Recently, I’ve noticed that my boy and I are getting a lot of snide comments from people, mostly stemming from jealousy and ignorance, and concerning our lifestyle. He and I both own our (relatively new) cars outright, have purchased a house, and currently have no debt, but for our mortgage. People tell us it “must be nice” and “I wish I had that much money!” and typically, they make about the same amount that we did when we were both Second Class Petty Officers collecting single BAH. They want to know how we did it while they are struggling to pay rent and live paycheck-to-paycheck. So for those of you looking to join the military, are just starting out, or maybe you’ve been in for a while and just don’t know what’s going wrong, here’s some tips (civilians can follow these guidelines as well, but it will be more tailored to the Serviceman:
1. Live within your means.
Some people are thinking “duh, lady…” and others will think “I’ve heard that a million times, and I’m not sure I know what that means…” Well, here’s the down low: you can’t spend more than you make, and in order to do that, you need to prioritize. We all know that the E-1 to E-3 crowd is usually hurting for cash. They have to live in the barracks, where there’s nothing to do, so they buy things to keep them entertained: stereos, cars, fancy phones, and let’s not forget booze. Single junior sailors tend to drink a lot, I did, and why? There was nothing better to do! They aren’t thinking about saving for E-5 when they get single BAH and have to come up with the cash for renting an apartment and furniture, so half of them won’t have the cash to do it right away, and the other half get married to get the BAH that will get squandered on more stupid stuff, or lost in a nasty divorce. The solution is to budget. Living in the barracks is an excellent opportunity to save money, if you know how.
2. Don’t get a damn car!
You live on base, you can walk to work, wtf do you need a car for? Make friends with the married people or the E-5’s that have cars and bum rides, that’s what I did. If you bring something to the party (like an excellent personality, not like a case of beer, cuz remember, you can’t afford it, so only do that once a month) people won’t mind swinging by the barracks to pick you up on their way home on Friday and let you chill for the weekend. Also, if you go this method, you should be cooking, cleaning, or otherwise earning your keep. One thing I found about being a couch-surfer: if you feed people and help clean up after, you will always be invited back. Cars are just to expensive, because you start out with no money, so you’re financing the whole thing, you’re young, so your credit sucks and your interest rate will be like 14%, also your insurance will be high, again, because you’re young, and gas, maintenance and repairs will suck you dry. I know people that bought their cars, and then it sat there because they couldn’t afford to drive it! Is that what you want? No! Of course not! So you wait…
3. Build your credit.
Obviously, you’re going to buy stuff sometimes, I’m not saying you can’t hit up a bar once a week (preferably dive, because they’re cheap, and usually more fun, because who wants to party with bougie douchebags?) or that you always have to eat at the galley (honestly, I never ate there, when I was in the barracks, I lived off off sandwiches, Ramen, and EZ-Mac). So when you do buy stuff, use a credit card.
Yes, I’m telling you to get a credit card. Shocking, right? But don’t run out and get one yet, let me explain…
Hopefully, when you were in bootcamp, you were smart and signed up for a credit union and not a bank (because banks are for-profit and credit unions aren’t, you don’t want someone making money off of your money in the form of dividends), but if you didn’t, it’s okay, you’re not doomed. What you do now, is you apply for a credit card with rewards, and if you’re smart, you’ll get a card with airline rewards… See what I’m sayin’? You gotta fly home to see Mom and Dad once a year, right? Why not do it for free from your credit card? (I’m smiling really smugly right now, just to let you know) So you’re looking at cards right now, right? Good. Once you find the one you want, make sure there is no annual fee, that shit’s stupid, don’t pay to have the damn card. Now look at the interest rate. Whoa! Right? Pretty high? Double-digits I’m guessing? Don’t worry about it, the interest rate doesn’t matter, it could be 100% and you will never have to pay it.
Now you’re really confused, aren’t you? 🙂 I thought so.
If you pay the entire balance every month when the bill comes in, you don’t pay interest to the card company. They don’t want you to know that because if everyone did it that way, they wouldn’t make any money. But you know it. So you can stick it to the man and deny them your hard-earned money! Put everything on that card, just make sure you’re not spending more than you make, because the more you use that card, the more miles you’ll get, and the more likely that plane trip home on Holiday Standdown will be free, maybe even first class! 😉
4. Don’t finance anything!
On the subject of paying interest, here’s a fun fact: you will pay more for any item that is financed than said item is worth. Let me say that again: if you finance anything but a house, you will pay more (a lot of times significantly more) than that item is worth. Don’t finance a computer, save for it, don’t finance that awesome new car stereo and spinner rims, save for them. You can bleed yourself dry financing all these nice things, and it’s so much more beneficial just to save for a few months and pay cash (or, in your case, credit, because you now have the money to pay off that card balance when the bill comes in). Technology especially, is not something you want to buy on credit, because it’s pretty much obsolete within three months of buying, so why pay even more for that iPhone? Everything except a house depreciates in value (meaning the value goes down), a house will appreciate in value (usually), I know you’re all thinking “what about the housing market crash?” Well, yeah, that happens, but as a general rule, real estate will gain value, which brings me to my next point:
5. Save, save, save!
This one’s easy, trust me. Make a list of your expenses in a given month, all of them, anything you spend money on, list it (another perk of the credit card is it does this for you, if you put everything on the card, your statement is this list, you just have to separate it into categories) food, beer, clothes, gas, insurance, cable, whatever you bought, list it. Now compare that to your monthly take-home. Is it more? Less? About equal? Obviously, we’re shooting for less here, the lesser the better, but be realistic, if you’re thinking “oh, well I just won’t spend money anymore.” you’re an idiot. Don’t do that, just be reasonable. If you’re spending $200 a month on Starbucks, then yeah, maybe you should start making your own dang coffee, you know? So you track your spending for a few months, tweak things here and there, and arrive at a number. This number tells you your cost of living, and it shouldn’t be as much or more than you make, if it is, suck it up and cut more stuff out of the budget, you’re not a baller yet, and you never will be if you insist on acting like one when you don’t have the means. So you have this number, and you subtract it from your take-home, and you look at the difference. That is what you need to be putting in the bank every month, it should be about 20% of your paycheck (more is better, but that’s a baseline) so if you make $1,000 a month, you should be able to bank $200 of that, easy, and you still have four times that amount to spend, so if you’re thinking “that’s too much, I can’t do that,” stop it, this is how people like me own houses and cars and have no debt at 26.
6. Stay the $&#% out of trouble!
When I joined the Navy, my recruiter gave me the best advice I’d ever gotten from a military member: “do the bare minimum, and you will go incredibly far.” It totally sounds like a lazy man’s cop-out, right? But he’s right! You don’t have to be a hard-charger to do well, you just have to do three things: follow instructions, show up on time, and be in a good uniform. That’s it, that is literally all you have to do! I followed those rules (with two exceptions that led to two DRB’s and a Mast, but whatever, it was like a right-of-passage when I was in) and I went from E-1 to E-5 in 27 months. That’s not bad. That’s actually really good, and I was not a hard-charger. I made STG2 about six months after reporting to my first command, and was out of the barracks as soon as we returned from deployment the next year, and because of the money I saved on that deployment, I was able to put down first and last month’s rent, and buy all my furniture with my credit card, and pay off the balance, with plenty to spare to pad my bank account.
Speaking of bank account-padding, you want to have at least half of your yearly salary in the bank at all times, that way, if you suddenly lose your job, you have six months of income to live off of while you regroup and find another one. This really came in handy when I was PTS’d out, I didn’t have to depend so much on my boy, a fact which probably saved our relationship.
7. Renting, while necessary, is bad.
I realize that no one can go through life not renting at some point (unless you’re a trust-fund baby, and to you I say: “get a fucking job and contribute to society instead of leeching off of your parents’ legacy, you piece of hot garbage.”) but I strongly recommend that you do it for as little time as possible. I realize that in the military, it can be difficult to stay in one place and that sometimes renting is the only option, but check it out: if you spend $10-$20 thousand dollars a year on rent, it’s gone, you don’t get it back, but if you’re paying that money into a mortgage, it’s like a saving’s account. As the real estate market recovers and property values come back up, that’s like earning interest on an investment. And one extra payment a year (I think October 1st is a good date, don’t you, people who have SRB’s?) takes seven years of payments off of a 30-year fixed mortgage. So imagine you’ve got yourself a little lady (or fella, in my case) and you both can afford to pay the full mortgage every month, in addition to both making an extra payment once a year… You see where I’m going with this? The less time you spend paying off a loan like a mortgage, the less interest you have to pay, but since houses appreciate in value, if you’re smart about it, you can make that interest back when you sell it, so there’s no money lost, unlike trying to resell an old computer or tv, you will always lose in those ventures. So rent for as short a time as possible, and remember that even if you do get transferred, instead of selling, you could always rent the place out, and you might be able to generate a little extra income for yourself. 😉
8. Don’t run out and spend your tax return/SRB installation/windfall cash.
In April and October, everyone in the military always suddenly has something new and cool, because that’s when they get their tax returns and their bonuses. This is stupid. You should not be including this money into your budget, and instead, throw it into your savings (and yes, I consider a mortgage a savings, and that’s why I say to add that extra payment in during bonus time) and keep on with the budget. Now, if there’s something you really need to do (pay down credit card debt or a personal loan, your car needs tires) go ahead, but make sure it’s an investment and not just a purchase. Make sure you’re really going to benefit from whatever it is that you’re spending that money on (like your tires, if those are bald, you might die, so new ones would, in fact, be a good investment). My point is, just try to be smart with your money, don’t be frivolous, you’ll end up miserable. Money can buy happiness, if you manage it wisely, but if you don’t, you’re screwed.
Incidentally, I learned about 80% of this information from my mother, who has always been very successful with her money, 10% from the Internet (and only because my mother told me first, all this information is there), and another 10% from personal experience. If you start off smart with your money, life can be a lot easier, but if you’re already in a bind, it’s not hopeless, you can get back on track, it just takes commitment, and a lot of prioritizing.