Military Members and Money

Reporting for Duty

  • If I were reporting for active duty tomorrow, this is what I would do. (I spent 26 years in the Army.) This advice applies to active duty, reservists and the national guard. This also works for the not so young NCO’s and officers.


  • Save 20% of your gross income BEFORE you start spending your money. Save first, spend last and never mix these two up. Educate yourself on money matters so you can become your own financial adviser. I would start with my book, Now What?, and then Financial Happin$$ and then proceed to investing with What Color is the Sky.


  • Learn from teachers and avoid salesmen who have a conflict of interest with the “education” they provide. Go to the recommended reading tab on this website to see a long list of recommended books.




  • Open a checking account and direct deposit at Why? USAA does a great job taking care of its military members and you can take your bank with you wherever you go in the world.


  • Your savings should be elsewhere. Open up a credit union account (take $5 and open a savings account) that will provide you a local place to cash any checks or transfer money (applies primarily to active duty members). Your credit union should have no fees. If they do, go elsewhere.



Emergency Account/Savings

  • Get $3,000 together and open an account at Select the Prime Money Market Fund. This fund will provide you a decent return on your cash (almost 2.5% as of 7 January 2019). You can access this money whenever you like for that next emergency or big ticket purchase. Transactions can take place online or over the phone. In two business days, the funds will be in your checking account.


  • Have at least 3 months of living expenses in this fund. Why? This type of fund will help you keep up with inflation. This is also the place to stash extra cash that you need in the short term. Make your emergency fund one of your highest priorities. You can write checks from this account ($250 or above) and transfer money back and forth to your USAA or credit unions at no cost. This is convenient and smart.




  • This term life insurance policy is a wonderful option IF you need it (you are automatically enrolled and must opt out through your S-1/PAC clerk). Does anyone rely on you financially to live? If the answer is no, you don’t need SGLI in most cases and you should cancel the policy. If the answer is yes, then by all means, keep your SGLI.  Only sign up for SGLI if you need it, if not, take that money you would have spent on life insurance and put it toward your savings/investments. Next up, the TSP.



  • Sign in to your mypay account and scroll down until you see TSP contributions. Put a number in the box based on percentages that you wish to start investing each month. Make sure to put that number in all of the payment options as well. Your money will go to the G Fund, which happens to be the default fund. DO NOT keep it there!


  • In about a week you will receive the user name in the mail and a week later the temporary password will follow. Make sure your mailing address is correct. Take that information and go to to sign in. Once you are signed in, it will be time to make some changes.


  • Consider moving  your money away from the G fund (ultra conservative) and into investments that will grow your money over time (stocks). You do this by transferring the money to the fund of your choice and start your future contributions to your new selection(s). Here is a very simple option. Invest in a Lifecyle Fund that relates to the time when you might need the money in the future.


  • Invest in the L2050 mutual fund (or highest number at the current time). Why? This is a long-term investment, which contains all of the TSP individual funds. It will gradually reduce its volatility as the years go by. Dollar cost your money in every month through your mypay system. How much? This amount should be part of your 20% monthly investment.


  • A nice goal is to max your contribution limit for the year ($19,000 for 2019 for those under age 50 and $25,000 for those 50 and older). Consider selecting the Roth TSP version if you are deployed and paying no tax on your income or if you are an enlisted person with a moderate income (E-6 and below). You make this selection on your mypay site under the tsp tab.


  • The Roth version places money into your account after it has been taxed (when you pull it out all of your money including earnings will be tax free) and the traditional version places money into your account before tax (reduces federal and state income taxes now, but you will pay tax when you pull it out later). Identify your specific situation and select accordingly. Generally speaking, most military personnel should select the Roth TSP. Pay the tax upfront and then all future earnings will be tax free when you pull them out years later. For those of you who are making over $80,000 of earned income a year, you might consider the Traditional TSP to capture the tax benefit upfront instead of later. Learn more here: Roth vs. Traditional.


Roth IRA

  • Get $1,000 together and start a Roth IRA in the Target Retirement Fund of your choice at Vanguard. Select a number that corresponds with the age in which you plan to take the money out. This fund can be used to provide a down payment on your first home (follow the rules), fund your education (follow the rules), or fund your retirement (follow the rules).


  • Why? This is a great deal. Once you put the initial $1,000 in the account, simply set up an automatic investment ($100 is the minimum) out of your USAA checking account (you can do this at Vanguard) and try to max your investment each and every year (the max for 2019 is $6,000 for someone under age 50 and $7,000 for those 50 and older).


Real estate

  • Invest in real estate with extra money. Why? You will probably be moving multiple times in your career. This will make it hard to own real estate. I do not recommend owning a home if you are moving in less than 5 years. You need that period of time (at a minimum) to overcome the costs of ownership which includes maintenance, upgrades, property taxes, insurance and commissions to the real estate agent.


  • You can do this by owning a REIT (Real estate investment trust). This investment purchases stock in commercial real estate. This can help you in diversifying your portfolio. I would do this with a no-load index fund at Vanguard. You can start an account with $3,000 in the REIT Index Fund. Put money here only when you have maxed out your other funds (Emergency Fund, TSP, and Roth IRA).




  • Go out and buy The Total Money Makeover by Dave Ramsey. Why?You MUST pay off your debt and stay out of debt if you ever want to have a successful financial future. If you do not have debt, stay out of debt.


  • If you have debt, buy this book and follow the advice. My personal recommendation for you would be to complete baby steps 1, 2, and 3 with Ramsey and then move over and complete the plan that I have designed for you.




  • You have nothing to prove! What? You are going to show up for duty and immediately things will change from your high school or college days. Some of your buddies will buy new cars (with the debt to go with it), some of your buddies will find a woman/man (choose carefully, the wrong woman/man can bankrupt you), some of your buddies will become influenced by First Command (avoid this high commissioned and high fee sales pitch), some of your buddies will start spending money just because they can (we can be our own worst enemy), finally someone will follow these simple strategies that I have laid out for you.


  • They will keep it simple and sustainable. They will dollar cost average their money into the funds I have listed month after month, year after year. WHY? Why do all of this? FREEDOM! Read Your Money or Your Life, by Vicki Robin and Joe Dominguez for a better understanding of money and how your life will be affected by the decisions you make.


  • Follow these steps and financial freedom will be yours one day. This means that when you are ready to leave the military you will have provided yourself an opportunity to live out your dreams beyond your time in the service. You will not be a slave to anyone or anything. You will be FREE!


YOU are the answer!