Hello I am enlisting as a Private First Class and go to basic September 17th my contract is for 5 years. I’m 21 years old and although I’m a smart guy I’m extremely financially illiterate. I have a credit score of 0, I’ve never messed with credit at all I don’t really know what it is. I hear people talk about TSP and it sounds good but again I’ve never heard of it and don’t know how it works or how to use it. I’m making this post mainly to ask for advice, as I plan on saving all my money I make for the military that’s what I’ve always done with my money just save it and let it stack. I live with my parents and already own a car that’s paid off so I don’t have any major expenses and I’m mainly wondering in 5 year timeline, again, enlisted as a PFC so a bit more money to start, could I realistically save my way to six figures in my account. Thanks.
How much money can I save in a 5 year contract (mos: 15q)
byu/Various-Document-456 inMilitaryFinance
Posted by Various-Document-456
4 Comments
You’re starting off in a much better spot than most!
My suggestion is to follow the prime directive on the personal finance sub
https://www.reddit.com/r/personalfinance/s/h2WMhABwh0
Click on the view flowchart and follow that. The only difference is that your 401k is the TSP and you won’t be eligible for a health savings account (HSA)
If you get the time, I would read “Simple Path to Wealth” by JL Collins. It’s a short read you could do in a couple days and it helps explain stocks, index funds, and saving
You’re going to do great man!
Set a budget, right now you know the amount of money you can get year.
In a year you receive 24 paychecks and you know how much each one is. Set aside how much you will spend monthly.
First off get a High Yield Savings account that has at least 4% interest. It’s basically a savings account that accrues more interest than normal ones. I use American Express, but I get paid through Navy Fed and transfer after.
TSP is a retirement account and you can go into mypay and set the percentage. TSP Roth is an account where the money you put in gets taxed as it goes in. So when you’re old and have a lot of money it’s not taxed when you pull it out.
So most people suggest 5 percent to put in because after two years in the military you will get a 5 percent match. I suggest putting as much of a percentage that you’re comfortable with. “Minimum put 5-10%”
Make sure you have access to your TSP account do your own research on funds most people put 100% C which is comparable to the S&P 500, and some others leave it in the lifecycle for their retirement years which automatically adjusts as you get older.
don’t be afraid to have fun, but separate your wants from needs. I kind of gave a very barebones explanation for all this but hope it helps!
Edit: for your goals of 5 years 6 figures if you remain a PFC for 5 years you make like what 23,000 a year.
If you can save a 1,000 a month that’s like 60,000 in 5 years not counting your clothing allowance, and other extra pay.
This is all really general things, it will be up to you to calculate how much you can realistically save.
TSP is a 401k plan thru the military.
Your credit starts off at around 550ish by default when you open your first credit card / account. It will build up rapidly as long as you pay off your card every month on time.
I joined at 21 as well. My best advice? Max out the yearly contributions you can make to your TSP and set it to some aggressive / risky investments while you’re young.
5% in TSP to get the match. After that max out a Roth IRA. If you can save anymore beyond that, keep adding to your TSP.
I just buy VTI in my Roth. It’s an index fund. I wouldn’t recommend playing around with individual stocks.