After the TSP, I invest my money in Betterment and Vanguard. I track all of my investments with Personal Capital. I also wrote a short, 2 hour book summarizing this site. You can buy it here.
This is my 100th post on Military Money Manual and the third year I’ve been writing. You can see all my posts in reverse chronological order here. I’d like to take this post to share a bit about the site, why I started it, some things I’ve learned, and also how much I’ve earned over the past 3 years.
I started this site in April of 2012 while I was on a long training TDY with lots of free time in Nowhere, America. It seemed like a good use of my time writing personal finance and investing articles for military types. Better to write blog posts than play videos games and TV all day.
As far as I know (and please correct me via email or comment if I’m wrong), there are no active military personal finance blogs written by active duty military personnel, other than this site. The only other sites that come close are The Military Guide (retired Navy author Doug Nordman) and The Military Wallet (Air National Guardsman Ryan Guina).
I think that’s kind of a reflection on how much time and effort most military personnel put into thinking and planning their finances. I believe that just 10-15 minutes of reading these two articles here and here would create a $1,000,000 net worth increase for the average military member if they applied the steps to achieving financial independence.
Why I Started This Site
I started this site to:
- Share what I’ve learned about personal finance in the military
- Help other military members with their finances
- Chronicle my journey from $100,000 in student loan debt to financial independence by age 40
- Make some money online
I try to write unique, military focused content and especially write about things I have experienced myself. I have never experienced credit card debt, so you won’t see a post about how I spent years battling high interest rate debt. I do invest in the TSP and the SDP, so I write some of my articles about my investments in those programs.
I have received many comments and emails from like minded military personnel who have shared their success stories. It’s awesome hearing about people who get their American Express fees waived, who have maximized their TSP investments, and who have paid down debt and begun their journey to financial independence.
All of these are very encouraging and make me feel that the hours I’ve poured into this site have done some soldier, somewhere, some good. I hope that over the years more and more people will find the financial freedom they are looking for. If I can help them do it that with this site, that means I’m doing something right.
Student Loan Repayment
When I entered active duty in 2010, I had $60,000 of student loans. My wife brought an additional $50,000 when we married in 2011, but she soon paid off her balance with money she saved from a year of working and living like a college student at home with her parents.
When I started this site in 2012 I had $48,999 of student loan debt. Today, 3 years later, I’m down to $22,000. Our plan is to be debt free by the end of 2016. If we sell our house when we PCS as we plan to, we should have enough cash from the sale to pay off the rest of my student debt and the auto loan we took out for our 2015 Mazda 3.
Since I started writing I’ve promoted from a second lieutenant to a first lieutenant and I’m now a captain (O-3). I’ve deployed three times and gone on temporary assignments dozens of times. I’ve watched my annual income rise from $36,000 to nearly six figures (even closer to six figures with the wife’s income included).
In that time I’ve tried to prevent lifestyle creep as best I can. I always try to be conscious of what I’m spending my money on. If that means beers and going out, great. If that means eating really fancy food at home, awesome. I like to just be conscious of what I’m spending. Even though I’m making almost 2.5x what I did as a lieutenant, I’m still aware of where I spend my money. If it doesn’t align with my values, I adjust it as soon as I notice.
No matter my income level, I’m working at getting my investing rate to 50% of my income. Right now I’m at about 35% with the maximum Roth IRA and Roth TSP maximum contribution. As soon as my student and auto loans are paid off I should be able to get to 50%. We’re also saving 100% of my wife’s income.
One thing that’s really helped keep our marriage a happy one is paying ourselves a “marriage premium.” It was an idea that came from a marriage counseling book we read before we married. Most of our accounts are joint accounts and we make most of our spending, saving, and investing decisions together.
However, every paycheck we allocate a percentage of the paycheck to individual accounts, one for my wife and one for myself. We call it the “marriage premium,” like a premium you pay on your auto, home, or life insurance. That’s money we can spend completely independently of each other.
No questions asked, my wife can go get her hair and nails done or buy that $300 dress she wants, as long as it comes out of her marriage premium. I can go get drinks with the guys or buy $100 worth of video games, as long it comes out of my marriage premium account, and she can’t question it at all. It’s really helped us keep money debates and stress to a minimum.
What I Learned
I’ve learned much in the past 3 years about money, investing, running a website part time, and making extra money outside my paycheck. Here’s just a few quick ideas.
The first $100,000 really is the hardest.
It took my wife and me 4 years from college graduation to break the six figure mark. Graduating with $110,000 of student loans between us certainly didn’t help. Now we’re looking at breaking the next $100,000 in less than 18 months. I track all my accounts (TSP, Vanguard, USAA, my home value, etc.) with Personal Capital. It’s a free and secure tool that provides advice on maximizing your wealth.
The growth curve on our net worth should get even better as my student and auto loans get wiped out and we can begin investing that money every month. The market has certainly been helping for the past 5 years, but it’s mostly been my savings rate that has accelerated our net worth growth, not returns on investments.
Debt is still debt, even if it’s a low interest rate.
This is something I’ve slowly come to terms with. When you take on debt, even if it’s a very low interest rate, it still earmarks a certain percentage of your paycheck for paying that loan. There is no such thing as “free money.” Even though my student loans are at 2.75% and 1.75%, I’m itching to crush them. It’ll only free up about $220 per month in our budget, but the thought of being done with that debt is a powerful motivation.
I know mathematically I’d probably be better off investing any additional income and letting the loans go on as long as they can, but emotionally and mentally I really need to be rid of them. They have to be paid off sometime, why not sooner rather than later? That’ll free up more of my paycheck for bigger investment opportunities. Personal finance isn’t just logically, there’s a very emotional and mental component to it. Do what makes you happy.
I don’t like owning real estate.
I don’t like owning real estate unless I live close to the property. There’s too much hassle in managing a property long distance. A property manager just doesn’t seem to be worth the cost, especially when the rent for my place won’t cover the mortgage plus HOA dues. Plus, no one cares about your property more than you do. We’ve made nearly $10,000 renting our home on AirBnB (see below) but the hassle of managing it from afar just doesn’t make it worth it. We hope to sell our current home before we PCS.
Real estate can be a great investment asset class. But as 2008 showed us, it’s definitely a risky one. I know lots of older guys in the military who are still underwater on multiple homes around the country. Being a long distance property mogul just doesn’t appeal to me. I’ll stick with my much more liquid assets, especially when I’m moving for work every 3-4 years.
While alternative investments may seem attractive, there is definitely no free lunch.
I was very excited about Lending Club as an alternative investment when I first started writing this blog. Since then though I’ve soured on peer-to-peer lending. I have several reasons for why I stopped investing in LC. The main point is every investment has it’s advantages and disadvantages. When someone comes along and offers a new way of doing things, be skeptical. Try new things (like peer-to-peer lending), but realize that results may vary and past performance is not an indication of future results.
Real returns (inflation adjusted) above 7-8% in the stock market are rare. Bond returns around 3-4% is the historical average. Lending Club advertised 8-9% returns but mine were closer to 6% with a lot of risk. Make sure your risk and reward balance each other out. I don’t think Lending Club provides a good enough reward for the risk you take on.
Used cars are great to start in but new cars definitely have their advantages.
I still believe that if you’re struggling financially or just getting started in the military, a used car can mean the difference between building your net worth or stagnating in debt. A well cared for Japanese car like a Honda, Toyota, or Mazda will go for 200,000 miles and 20 years. You can pick up a 10 year old one with 100,000 miles and one previous owner for around $5000. Do yourself a favor and don’t start your journey to financial independence with an auto loan.
Now, I did recently purchase a new 2015 Mazda 3. I negotiated hard for it, but in the end I still financed it at 1.29%. Does this make sense financially? I did the math on old vs. new car ownership costs and it’s closer than you’d think. For me, it made sense to not have to worry about maintenance, to jump to 35 MPG, and to have a reliable car for our upcoming PCS road trip. New cars can be great when you can afford it. Just don’t start with one if you’re just getting started on your journey.
Go for the big wins and don’t sweat the small stuff.
I got a parking ticket the other day for $35. I pulled into a spot with my nose in rather than backing into it. Dumb, I know. I’ll read the sign next time. But guess what? $35 in the grand scheme of things isn’t much. This month I’m investing $2500 into my Roth TSP and Roth IRAs. I also made an additional $500 payment towards my student loans.
I can’t be worried about a measly parking ticket. I got big plans to achieve financial independence and I’m making hundred and thousand dollar investment to get there every month. You should make big moves too and not worry about the little things.
What I Earned
The two biggest boosts to my income (besides promoting, deploying, and going TDY) over the past three years have been renting our home on AirBnB and online income from this blog.
AirBnB has been a great success for my wife and I. It forces us to clean the house before we leave for vacation or business trips, so that’s an added bonus. We’ve had great guests every time we host who usually leave the house cleaner than we do.
Since we started AirBnB in 2013, we earned $8788 before taxes. Instead of our home sitting idle when we’re gone we’ve put it to work for us. That’s nearly $3000/year in additional income.
How Much I Made Online in 3 Years
Finally, the reason you clicked on this link. This website has provided an additional income source, although it’s not very substantial or predictable. Still, it’s nice to occasionally get checks in the mail or bank deposits from Google or other companies, just for running a few ads on the site. It started off pretty slow. I didn’t earn my first $100 from Google Adsense for 10 months. But the next $100 came within two months. And then the next $1000 came within 10 months.
I have not quite reached the $10,000 mark yet, but it’s coming up quick. I’ll hopefully pass that milestone this year. Not bad for typing some words into my computer and publishing them anonymously. On average it works out to a few hundred dollars a month, which is certainly a nice bonus, but definitely not life changing yet.
I hope the site continues to grow bigger over the next 100 blog posts and the next 3 years. My goals will continue to be:
- Sharing what I learn about personal finance in the military
- Helping fellow military servicemembers
- Documenting my personal journey to financial independence
- Generating more income online
Reader, what have you learned recently about finances or life? Have you achieved any life milestones recently? What have you done recently to boost your financial life? Are you better off now than you were three years ago?
2 Websites I Use to Achieve Financial Independence
The best way I know to achieve financial independence is to keep your investments simple, diversified, automatic, and low-cost. Costs eat into your returns like you wouldn't believe! A 1% difference in expense ratios can mean $100,000s lost to fees over a lifetime of investing.
Even if you're a DIY (do-it-yourself) investor like I am, you need to check out Betterment. You can read my full review here, but the bottom line is for only $250 per $100,000 invested (0.25% expense ratio) you get simple, diversified, and automated investing. In addition every account now gets free Tax Loss Harvesting+ features, which should increase returns for the average investor more than the minuscule management fee.
If you're not a DIY investor or are just getting started with investing, then you definitely need to check out Betterment. It's what I recommend to my family and friends who aren't strong investors or don't care to learn about asset allocations, diversification, or rebalancing.
I have investment accounts all over the place. To keep track of all of them in one place I use Personal Capital. It combines all of my accounts, shows me where I may be overpaying in fees, and provides beautiful charts showing my overall asset allocation and performance.
I use Personal Capital to track my Roth and Traditional TSP, Vanguard IRAs, banking accounts, SDP, and my Betterment taxable account, all in one place. It's free, secure and presents me with a one-stop dashboard so I can see all my money on one site.
Read my full review of Personal Capital and see how easy it can be to manage your investments in one place. Trust me, once you try it, you'll love it.
P.S. - If you have over $100,000 of assets and a 401k, you really need to run the Personal Capital 401k Fee Analyzer.