HOW TO SAVE $50,000 IN YOUR FIRST ENLISTMENT
I always laugh when military members claim they don’t get paid that much. Relatively speaking, it isn’t too shabby. It probably would’ve been much more difficult for me to save well over $50,000 in liquid assets by the end of my first enlistment in the Marine Corps at the age of 22. If I’m being honest, that number is pretty weak compared to what it could have been. First, let’s figure out how much money you actually make. Then, we can figure out where to put it.
HOW MUCH DO YOU MAKE IN YOUR FIRST ENLISTMENT
Similar to most jobs, the higher rank you are in the military, the more money you get paid. Individual career paths can vary quite drastically, but let’s assume it took you longer than average to get promoted (faster promotions = more money). Your first enlistment may conservatively look like this:
E-1 (6 Months) = $9,875.40
E-2 (18 Months) = $34,965.00
E-3 (24 Months) = $53,686.8
Total pay received in the first four years: $98,527.2
This is your basic pay. Your bare minimum take-home money (assuming you stay out of trouble). That doesn’t take into account all of the additional benefits you receive in the military that we’ll talk about in a little bit. So, if we take $50,000 out of the equation immediately, that leaves us with $48,000 for four years (I like round numbers).
That gives us $12,000 a year. That makes it pretty simple, right? $1,000 a month to spend!
Now, I know what you’re thinking, and NO, I’m not going to tell you to live under a rock for four years. I am a firm believer in simply being conscious of your decisions.
Simply understanding the implications of your spending will go a long way. Before every purchase you make, ask yourself two questions – 1.) Can I purchase a product for less money that will provide me comparable results? 2.) Is the amount of deceleration toward my financial goals outweighed by the value that is provided by this purchase?
If the answers are “No” and “Yes” then buy away! If not, you may want to reevaluate. This, along with the app “Mint” which provides a budget, net worth, monthly cash flow, and credit score tracker, is a hybrid that keeps you aware of your spending and shows you exactly where your money is going. If your money seems to disappear after a couple of days, this is probably the route you want to take.
More aggressive approaches like inputting everything you spend into an excel document might be necessary if you struggle with the previously stated spending boundaries. Now that you know the basics of how to decide on making purchases, let’s talk about what most of the necessary purchases of a first-term Marine are.
WHAT TO SPEND YOUR MONEY ON
I shouldn’t have to say it, but yes, obviously specific situations are different. Some people have college debt, kids, spouses, etc. However, the majority of first-term Marines can have an extremely small number of expenses. Let’s assume all of your training and schooling is roughly six months (this can differ drastically depending on your job). After that, you can finally start experiencing the tiniest hint of what adulthood is supposed to feel like. This is where the majority go wrong.
They buy the brand new mustang (coupled with ridiculously high insurance), every videogame to hit the market, and straight up stupid stuff that drains their bank account. From my experience, the only necessity you truly need is a phone. Maximum, that should be $100 a month. However, I understand that most people will want the freedom to drive, so, let me give you my unsolicited opinion.
BUYING A CAR
If you just have to have a car, (for the record, I bought one the moment I could) buy a certified pre-owned vehicle. When you’re first on your own, the last thing most people want to be worrying about is unforeseen expenses for a beat-up old car. A certified pre-owned vehicle is a happy medium that I’ve found. It is pretty much brand new (mine had 15,000 miles) without the “brand new” price tag. Additionally, you will have a warranty on it for quite some time.
I would be remised not to mention the lower insurance premium you will get with a more conservative car. Especially in the beginning, all it should be for is getting you from point A to point B. I repeat — A VEHICLE IS NOT A STATUS SYMBOL. Just buy a car with good gas mileage, and commit to driving it into the ground. I’ve now had my car for almost
six years, it still runs great, and has plenty more years to go. It’s completely paid off, yet every month I save that money like I had a car payment (you can thank my Mom and Dad for that tip) There’s an incredibly interesting phenomenon called Hedonic adaptation, which I won’t go into great detail on right now, that shows you will revert to a baseline level of happiness after about two weeks of something new. What does this mean? Put candidly, a Ferrari, and a Prius drive on the same streets. Aside from a vehicle, almost all other essentials are provided via the military.
If you take the above advice, I strongly suggest you finance the vehicle. For starters, most first-termers probably don’t have a huge nest egg to just go and buy a car outright. This means that taking a loan out is probably one of the few options you have. Am I saying that you should take out a loan at 25% interest? HELL NO! I was 18 years old, had credit for a few months, and locked in a 2.9% 72-month loan. Just shop around, talk to others, and I promise you’ll find something similar.
Looking back, I definitely splurged a little more on the car than I probably should have, but my monthly payment was $251.01. I decided to pay an extra $50 every month and that actually saved me quite a bit in interest! Next, Insurance can vary depending on where you live, but will probably be somewhere between $100-$150 a month.
Pro tip: if you keep your car on base, you can say it is “garage-kept” and it will lower your monthly rate by a few dollars.
The phone bill, along with a conservative auto payment should be no more than $500 a month. Remember we came out to roughly $1000 a month to spend? Well, that’s about $500 a month in discretionary funds left over.
I understand that most people want to have a life. Driving around a lot with friends? Budget for gas money. Plan to go home for the holidays? Save a few bucks every month for it. Just understand that every purchase you make slows down your progress toward a financially abundant future. I am by no means telling you to live like a hermit, but I promise for most things you want to do that cost money, there are equally fun things to do that don’t (or at least cost a lot less). But wait… I have kids! I have a wife! I don’t live in the Barracks!
FREE STUFF? YES PLEASE!
Like I mentioned, situations may differ. However, most of these situations are compensated for by the military. I’d just like to mention some of the additional benefits that are provided:
- Gym ($10-$50/Month)
- Library (Many resources available)
- 7 Habits of Highly Effective People Course ($2000-$3000)
- Bars/Recreation Centers (reduced drink and food prices, free games)
- Tuition Assistance ($4,500/year)
- Barracks (base provided housing for single Marines E-5 and below)
- Basic Allowance for Housing (if you live off base) (Area dependent)
- VA loan (obnoxious amount of benefits)
- Hazard pay (varies)
- Per Diem (I probably made upward of $10,000 EXTRA for traveling with the band my first enlistment)
- Basic Allowance for Substance (food allowance) (~$300/month)
- Chow hall (all meals provided)
- Uniform Allowance (~$600/year)
As you can see, there is so much additional money to go around, that if you’re intelligent with your finances, you can blow past the $50,000 mark. I’m not even going to touch TSP, VA loan house-hacking, or the plethora of other options you have to increase your net worth.
PUTTING IT ALL TOGETHER
When you take into account the additional benefits of the military, you make a pretty good penny. There are so many ways to reduce your spending, which will inherently skyrocket your savings rate. Don’t miss out on life, but don’t spend frivolously in the beginning, so you miss out on life for the subsequent years.
Conscious decisions that are based on a long-term financial perspective should be all you need. Happy spending, and even happier saving toward your first $50,000!
ABOUT THE AUTHOR – Brian Koons
My name is Brian Koons. I’m currently a Marine Corps Drill Instructor in San Diego, CA. I am into fitness, real estate, self-development, and travel. Slowly, but surely, making my mark in this world. Instagram – @Koonsinator