Excellent advice capt MJ. Unfortunately, there are some that have no education in finances. They don't know how to save. They don't know how to budget. There's some that think they are suppose to, and be "entitled" to the luxuries and pleasures that their parents have; and they had by default at home. They don't realize that most people start their life off much poorer than they appear currently. It quite common come the C2C/C1C year when cadets get most of their money each month, that they start a spending spree. Many go out and buy new cars. They have their $400 a month car payments and $200 a month for car insurance. Then they are back to the same amount; or less; that they had when they were a C4C. It's not uncommon for my son to be able to "Borrow" a lot of people's cars at the academy if he wants to go downtown. Many leave them parked because they don't have the money to pay for gas.
Now; if you picked up that 5 year old used car; either in cash or for a small monthly payment; e.g. $250. And possibly "Borrow" the money either from a parent or as a signature loan instead of a "Car loan"; then you could get away with liability insurance instead of full coverage. But even so; full coverage on a $5000 used car is a lot less than full coverage on a $25,000 new car. Then you have $300+ a month to save, buy gas, ski trips, etc... Don't feel like you HAVE TO have a new car.
Also; when you graduate, you will have access to an almost 0% loan up to; I believe it's $35,000. Don't use this on a new car. It's tempting, but very bad advice. There's a lot of good things to spend $35,000 on. Especially at a very low interest rate. Remember; the loan; even if it was 0% is paid back in the first 5 years. That's $583 a month. There is a little interest, so just assume $600 a month for 5 years. now, considering you will be a 2Lt making quite a bit more than you are now, it's still money that you'll need to pay rent, buy furniture, maybe you're getting married, stereo, computer, and everything else that is part of life. now; I definitely think a $35,000 load at almost 0% interest, is a great deal. You should take advantage of it. If you use it to purchase a good USED car, furniture, set up an apartment, get married, etc... that would be worth the $600 a month. You're probably going to have to spend that anyway. Or; you could go to the farther extreme. If you took that $35,000 and put it into a secure bank CD; making 5%; if you let it sit there forever and FORGET ABOUT IT. (Until you're 62 years old); it will compound and be worth $257,544.61. You could basically have your entire retirement (Plus whatever you get from your career in the military or private company); and you'd be set for life. You'd almost not HAVE TO save monthly in more RISKY retirement investments like 401K and such. There are a lot of very safe investments. They don't pay a high interest; e.g. 5%; but if you have TIME on your hand, which you do when starting at 22 years old; then it can be great. But this is the extreme on what to use the money for. Unfortunately, there's some that will spend almost all of it on a new car that is depreciating the minute they drive off the lot. Or they spend it on other items that are disposable. remember; you have a lot of things you will NEED TO BUY when you start off your life after the academy. You WILL pay for these whether you like it or not. Why can signature loans or credit cards when they will give you money almost interest free. Making an instant retirement fund is just the extreme of what you could do.
Anyway; there's a lot of very financially smart cadets at the academy. Most will do well with their finances. But there are those who never learned basic financing. Best of luck.... Mike.....
