O-1 Budget in Flight School

[Draples]

@utswimmer37, your spreadsheet was exactly what I was hoping for. Thanks!

 

[BusyBee604]

I went through flight school as a Cadet... ~2 years from pre-flight to Wings/Commission @ $90.00 p/mo. plus $50.oo flight skins after PF. Managed to afford max liberty (mostly weekends), afforded a cheap ENSmobile. Didn't save any $$$, but never went broke, and gathered max honey all the way through.

Different world... long ago, in a galaxy far away!
BzB

 

[Renegade One]

I'm jealous…although I don't know why, other than the numbers:

My 1972 tax return (my first "full tax year" as an Ensign) shows that my "Gross Income" was $7200. I was unmarried…no dependents…no college loans…lived in the BOQs and pretty much subsisted most days out of the "Commissioned Officers' Mess (Closed)" in those BOQs…drove my "Riverside Red" 1963 Corvette convertible (California Edition) with 1965 side-pipes, which I purchased at "Don Barber's Clean Cars" (right over the bridge on the right when departing the Main Gate at NPA "Mainside").

Some things that never entered my mind at Pensacola, Glynco, or Miramar that year:

• taxes:
• rent (mortgage?):
• food:
• retirement:
• college loan payments:

You folks are WAAY smarter…probably for good reason…but, jealousy over numbers aside…not sure I'd trade if I could…

 

[Ralph]

Don't forget to max out your Roth Ira, the rest doesn't matter. Oh and don't get divorced, that hurts the finances the most.

 

[Spekkio]

And do it into TSP, their fees/surcharges can't be beat. although maxing it out for the year by putting 1500/mo into roth tsp might be a bit tough for a new Ens.

 

[Tycho_Brohe]

Don't forget to max out your Roth Ira, the rest doesn't matter.

I agree, sort of. Roth is definitely better than traditional starting out, but if you're not investing in individual stocks, the Roth TSP would be better than the Roth IRA. Its expense ratio is like 0.025% as opposed to 0.11% from something like Vanguard and even higher for most everything else. Doesn't seem like much, but it adds up.

Edit: Beat me to the punch

 

[FlyBoyd]

Here's something my wife I did my whole career.

For every raise you receive (promotion, yearly COLA, longevity salary increase, etc.) use 25% to better your QOL and 75% towards bills/investments.

I'm not going to get into what you should/shouldn't spend your money on here....we could argue that all day. But, you do need to live well within your means to keep you options open. Too many times I saw friends want to walk away after their winging commitment was up and they couldn't because they had too many toys/bills. They hadn't planned to have the option to leave so they stayed in. I'm not saying finances were the main decision factor, but it played a big role. At that time you will be making $100k+ and will need to have the ability to take a severe paycut in order to leave. By no means am I advocating walking away. Everyone's situation will be different. Setting yourself up to actually have the option is what I am preaching.

Live and spend conservatively and you can get rich in twenty years of active duty. The DoD doesn't really teach you how to do it. They only react after you mess it up. IMO, it is an unofficial retention tool. Don't let them (let you) box yourself into a corner.

 

[Ralph]

I agree, sort of. Roth is definitely better than traditional starting out, but if you're not investing in individual stocks, the Roth TSP would be better than the Roth IRA. Its expense ratio is like 0.025% as opposed to 0.11% from something like Vanguard and even higher for most everything else. Doesn't seem like much, but it adds up.

Edit: Beat me to the punch

The only downside of the TSP is that it takes a lot more to max it out compared to a traditional Roth Ira.

 

[Tycho_Brohe]

The only downside of the TSP is that it takes a lot more to max it out compared to a traditional Roth Ira.

Never heard it called a downside before. Sounds more like "You can contribute way more to a TSP than you can to an IRA." You don't necessarily need to max out either of them. If you save $5,500 for retirement this year, you can put it all in TSP, all in the IRA, or a mix of both. It's not like you get a bonus for maxing one of them out.

 

[Pags]

Don't forget to max out your Roth Ira, the rest doesn't matter. Oh and don't get divorced, that hurts the finances the most.

A Roth should be part of a good portfolio. Don't only do a Roth, make sure you have some other funds to allow you to use your investments for stuff like college, down payment, etc.

Also, don't buy a condo or a townhome.

 

[Spekkio]

I agree, sort of. Roth is definitely better than traditional starting out, but if you're not investing in individual stocks, the Roth TSP would be better than the Roth IRA. Its expense ratio is like 0.025% as opposed to 0.11% from something like Vanguard and even higher for most everything else. Doesn't seem like much, but it adds up.

Edit: Beat me to the punch

A caveat there too: You generally need a min of $10k to put into a fund to get vanguard's 0.1% rates. Otherwise, you end up about 0.15-0.2%.

If your plan is to invest in index funds, which it probably ought to be, then TSP can't be beat. The only reason to venture into Vanguard is to invest in specific stocks or managed mutual funds; the former requires a market knowledge and foresight that few officers have, simply because you don't have the time for it, and the latter often don't do better than index funds over the long term, especially after they take their cut.

 

[Ralph]

Never heard it called a downside before. Sounds more like "You can contribute way more to a TSP than you can to an IRA." You don't necessarily need to max out either of them. If you save $5,500 for retirement this year, you can put it all in TSP, all in the IRA, or a mix of both. It's not like you get a bonus for maxing one of them out.

Hmm, I was told it was best to max your Roth Ira and then use what's leftover invest in a TSP.

What's wrong with buying a condo?

 

[Spekkio]

That's old gouge from the days before TSP had a Roth option.

EDIT: If you're a single O-3/O-4, traditional TSP or IRA might be something you look into. It depends on where you think you'll be for tax liability at 60 years old.

 

[Tycho_Brohe]

A caveat there too: You generally need a min of $10k to put into a fund to get vanguard's 0.1% rates. Otherwise, you end up about 0.15-0.2%.

If your plan is to invest in index funds, which it probably ought to be, then TSP can't be beat. The only reason to venture into Vanguard is to invest in specific stocks or managed mutual funds; the former requires a market knowledge and foresight that few officers have, simply because you don't have the time for it, and the latter often don't do better than index funds over the long term, especially after they take their cut.

Yeah I defaulted to Vanguard because of the low-cost index funds, but actually the SPDR's are probably cheaper at that rate.

And Ralph, I remember Suze Orman saying that a lot, and for most people that's usually the case, but not for us, since the TSP and Roth TSP have such low expense ratios.

 

[Pags]

Hmm, I was told it was best to max your Roth Ira and then use what's leftover invest in a TSP.

What's wrong with buying a condo?

You'd be better off renting a nice apartment and saving to buy a real house that's more marketable. Also, when you end up PCSing you don't have to worry about selling or renting it.

I have a ton of friends who are still underwater on property they bought during their first fleet tour. Mine remains an albatross around my neck.