Financial Advice For a New 2nd Lt / Ensign

maxpatty02 said:
I'm only in high school, but I am taking a personal finance class and it is based off the Dave Ramsey program called Financial Peace University. I'm pretty sure you can buy it on DVD and it tells you everything you need. His videos are very good and he says that 80% of millionaires are first generation rich and that you just need to be smart with your money. He also makes the point to never buy new cars, just buy a two or three year old used reliable car because a new car depreciates a lot over a short period of time. Also never use a credit card, a debit card can do everything a credit card can. He also emphasizes the point to purchase things in cash and to save money for things no matter how much it costs. Also he says you need to have an emergency fund of at least $500 because emergencies are bound to happen and you never know when.
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I actively ignore Ramsey. I would only tell someone to follow his advice if they are incapable of managing their finances and have no self control on spending.
 
He says to start with $500 at first to start it's one of the baby steps and as time goes on you add more to it. I know I'm only in high school but what he says he can back up with stats to prove what he says and he has been in both bad and good times financially and he has learned from his mistakes.
 
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Most Americans are incapable of spending money. Actually America's average savings rate is in the negatives and the lowest in the world, so most people are spending more money than they actually have.
 
I'm not trying to start an argument, I have no experience with finances and you do. Dave Ramsey seems to me like he knows what he is talking about.
 
hornetguy said:
I would only tell someone to follow his advice if they are incapable of managing their finances and have no self control on spending.
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You just described a majority of the country and the U.S. federal government with that statement.
 
maxpatty02 said:
I'm not trying to start an argument, I have no experience with finances and you do. Dave Ramsey seems to me like he knows what he is talking about.
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I am we'll aware or what Ramsey says. It is for people who cannot control their spending. Myself and many of my friends have enough self control and education on finance to make sound decisions. I treat my credit cards as debit cards and pay all off at the end of the month. As a result, I have accumulated well over a thousand dollars in points and perks, been able to have my CC agency settle merchant disputes that I would not be able to with a debit card, and my credit score is through the roof. If you choose not to use any credit or manage, your score will suffer requiring larger down payments and interest rates on necessary loans like a house or car. If we want to talk straight basics on spending, learning to manage credit cards appropriately and what goes into determining your credit score are wise for now and the future and builds a credit base that makes life better now and later - an opportunity few have like academy graduates.

If I was asked by someone for financial advice, here's what I would do. First, I would encourage them to obtain a credit card and learn how to use it like debit. This establishes the appropriate discipline without assuming much risk. If they can do that, I would teach them about credit scores, what they mean, what it gets you, and how to work towards a good one. Then I would explain the types of retirements accounts, the difference between them, and show them the number on what investing now means for the future and how interest works. I would explain dollar cost averaging, risk portfolio management, and the difference between available monetary assets such as bonds, mutual funds, index funds, stocks, money markets, etc.

If they are unable to manage credit card spending, can't manage their accounts actively, etc. then I would refer them to Ramsey. I assume if someone is asking, they care enough to learn. If they find themselves unable to learn it or unable to discipline themselves, then I advise going the route of Ramsey. He is a last resort to me for people who want to learn how to manage their finances and cannot.

I took the time to read and educate myself thoroughly on finances. My credit score is nearly perfect, my retirement is well funded, I maintain active market assets for future goals, pay my bills, and have some left over to have some fun. I taught a few friends what I learned and they are now in the same position.

When asked advice, that is my philosophy. I'd rather not assume the person is incapable.
 
hornetguy said:
I am we'll aware or what Ramsey says. It is for people who cannot control their spending. Myself and many of my friends have enough self control and education on finance to make sound decisions. I treat my credit cards as debit cards and pay all off at the end of the month. As a result, I have accumulated well over a thousand dollars in points and perks, been able to have my CC agency settle merchant disputes that I would not be able to with a debit card, and my credit score is through the roof. If you choose not to use any credit or manage, your score will suffer requiring larger down payments and interest rates on necessary loans like a house or car. If we want to talk straight basics on spending, learning to manage credit cards appropriately and what goes into determining your credit score are wise for now and the future and builds a credit base that makes life better now and later - an opportunity few have like academy graduates.

If I was asked by someone for financial advice, here's what I would do. First, I would encourage them to obtain a credit card and learn how to use it like debit. This establishes the appropriate discipline without assuming much risk. If they can do that, I would teach them about credit scores, what they mean, what it gets you, and how to work towards a good one. Then I would explain the types of retirements accounts, the difference between them, and show them the number on what investing now means for the future and how interest works. I would explain dollar cost averaging, risk portfolio management, and the difference between available monetary assets such as bonds, mutual funds, index funds, stocks, money markets, etc.

If they are unable to manage credit card spending, can't manage their accounts actively, etc. then I would refer them to Ramsey. I assume if someone is asking, they care enough to learn. If they find themselves unable to learn it or unable to discipline themselves, then I advise going the route of Ramsey. He is a last resort to me for people who want to learn how to manage their finances and cannot.

I took the time to read and educate myself thoroughly on finances. My credit score is nearly perfect, my retirement is well funded, I maintain active market assets for future goals, pay my bills, and have some left over to have some fun. I taught a few friends what I learned and they are now in the same position.

When asked advice, that is my philosophy. I'd rather not assume the person is incapable.
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Do you have the names of any books or websites that I can start reading? I do want to learn a lot more about finances and pretty much treat it like a second job.
 
^ The purple book. I'll go look for mine to find the title, but it's something like "Army financial responsibility"
 
SamAca10 said:
Do you have the names of any books or websites that I can start reading? I do want to learn a lot more about finances and pretty much treat it like a second job.
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Intelligent asset allocator by William Bernstein is good on portfolio management. The WSJ complete finance guidebook is good.
I'd recommend perusing Suze Orman's website as well.
 
I realize this thread is geard to those already commissioned, but for current SA students or parents - I would suggest setting up a Roth IRA now while you/they are in still in college. We set up a Roth IRA for our plebe this year. He took a financial class in H.S. and was interested in learning how to invest. It came down to picking one mutual fund, but it's not about the appreciation of the investment; it is about building a life time habit. These SA students earn 10K to 12K each year, are issued a W-2 and are eligible to fund a Roth IRA.

We happen to fund part of it right now for him, but we chose to have the money transfered to his checking account where it in turns gets electronically transfered again to his mutual fund company. I didn't want to just fund a retirement account directly for him and he never feel some of the pain of contributing or see the movement of the money. At age 19 he is learning about cost basis, electronic transfers, having a balance available if the timing is off a few days between what comes in and goes out, how contributions are based on tax return due date so you can still fund it in 2013 for 2012. By the time he commisions, he will be funding it intirely on his own and have a life time habit already built into his psche. Anyone else doing something similar?
 
maxpatty02 said:
I'm not trying to start an argument, I have no experience with finances and you do. Dave Ramsey seems to me like he knows what he is talking about.
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Max, You're right he isn't bad. However, most people who use him have money troubles. Yes, his own history has something to do with the attraction. Its all good, if Dave gets them on the right track.

When you get out of high school don't go into debt. Credit cards aren't 'forbidden'. Remember always pay them off. It will build your credit history. The $500 is for those swimming in debt. Remember, six months salary is an emergency fund, if you need it keep it in a separate account. Pay yourself first, a few on here talked about IRAs and Roths.

Good luck Max to being a future billionaire.
 
Wanted to bump this back up into the thread, as Bullet's advice is excellent and timely for those commissioning shortly. I am cutting and pasting it into a document to give my new ensign along with Capt MJ's advice.
 
For all those new officers: every time you get promoted or get a Time In Service pay raise, auto-invest half of the raise. By the time you hit 10yrs as an O-4, you'll be saving over $2100/month (that's just using base pay), and you'll never feel like you took a pay cut to do it.

For those in the blended retirement system, make sure you use TSP to get matching (hard to beat an instant 100% rate of return+market return). Also, look at Roth TSP.

...and don't spend too stupidly. You don't need a new Raptor as an LT.
 
Here are two sources I gave my about to graduate and commission daughter:
This is a great book for young military members by a retired Naval Officer about achieving financial independence in anticipation of military retirement. He spends his time now writing about financial independence for military members.
https://the-military-guide.com/start-here/
This is also a good site for learning about investing for new AD members: https://jlcollinsnh.com/

A lot of emphasis on keeping debt low, index funds, and auto investing.
 
unkown1961 said:
Here are two sources I gave my about to graduate and commission daughter:
This is a great book for young military members by a retired Naval Officer about achieving financial independence in anticipation of military retirement. He spends his time now writing about financial independence for military members.
https://the-military-guide.com/start-here/
This is also a good site for learning about investing for new AD members: https://jlcollinsnh.com/

A lot of emphasis on keeping debt low, index funds, and auto investing.
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The author is a former submariner but often posts at a SWO community social media site. His recommendations are
especially good for young adults who are not very financially literate and worth a read-thru for even the most
savvy.
 
I don't see anything in here about Robinhood or Dogecoin? This must be boomer advice...just kidding, good stuff in here. My Dad made me read The Wealthy Barber. My grandmother worked for Vanguard, so we are all about Index Funds and the pay as you go and you'll never owe.
 
When my son went in as a newly minted officer, they provided several speakers about the importance of investment for retirement and such. I have no idea if they go into detail as others have posted here, but he does max out his retirement contributions and he does invest in a personal Roth IRA. They really instilled the fact that small contributions every year will add up to a lot of money over time. He has mentioned other seminars he has been given about financial matters so it seems like the AF makes the effort to educate their people about money. How involved or how deep they go, no idea but they try. I also told my son to forget about the new officers' loan. Sure it is low interest but you still got to pay It off. I also bought him a brand new car when he was a sophomore in college and if he puts 5000 miles a year on it, it's a lot. So he has had no need to buy a car or use the new officer loan to buy a car. So from what i can tell he is doing well. Does he spend more money on crap than he should, definitely but as an officer in his mid 20s living with a roommate, he is saving a lot of money
 
I would recommend taking the cadet loan, so long as the interest rates remain low and you spend and invest wisely. It gives you the ability to fund your IRA for a couple years, buy a cheap but reliable car, furnish your first apartment (buy decent stuff that will last...my desk is still going strong after 10yrs), and have some emergency cash on hand. For that, you have to pay less than the rate of inflation in interest. It can help you start retirement savings and buy necessary items of sufficient quality to last a while. This is all while you have a secure job and very little chance of failing to be able to pay it back. If you stay in after 5yrs, you'll also get used to living without that loan amount, and be able to turn that portion of your income into savings/investment when the loan is paid.
 
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