Army ROTC Cadet Planning for Financial Independence

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I receive some great emails from readers frequently. This was one of my favorite to respond to. “W” is a young man enrolled in Army ROTC at a university in Florida.

I wish I had reached out to personal finance and lifestyle mentors like JD Roth, Ramit Sethi, or Tim Ferriss at a younger age. Well played, W! Here's the email he sent me:

I am currently playing college football and enrolling in Army ROTC at (a university in Florida)! I want to thank you for the work you have done writing the book The Intelligent Military Investor!

I feel I am so ahead of the game and ahead of everyone else because no one is thinking about financial independence at my age.

Any advice you have for a kid like me? I will be commissioning as an officer in about 4 years so please offer any advice regarding investing or military lifestyle.

First of all, let me congratulate you on being one of the smartest 18 year olds I know. You are certainly among a tiny minority of teenagers giving so much thought to your future. You are asking all of the right questions.

Thank you very much for your kind words. I hope my book was valuable to you.

It's easy to get fixated on financial independence (FI). Type A personalities love to achieve goals just for goals sake. Try to remember WHY you are doing this. Becoming FI isn't so you can sit on the beach and drink mai tais until you die.

Becoming FI should be so you have the freedom and resources to do something meaningful for the world. Whether that's taking care of your family, or community, or even just yourself, don't become FI just to be FI.

Build the Life You Want, Then Save For It

Build the life you want, then save for it” Don't completely deprive yourself of life's pleasures to save another 2-5% of your income. Life is short and we don't know when it ends. How you spend your days is how you spend your life.

If you don't have a grand, higher purpose yet, then it's fine to save and invest for FI and figure out what you want to actually do with your life along the way. But just remember to constantly question every aspect of your life and ask:

  • “Does this add value?”
  • “Am I making the world a better place?”
  • “Does this bring me joy?”

I started saving for FI in 2012 and obtained a 50% savings rate. I slowly dialed it back and enjoyed life much more.

Now I save about 40% of my military paycheck. It's a great life and I should still achieve FI before age 40. I still enjoy life and my wife and I travel extensively, eat great food, and have fun with friends and family. That's what life is all about. Relationships with people.

Good Move on ROTC

Enrolling in Army ROTC is a smart move. Are you getting a scholarship? I recommend Air Force ROTC, but if that's not an option and you enjoy the army lifestyle, then Army ROTC is the way to go.

I did Air Force ROTC and loved it. It is the foundation of my current success (whatever that may be) as an Air Force officer and military financial blogger.

That's great that you are already thinking about saving, invest, and FI. I opened my Roth IRA when I was 16. I recommend you do the same to get yourself started.

Open your Roth IRA at Vanguard and buy VTI (Vanguard Total Stock Market Index Fund, ETF version) to get started. Contribute as much as you can (up to $6000 per year for 2019) and it will grow like crazy over the next 20, 30, 40 years.

My advice for a smart kid like yourself is start educating yourself. Read, read, and read some more. Listen to podcasts when you're working out or driving. Tim Ferriss and Jocko Willink have some really good podcasts.

Read all the books on my financial independence book list. You should be able to get most of them at your local library.

Start with I Will Teach You To Be Rich, then the Millionaire Next Door, then the Simple Path to Wealth, then the Four Hour Workweek. A Random Walk Down Wall Street is also a great read which explains my investing philosophy: simple, low cost, diversified, and automatic.

Advice Regarding Investing

Buy simple, diversified, low cost, index funds and hold them forever. VTI or VTSAX (Vanguard Total Stock Market Fund) and VXUS VTIAX (Vanguard Total International Stock Market Fund) and BND or VBMFX (Vanguard Total Bond fund) should be the core of your portfolio.

I used a Bogleheads lazy portfolio for the past 10 years. Returns have been great. Here's my asset allocation in 2018. Read everything on the Bogleheads wiki. It's a great resource.

Keep buying VTI, VXUS, and BND for the next 10-20 years and you will have an enormous pile of money at the end. Use the TSP (Thrift Savings Plan) after you commission.

Start with a minimum of 15% going in there. Try to max it every year ($19k/year in 2019) plus max your IRA. Make sure your spouse is maxing his or her 401k and IRAs as well.

You can't time the market, so don't even try. Time IN the market will always beat TIMING the market. Be happy with the average return and you will grow wealthier than 90% of folks out there. Read The Little Book of Common Sense Investing by Jack Bogle.

One other thing that would be a smart move is if your parents have a good credit score, have them add you as an authorized user to their credit cards.

You don't even need to have the actual card, but by getting access to their credit your credit score will rapidly increase while you are in school. Also, I recommend getting a student credit card or secure card with a low limit, say $300-500.

Put a few charges on it every month, pay it off in full immediately, and your credit will be outstanding when you graduate college. DO NOT CARRY ANY DEBT month to month! Pay the card off in full before the bill even arrives.

That will open up the world of traveling on points and miles. You can use your credit card rewards to see the world on the cheap.

Military advice

Listen to your NCOs, but be an officer. Lead, follow, or get out of the way. Listen to Jocko's podcast on leadership and discipline.

Read: Turn the Ship Around! before you commission. Read it again 2 years after you commission. Read it again 5 years after you commission. Apply the principles to your own command and unit and you will see impressive results.

Take a “Hell YES!… or No.” approach to life.

Military Lifestyle

The military will take, and take, and take some more. They will always take more from you. Protect yourself, your family, and prioritize what's important to you. When your spouse or kids aren't happy any more, get out of active duty and go to the guard or reserves.

Do NOT lose your family for a military pension at 20 years. At the end of the day, if your family isn't there with you, none of it will be worth it. There's ALWAYS someone else who can do your job, but they are going to tell you that YOU are the only one.

It's not true. Give what you can, sacrifice what you must, but protect yourself and your loved ones and get out when it's the right time.

The military life is fun though. The training, the camaraderie, the mission, the focus: it can be a peak experience. But continue to develop interests and passions outside the military.

Everyone eventually retires or separates some day. You have to have something ready and waiting for you after you get out, or you'll be in for some pain.

I hope we stay in touch as you go through school, ROTC, and commission into the US Army.

If you have a question for me or just want to say hi, I always appreciate messages from readers. Use my contact form, the comments section below, or sign up for my Ultimate Military Credit Cards Course.

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