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Wealth Virtues Journal: February 27, 2016

Helpful Advice for Military Members and Veterans

Filed under: Wealth Planning — Tags: , , , — James Ward @ 5:02 pm
© 2009 Poor Richard Web Press, LLC

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When I wrote Wealth Virtues, I did so from the perspective of one who saved from the day I started my first real job after college. I did so throughout my military service, and have amassed a 7-figure retirement nest egg (and still growing) due in no small part to applying military discipline and training into the way I saved and invested.

I hear too many stories of folks leaving military service after 5, 10 or even a full 20 years, and having not saved much, even though all active duty personnel have access to the U.S. Government’s Thrift Savings Plan (TSP).  I took advantage of this during the period of my government employment and I saved quite a large sum which I was able to rollover to a 401K when I left government service.

While almost all military personnel are dedicated, disciplined, and look to seek satisfaction in honorable duty, many forget to use that same discipline and dedication to thinking more long-term. It is hard for a young 20 year old E-5 to think about what life will be like when he or she is in their 50’s, but once you are there, you will wonder where the time went and why you did not take the time to save.  With that in mind, here is an excerpt from Wealth Virtues to which military folks can relate.

One method you may want to consider in your planning is to start with the framework of a military operation order. Combat forces utilize it to plan small tactical missions. It is also an excellent tool to use when formulating your financial “plan of attack.” The separate paragraphs of our military “Op Order” are Situation, Mission, Execution, Support, and Communications.

Situation looks at both “enemy” and “friendly” forces. In this case, we call this “debt” and “income.” Your plan needs to start with all of all your sources of gross income. It needs to include all of your deductions, especially any contributions you make to a retirement account. Your debt list needs to include all outstanding balances on your debts as well as the monthly payments you are making.

A simple situation statement along with the list of your debt and income lists can be quite helpful. For example:

Situation – “We need to be able to maximize our 401K and IRA contributions within two years to ensure we have at least $2 million in savings at our planned retirement age of 65.

Income: As a couple, we earn $7500 per month in gross salary. From that, net income, contributions and taxes are as follows:
Net income: $4790
401K Contribution: $1375
Federal Taxes: $750
State Taxes: $300
FICA: $150
Medicare: $100
Insurance $35

Debt: We have $10,000 in credit card debt and two car loans totaling $22,000 that we need to eliminate within 2 years.

Reoccurring Payments: List all of your other monthly purchases and financial obligations here. They will include utilities, food, clothing, monthly/yearly fees, monthly/yearly payments, subscriptions, and any costs for services you receive.

The better you are able to breakdown your situation, the more reliable and realistic your plan will become.

Mission looks at the ‘Who’, ‘What’, ‘Where’, ‘When’, and (most importantly) ‘Why’ portion of your plan.

  • ‘Who’ – refers to yourself, your family, or your business.
  • ‘What’ – can be one or many goals such as “to eliminate credit card debt,” “to increase my 401K contributions,” “to start and maintain a college education fund,” “to have $2 million dollars saved for retirement,” etc.
  • ‘Where’ – is obvious for the military – it is the area in which actions will take place. For your financial planning, this should be where you currently are in life. The plan you develop is dependent on how long you want to work, the age you are now, your current savings, your income, and your debt. Your “Where” should also include where you want to end up financially.
  • ‘When’ – helps you to establish timelines and schedules. The questions to ask yourself to help determine timelines should start with your desired end-state and work backwards. Your first question should reflect your goal. “When can I reasonably have more money coming in than going out?” is an example question you could ask yourself. After that, subsequent questions should pertain to the sub-goals to help you reach your main goal. “How soon can I pay off all my credit cards and have no revolving debt?” is one question that you should answer before trying to answer the main question.
  • ‘Why’ – is the most significant question to ask yourself, and reflects your ultimate goals. The answers to ‘Why’ can be as varied as, “I want to retire at age 55,” “I want to pay for my children’s college education,” I want to be able to afford real estate to rent and make additional income,” and so on. Without knowing the ‘Why’, everything else is meaningless.

Execution is your ‘How’ part of the planning. Based upon your mission data, this part of your planning describes what you will do to answer the “who, what, where, when, and why” of your mission. “Execution” is the means by which you will carry out the Action element of the Cycle of Positive Wealth.

Support encompasses the tools and resources you use to accomplish your goals. This and other books that help you to change the way you think about income and wealth is a start. The checklist included in Appendix II is another. The section on the Investing element of the Cycle of Positive Wealth includes information on online support tools that help you make better investment decisions.

Communication is, in essence, the ability to send and receive information. More importantly, the receiver needs to understand the information. The support resources we mentioned previously all require the use of clear communications.

At a personal level, you need to be realistic with yourself about your financial circumstances, and you need to be a willing recipient of sound advice, as hard as it may be to hear it.

The book goes into a bit more details and personal stories related to this “Op Order” way of thinking about planning for your wealth creation plan, and whether you served in the military, or pursued a different path in life, you still need a plan. Sometimes the methods created and actively used by the men and women of the U.S. Armed Forces are both simple and effective.

About the Author

bafJames Ward is wealthy. Not “John D. Rockefeller wealthy”, but rather has more money flowing in than flowing out. He is or has been a successful computer scientist, Coast Guardsman, Army Officer, analyst, musician, graphic designer, skier, manager for a defense contractor, business owner, and a writer. He is also a successful investor, but lives well within his means. Although his savings and investments continue to grow from the continual practice of Dr. Benjamin Franklin’s Thirteen Virtues while following the Cycle of Positive Wealth, he realizes that his only true and most valuable treasure is his family.

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