For a large portion of our military force the idea of financial readiness plays second-fiddle to tactical, physical and mental readiness. While this is not necessarily a bad thing it is something that we need to work on as an organization. This is due to the fact that being financially unready can create secondary and tertiary effects that can delude the mission at hand. When someone spends most of their day worrying about the next paycheck they are less likely to be mission ready. Over the course of this article I will attempt to give some ideas of how to be financially prepared and set yourself up for life both in and out of uniform. These practices range from creating a budget to preparing for retirement.
In order to create your personal roadmap to financial freedom you must know where you are and where you want to be. At its core is the first idea of creating a budget. For many this is the hardest part because it forces you to take a serious look at where you currently stand financially. In some cases you may find that you are doing things right and in others you may be confronted with some hard truths. There are many tools on the internet to assist in creating a budget or you can ask a financial advisor who can work with you. Some advisors will build a budget for free while others will require payment for the service so make sure you ask before they start.
As a part of your budget you will want to ensure a 6-month minimum nest egg for emergencies. That nest egg should be your priority if you don’t have one. Another extremely important portion of your budget is ensuring that you give a portion of your paycheck to a “personal fund.” This fund will allow you to take vacations, buy niceties and pay for hobbies. If you don’t do this then you will have a harder time keeping to the budget over the long term.
Once you have created a budget that will give you an idea of where you currently stand. So the next step is determining where you want to be. The easiest place to start is to look at what your dream for retirement looks like. However, when it comes to this stage create at least three retirement plans. One for the dream, one for the acceptable and one for the absolute requirements. It is important that you do this so that when you get to the next step you have flexibility and a realistic outlook. As a part of this you will need to figure out exactly how much each of those plans will cost based on estimated retirement age, expected length of retirement, where you plan on retiring and what you plan on doing.
Now that we have established the two anchors to our finances we can create the vessel to get us there. If you did your budget correctly then you will have a much easier time during this phase. At the start of this phase you will set goals for the years between your current age and expected retirement age. I typically suggest using 1, 3, 5 and then every 5 years afterword’s. The idea is to create a savings and investment plan that will get you to your dream retirement. I highly recommend working with a financial advisor for this even if you consider yourself financially savvy. That advisor will help keep emotion out of it and ground your expectations in reality. They will also provide a profile of your financial personality that will guide your investments into the future.
By doing all of these steps you will have a complete picture of your financial world. For some of you this picture may be less than impressive. Do not let this get you down because now that you have an accurate picture you can begin to “right the ship” so to speak. By following the plan that you create you will not only improve the quality of your life but you will actively be working towards the life that you want.
For those of you who created your plan and were able to realistically and honestly say that you are ahead of your requirements do not let up. If you lose sight of your end goal then you may spend money unnecessarily and end up behind. Being behind is not where you want to be. The closer you get to retirement the harder it will be to adjust your investments without taking risks that should be avoidable. You may also want to set a stretch goal to ensure that you keep on track.
As each one of you follows these simple steps at some point you will see how much can be accomplished that you may have pushed off years ago. The idea is that with a budget and roadmap to the future you will no longer have to wonder if you are doing the right thing. You will know that you are pursuing your aspirations in life and that in itself will provide the freedom each of you desires. I will leave you with this last piece of advice; financial advisors are not the enemy and working with one will make life a lot easier on the financial side.
If you want to talk specifics for any of these things RE Factor Tactical can provide my contact information.
About the Author
Collin is a 13 year veteran of the US Army, where he has served in various units and holds MOS’s in Armor and Logistics. He has deployed to the Horn of Africa as a Mil-2-Mil trainer in Djibouti and Rwanda as well as a deployment to Afghanistan working directly with the Mongolian Expeditionary Task Force. Collin has also trained with nearly a dozen other nationalities both stateside and deployed. Stateside he works as a Budget Analyst and was a Financial Advisor for several years. Any opinions expressed here are solely those of the author and do not necessarily reflect the opinions of the US Army or the US Government.