Coast Guard Vet on the USAA Career Starter Loan – MICDC Guest Post

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The following is a guest post from Robert Shaye, a Coast Guard veteran and spouse. Robert is now a CFP® professional with Fireside Finances.

As part of my Military Influencers Conference (MICDC) 2019 Spouse Ticket Sponsorship, I am publishing the best guest posts I received.

One of the guest post authors will win a VIP ticket to the 2019 MIC in Washington in September plus $500 cash to cover expenses connected to the conference (airfare, hotel, food, etc.) Learn more about the Military Influencers Conference here.

Robert Shaye, CFP®

I’ll never forget the feeling of looking in my checking account and seeing the $25,000 deposit come in. “USAA Career Loan – $25,000” the transaction read. The year was 2003, and I was a 21 year old “Second class cadet” at the US Coast Guard Academy.

Our class had just been given what was officially called a “career starter loan,” but it was known to the cadet corps affectionately as a “car loan.”

As a bunch of young twenty year olds, this was the largest chunk of money most of us ever had in our own hands, at once.

The terms were great — 1.0% interest and a 5 year repayment schedule. That worked out to be $433/month, and the payments didn’t begin until we graduated about 14 months later, when our paychecks kicked in.

Most cadets use this money to purchase a car, though as an unsecured loan, it could be used for any purpose.

How I Used the USAA Career Starter Loan

Check out that license plate!

I used $20,000 of the loan to purchase a reliable used car (a 2000 Toyota 4Runner.) The rest of the money went towards funding my current year Roth IRA.

My car wasn’t as flashy as my classmates who bought a BMW 3 series, a new Grand Cherokee, or even a Porsche Boxster, but, a used 4Runner was perfect for me. Plus, it was a stick-shift, which reminded me of being 10 years old and my dad letting me shift from the passenger seat.

Graduation came and went in May of 2004 and the $433 payments soon kicked in. I remember watching my loan balance decline and thinking — “boy, this is sloooow going!”

But month after month, the loan balanced dropped and before I knew it, I was more than half-way through the repayments. That’s precisely when the idea came to me….

When Your Debt is Gone, Pay Yourself First

I would keep the monthly $433 deduction from my checking account going, even after the loan was paid off in full. I was accustomed to the deduction already, and I was living comfortably within my budget.

Since it took me exactly 5 years to pay off the $25,000, I knew if I kept the contributions going for another 5 years I would have $25,000 in my savings account (plus a little more for interest).  The money got parked in a high-yield (relatively speaking) savings account and I even named it “New Car Fund.”

In the summer of 2014 my savings account balance finally reached its goal — $25,000. It felt pretty darn good to hit that milestone and to be honest, it didn’t seem too hard because everything was on auto-pilot.

My original intention was to use the money to buy a new car, but fortunately the 14-year old 4Runner was still chugging along just fine. It survived four cross-country road trips, many weekends to the ski slopes in Lake Tahoe, and even some unintended off-roading in southern Montana — where, for the record, it is still possible to lose a paved road and genuinely get lost.

Instead of buying a new car, I decided to invest the $25,000. I also kept the monthly contribution active.  Instead of going into a savings account though, I now have it going directly into my taxable investment account.

So while thinking about saving a large sum, such as $25,000, can sound overwhelming, when you break it down and put the recurring contributions on auto-pilot, your goals can become reality quite quickly.

And for the 4Runner — she’s still doing just fine, even as year 19 approaches!

Pro tips:

★ “pay yourself first” by making the transfer to savings happen immediately after your paycheck comes into your checking account on the 1st and/or 15th of the month. Don’t fall into the trap of “saving what’s leftover” at the end of the month!

★ The amount you are saving each month should be slightly “painful.” If you aren’t feeling a pinch, time to up your contribution amount! (Kind of like getting your braces tightened as a kid. You knew it was working because it hurt just a little.)

★ Received a raise at work? That’s a great time to increase your recurring contribution amount!

By Robert Shaye, CFP®

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