O-1 Budget in Flight School

[Flash]

....Also, there's an O-4 who gave us the financial brief in P'cola, and then offered a sort of social hour at the Fish House where we could chat with him and his financial advisor (open bar, too), so if that's still running, it's a no-brainer. His advisor is with First Command Financial Services, and he was telling us that they have a bunch of benefits for active duty military.

Whoa, Red Light!! He facilitated a 'soft sell' that at the very least violated the spirit of the law and regulations if not the letter of them when he used his official position to help out his 'advisor', if that is all he was. The O-4 should know better, it's a no brainer.

In my own experience the First Command guys were also the worst offenders when it came to using their military connections to sell their products to military personnel. I knew nothing of finance when I was in A-Pool and I still walked away from my one meeting with a First Command rep, a retired USAF Colonel who "knew what it meant to serve and can now help serve me", feeling like I had just had an encounter with one of the used car salesmen charging 29% interest right out the front gate of NAS P'cola. And I am not the only one who thought they have been shady at times.

You are better just investing in TSP or an indexed Roth IRA with low fees.

 

[Pags]

Man, I wish I was smart enough to figure all this crap out. I just called USAA, asked them to transfer the 401(k) from my old job into Roth IRA (with some set aside in annuity) and that's that. No TSP or anything, just manual contributions here and there. And I don't know what half the words I just typed mean.

It may sound goofy, but a Dummies book is a good place to start. Past that, I recommend developing a relationship with a financial advisor you can sit down and chat with. It's that guys job to make your money make money. And I'd second flash's advice to stay away from First Command; sounds like our experiences were very similar.

 

[Recovering LSO]

Hard thing to put your head around now, trust me it took me marrying a VERY smart woman to figure it out, but start saving for your kid's college as soon as you can. Even if you don't have kids. Even if you're not married. Get a little bit each month going to a 529 (USAA has a good one). My wife and I were married for six years before we had a kid and are now done saving for college. With 18 (16 now) years of growth (conservative 5% growth prediction) the lad will have approx $200k for college. Some caveats: wife and I were both active duty LTs for most of that time, we also have post 9/11 GI Bill available (I will transfer mine, she will use hers). It certainly helped to have two active duty JO incomes, and that is not the norm - but most guys will end up with a spouse who is working in some capacity so you can find ways to make it work.

If you never have children you can use the money for your own education. If you get married and don't have kids, you can use the money for your spouse's education.

I don't recommend putting ALL of your investable money into a 529. You have to save for yourself as well, but compounding interest is a beautiful thing only if you take advantage of it. Youth is your friend in that equation. Remember, they don't make retirement scholarships, so get that college fund started early. Get it to a point where you can stop contributions, take advantage of time and growth, and get back to maxing out your own retirement accounts.

And stay WELL clear of First Command!

 

[Tycho_Brohe]

Whoa, Red Light!! He facilitated a 'soft sell' that at the very least violated the spirit of the law and regulations if not the letter of them when he used his official position to help out his 'advisor', if that is all he was. The O-4 should know better, it's a no brainer.

In my own experience the First Command guys were also the worst offenders when it came to using their military connections to sell their products to military personnel. I knew nothing of finance when I was in A-Pool and I still walked away from my one meeting with a First Command rep, a retired USAF Colonel who "knew what it meant to serve and can now help serve me", feeling like I had just had an encounter with one of the used car salesmen charging 29% interest right out the front gate of NAS P'cola. And I am not the only one who thought they have been shady at times.

You are better just investing in TSP or an indexed Roth IRA with low fees.

Ouch, in that case I'm glad I passed on them. He really didn't seem all that harmful, but he also didn't offer me much more than I could already get from USAA. The O-4 in question was getting out very soon, so he probably didn't really care, but when you put it like that, it does sound fairly shady in hindsight. And agree 100% on passive investing, low fees, etc.

AYB, Stocks for the Long Run is a good book to read if you want to learn more about this investing for retirement stuff, as well as a For Dummies or Complete Idiot's Guide like Pags said.

 

[xj220]

Man, I wish I was smart enough to figure all this crap out. I just called USAA, asked them to transfer the 401(k) from my old job into Roth IRA (with some set aside in annuity) and that's that. No TSP or anything, just manual contributions here and there. And I don't know what half the words I just typed mean.

You might be able to find classes nearby to help explain some of these things. It's very overwhelming and even with help from my parents it's still very difficult to catch on unless you want to spend a lot of time learning all the little details. Like I said, I use Schwab and they've been great and they can help you get started. I got to the point where I just have them manage my accounts now.

 

[Spekkio]

Man, I wish I was smart enough to figure all this crap out. I just called USAA, asked them to transfer the 401(k) from my old job into Roth IRA (with some set aside in annuity) and that's that. No TSP or anything, just manual contributions here and there. And I don't know what half the words I just typed mean.

A good financial advisor can certainly help you, but there are a lot of traps out there, too. You can educate yourself via the internet on the basics in a few hours, followed by some books if you want to go past that. As a single O-1/O-2, all roads are going to point to you paying off whatever debt you have, investing 10-15% of your income into an IRA with an aggressive growth strategy, and building a liquid savings base. Once you have your high interest debt paid off and an emergency fund and your IRA is in good shape, you can consider delving into some stocks.

If you go into your USAA IRA, you can bring up the screen and google the terms you see to get a handle on the basics.

Where a good financial advisor comes in is they can tell you stuff like when it's a good time to move money to more securities and bonds or more stocks, or whether it's a good time to move some money from tech industry stocks to medical stocks. But there are those who will say that the gain of doing this is so marginal and so many people take a loss vice just taking a cost-spread approach of investing into index funds each month that it's almost not worth the effort, at least not for IRAs.

Also, USAA is a great bank with top-notch customer service, but their fund fees are generally not competitive (0.8-1.0% vs. 0.2-0.1% for Vanguard, for example). Also, other sites offer access to more in-depth financial advice than USAA, although USAA will also allow you to talk to one of their financial advisors for free. I would recommend shopping around for a better site to put your funds in.

 

[smittyrunr]

Investment-wise, definitely give USAA a call. And do it again before and after you deploy each time. Last deployment they suggested a short term investment for the extra pays on deployment (this was a boat, not P-3 per diem world), which I never would have done otherwise and it made for a nice little vacation fund post-deployment. Sure, I could have set aside that money on my own in an existing account, but this was a nice way to do it.
I'm very happy with my First Command guy now. He's cleaned up the messes from our previous guys. The company has gotten a lot better since early-mids 2000s- it's free to sit down with one of their advisors in person. Yup, they want to sell you their stuff, but an initial one-on-one talk with one of them will open your eyes to a lot of options out there you may or may not want to think about yet.
My point is, once you figure out the monthly budget, have some goals for short and long term investing and sit down with a professional and see how they would get you there.

2 more months until we return to dual O-4 pay Oh, and already funding the 529 for the 7-month old.

 

[ssnspoon]

This is exactly what I'm doing right now. Also, there's an O-4 who gave us the financial brief in P'cola, and then offered a sort of social hour at the Fish House where we could chat with him and his financial advisor (open bar, too), so if that's still running, it's a no-brainer. His advisor is with First Command Financial Services, and he was telling us that they have a bunch of benefits for active duty military.


True, but Judd Apatow spelled it Brohe

NICE reference, didn't even catch it!!!

 

[villanelle]

This is exactly what I'm doing right now. Also, there's an O-4 who gave us the financial brief in P'cola, and then offered a sort of social hour at the Fish House where we could chat with him and his financial advisor (open bar, too), so if that's still running, it's a no-brainer. His advisor is with First Command Financial Services, and he was telling us that they have a bunch of benefits for active duty military.


True, but Judd Apatow spelled it Brohe

Don't invest with First Command. I say this as someone who not only did, but who worked there. They serve a purpose and without them, Husband and I probably wouldn't have started investing as much as we did when we did. But all of their funds are front loaded (assuming that hasn't changed since I worked there) and paying a front load is just stupid. You are a thousand times better off just setting up in investment account and tossing your money in a broad index fund. You can do this via USAA and pay nothing to purchase their funds (which have decent expense %s) or about a dozen other ways. Don't go to First Command. It's not that they are bad people or shysters, but using a commission-based financial adviser is always a bad idea.

 

[utswimmer37]

IRA's are great, many times you have to be somewhat educated to get the most out of them. Mutual funds can simplify IRA land but again you have to understand how different mutual funds react to changes in the market, i.e. when to saturate your portfolio with stocks and when to go heavy on bonds. I'll probably stick with vanguard and fidelity for my IRA's because it's so easy and cheap to make transactions. Also, go dump as much as you can into a Roth if you are young so when the day comes for you to start drawing on your investments you dont have a heavy tax burden like with traditional IRA's. Less money in your pocket now but you don't go through the capital gains tax, which only God knows what the tax burden rate will be 40 years from now.

For all you know there may be a person flying next to you who was an accounting/tax and finance professional before they figured out the real fun was in the Navy, so sometimes the best place to look/ask is right in front of you. Excel can be your friend too just so you have a projection tool under your fingertips and dont have to rely solely one what someone else says. I'd always be willing to build some budgeting worksheets/tools for those I serve with so maybe someone else may be willing to do the same for you...

 

[Gatordev]

Also, go dump as much as you can into a Roth if you are young so when the day comes for you to start drawing on your investments you dont have a heavy tax burden like with traditional IRA's. Less money in your pocket now but you don't go through the capital gains tax, which only God knows what the tax burden rate will be 40 years from now

Just a word of warning that I wasn't aware of but discovered this tax year... Depending on how much of a sugar-momma (or daddy) your spouse is, it's possible to exceed the allowed gross income to contribute to a Roth. While it's not hard to fix after the fact, it requires additional paperwork that won't let you e-File (at least according to H&R Block).

It would have been just easier to contribute to a traditional IRA from the start.

 

[utswimmer37]

Just a word of warning that I wasn't aware of but discovered this tax year... Depending on how much of a sugar-momma (or daddy) your spouse is, it's possible to exceed the allowed gross income to contribute to a Roth. While it's not hard to fix after the fact, it requires additional paperwork that won't let you e-File (at least according to H&R Block).

It would have been just easier to contribute to a traditional IRA from the start.

True and plus contributing the max amount of 5,500 to traditional IRA qualifies as a deduction from taxable income. This is why it is wise to have a traditional for the tax deductible advantages now and a Roth for the capital gain advantage down the road. Save save save...358 bucks a month, which as an officer starting out should be about 12% of your gross income. And see if you can't put away at least 10% after that into the Roth. This means about 4300 to traditional and 1200 to Roth. Should still be at about 2 800 - 3000 a month take home, which is all cake if you don't piss away your income with something that depreciates like a car/truck payment. Save for 5 years and start investing extra cash into cheap rental properties, just my .02

 

[Fallonflyr]

If you O-1's are not driving a new Corvette, Camaro, pickup truck or whatever, keeping the local economy vibrant thru your bar tabs, and eating ramon noodles and peanut butter sandwiches the last 3-4 days before your next pay check, you are doing it wrong.

 

[utswimmer37]

when does the clock start on years of service in regards to the pay chart. I understand I have an 8 year commitment from winging but does the two years it takes to get there count for anything toward years of service? i.e.) does the 2 years of flight school plus 8 years = 10 years of service/halfway to retirement requirement? I tried searching and couldn't come up with an answer...also, does OCS count?

 

[Tycho_Brohe]

when does the clock start on years of service in regards to the pay chart. I understand I have an 8 year commitment from winging but does the two years it takes to get there count for anything toward years of service? i.e.) does the 2 years of flight school plus 8 years = 10 years of service/halfway to retirement requirement? I tried searching and couldn't come up with an answer...also, does OCS count?

If you're non-prior, I think the clock starts at commissioning for retirement purposes, since that's when you actually start active duty service (you're USNR while at OCS). I may be wrong, it may start at DIEMS, which is a bit earlier (mine's Feb 27, and I started OCS March 10, so I guess it's when you sign your papers and swear in). But yeah, time spent at flight school counts towards retirement.