’re still slightly confused by this process and are unsure how to handle your TSP, keep reading, we’ll introduce someone who can help you weigh out your options.
Meet with Your Command Financial Specialist (CFS)
Every unit has a CFS that is available as a resource for you. They work with service members one-on-one to help you create and work towards your financial goals. Whether it’s helping you purchase a home, helping you manage your credit cards, or budgeting, they will help create a plan that works uniquely for you.
Command Financial Specialists have been specifically trained to be able to help educate you on various budgeting and saving techniques necessary to help you reach financial stability. Let’s say you’re having trouble understanding your options for the TSP mentioned above, your CFS can help break down your questions and concerns and make sure you reach a point where you’re comfortable with the decisions you’re making with your money.
Look into Military Relief Societies
No matter what branch you are in, there is a relief society for you. While they may vary in names, they all have the same overarching goal: to provide relief for service members experiencing financial hardship. There are a number of things these societies can offer you.
One of the most appealing services offered are interest-free loans or grants. They can also offer things such as financial preparedness counseling and tuition assistance. These services are kept completely confidential. For those who are not near an installation of their own service, these relief societies have long-standing reimbursement agreements with each other and with the Red Cross, to help service members who need assistance. Any service member can call the Red Cross toll-free number at 1 (800) 733-2767 for assistance.
As someone who is part of the military community, you have many benefits available to you that you may not even know about. There are several other steps you can take to work towards securing a stable financial future. Consider taking on a side hustle like food delivery, Uber driving or renting out your extra room as an Airbnb. Every dollar you put away, every meeting you set up with your CFS, every small effort you make now is something your future self will thank you for.
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