How Long Does it Take to “Get Ahead?”

I graduated college with $60,000 in student debt. When my wife and I got engaged, she was carrying $45,000 of student loans. Between us, we were working against over $100,000 of debt. Unlike debt incurred for property (like a home mortgage), this debt had no appreciating asset behind it and generated no rental income. This was dumb debt.

By the time we got married, she had paid off her entire student loan. That was a $45,000 weight off of our shoulders. However, I still had student loan and career starter loan payments of $700/month. We were making $1000 monthly loan payments, which absorbed 30% of our monthly income.

We were maxing out my Roth IRA ($416), but after we paid for our rent ($700), groceries ($300), cell phones ($150), gas ($300), utilities ($50), and internet ($30) and set aside money for our emergency fund ($200), auto insurance ($50), and home down payment ($200), we’d usually have less than $200 per month of unbudgeted money.

One hundred dollars per paycheck is tight. It was often less than that. One time we only had $19.

$19 for Two Weeks

$19 for two weeks. That’s barely enough for a night out at the movies. So we read a lot of books. Went to the library to pick up all 8 Harry Potter movies. Watched Netflix. We roadtripped to Christmas family reunion rather than flying. We made the best of it.

We had no cable, only one car, lived in an apartment that was only 66% of our BAH. The $1000/month student loan payment was strangling us. We saw our net worth rising every month, because of the decreasing student loans, but we weren’t accumulating any assets.

When My Wife Felt Like We Got Ahead

It was tough. We felt like we weren’t getting ahead, even though we'd cut our spending down to the bone and we're making 50% more than minimum payments on our debt.

I was working my tail off in training and my wife looked for jobs in our area. When I moved to another state to for a 100 day TDY for training, my wife stayed back with family and worked as a bank teller at minimum wage part time to help us out. Still, we struggled to save enough for a down payment on a house ($16,000) and to increase our investments (only around $17,000).

A 100 day training TDY can do wonders for your finances. It’s almost as good as deployment. You get the extra per diem every day, your expenses drop, and if you break your lease (which you can) you can collect BAH for a few months and just bank it. It was at the end of this TDY that I pinned on O-2 (1st Lieutenant). Shortly thereafter we PCS’d to a much higher BAH area.

Between our PCS pay advance, buying a house, and the increased income from 2 years in service and O-2 promotion, that’s when my wife felt like we got ahead.

When I Felt Like We Got Ahead

I’ll admit it was nice getting that O2/2 year pay bump. However, we were still making $1000 monthly payments on my student loans. The moment I knew we were finally getting ahead was when I received my first paycheck as a 3 year O-2 on deployment. During that deployment we:

• Deposited the full $10,000 amount into the 10% military savings account SDP
• Made the final $5600 payment on my USAA Career Starter Loan
• Set up allotments on myPay to nearly max out my Roth TSP

All of these milestones added up to a nearly $10,000 increase in net worth over 3 months. A few months later, we finished paying off our PCS pay advance and we’re able to set up allotments to maximize both our Roth IRAs and our Roth TSP.

We were married in October 2011. It wasn’t until April 2013, in the middle of my first deployment, that I finally felt like we were getting ahead. Retiring my USAA Career Starter Loan two years early freed up $471/month. Now our only required student loan payments are $225 on a 2.25% and a 1.75% Sallie Mae loan.

Instead of continuing the debt snowball, we decided to max out my wife’s Roth IRA, my Roth IRA, and my Roth TSP account. So now we’re making minimum payments on my $28,000 of remaining student loans but saving nearly 50% of our income into tax advantaged accounts.

For us, it took about 18 months of tough budgeting, working a minimum wage job, a promotion, a PCS, and two pay raises before we both felt like we were getting ahead. It takes time. Don’t give up!

What It Feels Like to Get Ahead

It feels fantastic. Every time we receive extra income now, whether it’s a tax free bonus for going into a combat zone, or TDY pay, or income from this blog (however small that may be), it feels like a little Christmas bonus.

Now we have a lot more than $19 per paycheck to play with. But because we refused to incur credit card debt and we stayed focus, we’re now crushing our savings goals and also getting to do a bit more travelling than just to the library.

When that extra income does come in, we usually tuck away half of it into a savings account and then splurge with the rest. It’s guilt free spending because we know that our allotments are already investing 50% of our income for us. It’s a great feeling.

How You Can Get Ahead

If I didn’t have the student loan burden, my first 3 years of military service would have been a lot easier, financially speaking. Probably more than 50% of military officers graduate with no student loan debt or less than $10,000. If you do, you have no excuse to not be getting ahead with every paycheck, from day 1. Okay, fine, you can blow the first paycheck, but then no excuses!

As a military officer, your first two years will be the most difficult financially. Until you get the promotion to 1LT O-2 (usually after two years) and then the 3 year time in service, you will probably struggle financially. If you stay focused you can come out of this difficult first 2-3 years with amazing financial fitness and you’ll be ready to take advantage of your increased pay as an O2 and O3.

Here’s how you can get ahead:

1. Use Mint or Personal Capital to track your progress

These are great tools to keep your spending on track and discover how much it costs you to live. Do you know how much you spend on gas every month? Or groceries? Or anything else? You can with Mint or Personal Capital. I prefer Mint for tracking every day expenses and PC for tracking my investments.

It’s also amazing how your expenses even out over time. I don’t track my expenses now day to day or even month to month because I know my expenses are pretty consistent. It’s about $100 per month on gas. One month may be $50. Then next may be $150. But on average, it’s about $100 if I’m just commuting, obviously more if we go on a road trip.

2. Automate your finances with myPay

This is probably the most important step. When you remove yourself from the equation and automate your finances, you set yourself up for success. Start contributing to your TSP, IRA, and savings accounts and you’ll be amazed at how fast your savings will grow.

3. Don’t incur credit card debt

If you don’t have the cash sitting in a checking account ready to pay off the card, don’t charge the card. Better yet, use a debit card until you start feeling like you’re getting ahead. You may sacrifice a few rewards points, but at least you won’t start moving backwards and have to pay interest on your credit card debt.

Do you feel like you're getting ahead? If not, what's holding you back?