How To Build Wealth On A Military Paycheck

Hint; it's not about how much you earn, it's about how much you keep

Author’s Note: According to this handy chart, the average annual income for a 34-year-old male in the United States is $63,419. And this site lists the annual income for someone with a Master’s Degree as $78,000.

My average annual income, since joining the military twelve years ago, has worked out to $68,000 a year, or right in the middle between my age bracket and education bracket.

On the day I was commissioned as a Second Lieutenant in the United States Air Force, I had an approximate net worth of negative $7,500.

While I was very fortunate to be able to attend and graduate college without taking out student loans, I got suckered into taking one of the many “career starter” loans that are out there to entice dumb college kids like me with low interest rates and promises of “you’ll never have a loan this good again.” So, I used the money to buy my so-called LieutenantMobile. I had to show folks that I had “arrived” after all!

Unfortunately for me, as my first duty station was in Washington, DC, I quickly realized that keeping gas in my sweet, sweet ride (a Silverado 2500 pickup with a MASSIVE six-liter V8) would be a pretty sizeable problem. Seriously, the thing only got 10 mpg going downhill. Add to that, I quickly found out it wasn’t worth the price I’d paid for it, due to some hidden mechanical problems, and I was all the way up a creek financially.

So now I had a banknote for a truck I couldn’t afford, and I was living in one of the most expensive cities on the East Coast, driving 30 miles one way to work every day. Safe to say at this point I was bleeding money.

Besides my upside-down truck loan, I had a few thousand in savings, a Certificate of Deposit and exactly four shares of Walmart stock that represented my total investment portfolio at the time. Hence, my estimation of my next worth being about seven grand below zero.

Let me pause here to say the one thing I did manage to do right during my first couple of years in the service was immediately get a handle on exactly what and how the Thrift Savings Plan worked. That proved to be a lifesaver down the line, because as I’ve gone on in my career I talk to more and more people who never bothered to even look at their TSP account.

For those who don’t know, when you join the US military, you’re automatically enrolled in their 401(k) plan, the TSP. Problem is, you’re automatically enrolled in their government bond fund, which means your money is basically sitting in a savings account earning pennies. In order to actually get any benefit from TSP, you have to go and actually make changes to enroll in one of the other funds that function more like your standard mutual funds. Many of my fellow servicemembers either don’t know, or don’t care to know, how to do this, with the result that they are forfeiting literally millions of dollars in retirement funds.

Anyway, back to the action.

After about three years, I went on my first six-month deployment. Threat of bodily harm and ever-present danger aside, that six months in the desert worked wonders for my finances. I was able to completely pay off that pesky “career starter” loan, and since I didn’t have any expenses at all, other than the occasional Amazon purchase or six-pack of Monster from the little snack shack on the FOB, I was able to sock away almost $30k!

When I returned home to the states, I spent some of that money buying things like furniture and kitchen appliances because I had sold or thrown away literally all of that stuff before I left. But, crucially, I also did something that I am, to this day, thankful I did: I talked to a financial advisor about what to do with the remainder of my deployment cash.

Too many military folks, when they get back from overseas, immediately buy all the things they’ve been missing in their life for the past 6 months. I’ve seen new trucks, new ATVs, big-screen TVs, you name it, I’ve watched my buddies blow their whole deployment savings on those kind of things. To be fair, I did buy a new MacBook and a Taylor guitar, but I’ve seen guys come home and drop $35k without batting an eye at a car dealership ON THE WAY HOME FROM THE AIRPORT.

Seriously, my conversation with the financial advisor is what really set me on the path to being the hobbyist investor that I’ve become. Understanding that, if I put my money into this stock, or fund, it actually makes me more money, was a mind-blowing realization and it lit a fire under me to learn more.

So I started learning, first via the Internet and then through books, about the basics of investing, and the common mistakes people make when it comes to trying to get your money to work for you, rather than you working for your money. Here are just a few of the things I learned:

  • I learned that a well-timed call or text to a financial advisor is a sure-fire way to prevent emotional investing. I must’ve called my guy three or four times in the first year, all excited about some new thing I’d learned about, or heard about on Google Finance, and wanted to get in on. He calmly talked me out of it each time and reminded me of my goals and what I was risking by gambling with my investments (which is exactly the same thing as gambling with chips: emotional decision-making).

  • I learned some of the basic terminologies of investing, and what the various general types of investment vehicles (stocks, bonds, mutual funds, real estate, etc.) were good, and not so good, for.

  • I learned that overdoing the diversification is a gains killer. I learned it’s better to have $1000 in one mutual fund than to have $10 worth of 100 different things.

  • I learned the true power of compound interest. I’ll never forget the very first year when the growth in value of my TSP, as a result of interest and capital gains reinvestment, was actually greater than the money I’d deposited throughout the year.

Since that initial course correction that set me on the path to actually achieving some measure of financial security, some other things have happened along the way. I got married and started a family, and the blending of our two financial situations has resulted in some different scenarios than when I was a single guy.

For example, we didn’t sock away some $30k on my second deployment in 2016. We had expenses and, unlike the first time, when I put everything I owned into storage and had basically no bills for 9 months, this time, I still had a family to support back here at home.

But we’ve still been able to consistently and steadily build our family’s wealth, despite only earning an average of $67,920 annually for the past twelve years.

And that’s the really important part of this post. It’s to say that, despite what a lot of people think, achieving financial freedom doesn’t take a lot of expertise or intelligence. It takes persistence, consistency, and patience. The moral of this story is if I can do it, anybody can. The “trick”, if you could call it that, is to shift your focus from how much you make, to how much you keep. As anyone in the military will tell you, we aren’t getting rich off our paychecks. But that doesn’t mean we don’t have the ability to make smart financial decisions that enable us to do more than just break even, paycheck to paycheck.

I hate seeing men and women who’ve served their country end up broke and hopeless because no one ever showed them how to keep more of their paycheck. I don’t just hate seeing it with my fellow veterans, but with anybody who’s working hard for their money.

The fact is that a lot of financial advice in this country is outdated, and there are numerous ways for companies to keep us in debt, lining the pockets of salesmen, bankers, and internet marketers, and distracted from the hard choices that you will need to make to actually start building wealth. Make no mistake, achieving financial freedom is a series of choices that a lot of businesses don’t want you to make. Because if you do, their revenue will decline.

In fact, that’s why so many industry pros make such a stink about the hard work you will have to do to build wealth. They paint dire pictures of scrimping and saving for decades, never eating a meal outside your home, or owning a car with less than 150,000 miles on it, so that finally, when you’re in your sixties, you can see that beautiful second comma in your bank statement.

Enough is enough!

Sure, you could live your life like that, and you’d probably have way more money in the bank right now than I do after twelve years, but YOU’D BE MISERABLE. I’m not saying you need to go out and buy some crazy expensive car, or drop stacks in Vegas to prove you’re living your best life, but the reality is that there’s more to achieving true financial freedom than the number of commas in your bank account.

Financial freedom is within your grasp, but it has to start with answering the question of what “financial freedom” means to you. It’s not a one size fits all answer. I know people who are perfectly happy to live in a small house with one car on $30,000 a year, and they are financially free. Because that $30,000 a year comes from investment income, so they don’t have to work. They can do what they want.

Every one of us has a chance to achieve our version of financial freedom.

I’m not here to tell you it will be easy, but I am here to tell you that it’s probably easier than you think it will be. All it takes, and all I’ve really done in terms of “investing knowledge” or “financial secrets” is to be patient, be consistent, and keep learning new things about money and how it works.

If you’re willing to do those three things, a life of financial freedom is well within your grasp.


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