tag:blogger.com,1999:blog-46420340629949176442024-03-12T23:59:27.958-04:00MilitaryMoney.USOne American Veteran’s Path to Financial Independence During and after Military ServiceUnknownnoreply@blogger.comBlogger8125tag:blogger.com,1999:blog-4642034062994917644.post-29166322372594420422019-03-09T11:57:00.001-05:002019-03-15T07:58:55.779-04:00Take Advantage of the Three Pillars of Military Retirement: Traditional TSP, Roth TSP, and Pension<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2U_o5lWnleO8g8BepVBHnnp9cNyQ_3gGACwbziQ1sTibnpxhWjlgouXsKs5qkpOL1INyZUraLXOgjmTDi98cpkE0XXxVmp4r_EpsgdDjfC86PqOqTmokf0cUBJO6QM9bDRvbYvLiI4Qg/s1600/Screen+Shot+2019-03-09+at+11.53.42+AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="Military Retirement Piggy Bank" border="0" data-original-height="984" data-original-width="1600" height="196" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh2U_o5lWnleO8g8BepVBHnnp9cNyQ_3gGACwbziQ1sTibnpxhWjlgouXsKs5qkpOL1INyZUraLXOgjmTDi98cpkE0XXxVmp4r_EpsgdDjfC86PqOqTmokf0cUBJO6QM9bDRvbYvLiI4Qg/s320/Screen+Shot+2019-03-09+at+11.53.42+AM.png" title="Military Retirement Piggy Bank" width="320" /></a></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Grow and Thrive - Beginning Phase 3</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">In Phase 1 on your <a href="https://www.militarymoney.us/p/financial-independence.html" target="_blank">path to financial independence</a>, it was crisis mode - stop hemorrhaging money now! Moving on to Phase 2, the goal was to stabilize the situation - set a strong foundation for future growth. Now, in Phase 3, we’ve built that foundation, and the focus now becomes truly building your wealth - not just to survive, but to truly thrive. Specifically, now that you've 1) paid off your consumer loan and credit card debt; and, 2) established a healthy emergency fund, we'll reallocate your Excess Income to support this growth.</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">BUT, </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">this is no get-rich-quick scheme</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Rather, as you move forward and embrace this plan, you will slowly - but surely - reach financial independence. And that’s what it’s all about, not the money itself, but the freedom that money provides you to <a href="https://www.militarymoney.us/2018/11/WhyFinancialIndependence.html" target="_blank">pursue your purpose</a>. When you have doubts or frustrations - and we all do - find inspiration in that reason you initially set for deciding to take control of your financial life. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Congratulations on reaching this point! </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large; font-weight: normal; white-space: pre-wrap;">The Three Pillars of Military Retirement</span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">In the post-Blended Retirement System (BRS) world, the military has three pillars to its retirement model: the traditional TSP, Roth TSP, and defined benefit pension. Making the most of these three will put you in outstanding financial position as you transition out of your military career. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Broadly speaking, the three work together like this: when you retire after 20 years, you’ll immediately begin to receive your pension payments - a nice check dumped into your bank account every month. Then, at age 59 ½, you get a nice little bump and can begin withdrawing money from both your traditional (need to pay income tax) and Roth TSPs (don’t need to pay income tax), money that’s been growing with that magical thing called <a href="https://www.smartaboutmoney.org/Courses/Money-Basics/Investing/The-Magic-of-Compounding-Interest" target="_blank">compound interest</a>, since the day you <a href="https://www.militarymoney.us/2018/12/thrift-savings-program.html" target="_blank">first opened your TSP</a>! Details below. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>***Note: Due to personal reasons, I chose to separate from the service after nine years and did not use the pension portion of military retirement in my own financial journey, but this doesn’t change how awesome an opportunity this is, which is why I emphasize pension benefits here.***</i></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">The Traditional/Roth TSP Combination Plan</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In Phase 1, you enrolled in the traditional TSP to gain the 5% government match. This means you’re already getting two awesome benefits. First, the 5% of your base pay that you contribute is not included in your current tax bill, so you save cash every year when it comes to tax time. Second, that 5% that you contribute is automatically doubled, as the government matches up to 5% and deposits it directly into your </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">traditional </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">TSP. Continue to take advantage of this your entire military career, and you’ll have a nice little retirement nest egg established.</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now that you’ve reached Phase 3 and are in a much better position financially, it’s time to start contributing to your Roth IRA, an absolutely incredible retirement savings tool. While I won’t cover all of the <a href="https://www.tsp.gov/PDF/formspubs/tsp-536.pdf" target="_blank">tax-specific details</a> here, a Roth TSP works like this: every dollar you contribute to this account is taxed </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">on your current tax return</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, and then, it grows tax free. As a result, when you turn 59 ½, you can begin withdrawing your initial contributions </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">plus all compound interest growth </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">of those earnings TAX FREE! Here are a couple examples to show how awesome this is:</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><b>Scenario 1</b></span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Situation</i>: At age 30, you contribute $2,000 to your Roth TSP then completely forget about that money until age 59 ½, never contributing another dollar.</span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Years to grow</i>: 29 ½ (age 59 ½ [withdrawal age] minus age 30 [current age])</span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Assumption</i>: 7% interest growth (normal planning factor for a stock-based portfolio)</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i>Your money at age 59 ½</i></span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">: </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">~$14,700*</span></span></div>
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<span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><b>Scenario 2</b></span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Situation</i>: Same as above, but after your initial $2,000 contribution you contribute $2,000 more per year until you retire from the military at age 40, then forget about it until age 59 ½. </span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Years to grow</i>: same</span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Assumption</i>: same</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><i>Your money at age 59 ½</i></span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">: ~$</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">125,300!*</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;">*Want to play around with these numbers? Here’s a good <a href="http://www.moneychimp.com/calculator/compound_interest_calculator.htm" target="_blank">compound interest calculator.</a> </span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Bottom line - the more you contribute and the earlier you start, the more you’ll have in retirement. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Next Steps and Reallocating Your Excess Income</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Because each service does it a little differently, confirm with your admin/personnel office how to open a Roth IRA - then do it! Now that you’re already contributing 5% of your base pay to your traditional TSP to receive the 5%, government match, I recommend contributing each additional percentage </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">to your Roth TSP</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. So, every time you get either a time-in-service raise or promotion, add a percentage or two to your Roth TSP contribution. In 2019 you’re allowed to contribute up to $19,000 to your entire TSP (traditional and Roth combined) - while this is certainly a lot of money, work towards this goal!</span></span><br />
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span>
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So how much should you initially contribute? Here's where that Excess Income comes into play. Now that you've finished putting together your healthy emergency fund and paying down consumer/credit debt, you have that extra money floating around each month. Use this as your initial Roth TSP contribution! Example: let's say you're an E-6 with 10+ years of service, current base pay is $3,656.23/month. Next, say your Excess Income (<a href="https://www.militarymoney.us/2019/01/spending-and-budget.html">identified in your budget</a>) is $200/month. To find out the percentage you should start contributing to your Roth TSP, divide Excess Income by base pay and multiply it by 100: ($200 / $3,656.23) x 100 = </span><span style="background-color: transparent; font-style: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><b>~5.5%</b></span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. This now becomes the beginning contribution percentage when you open your Roth TSP. </span></span><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;">And, as stated above, treat every raise you receive as an excuse to increase this by a percentage point or two. </span><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"> You've now successfully reallocated your Excess Income from paying down debt to building your wealth! </span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Note: </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When you begin withdrawing money from your TSP at age 59 ½, the money will be proportionally drawn from both your traditional and Roth. So, if you have 70% in your Roth and 30% in your traditional, 70% of each withdrawal you make will be tax-free, and you’ll need to pay income tax on the 30% from your traditional account. </span></span></div>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">An Endangered Species - The Pension</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">In the civilian job world, no-kidding pensions (aka “defined benefit plans”) get rarer and rarer every day. Instead, most employers have transitioned to the civilian equivalent of a TSP, known as a 401(k) or “defined contribution plan.” And, the ability to find a pension after only </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">20 years</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, almost impossible! With that said, while the payout in the BRS-version of the pension is lower than the legacy military retirement system, getting 40% of your high-three base pay after 20 years is unbelievable! (<a href="https://militarypay.defense.gov/Portals/3/Documents/BlendedRetirementDocuments/Fact%20Sheet-Defined%20Benefit.pdf?ver=2017-12-08-135008-747" target="_blank">full details here</a>). While a 20-year career in the military is absolutely not for everyone (as I said above, myself included), it can be an incredible way to establish your financial health if you love what you do. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Conclusion</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">You’re going to get out of the BRS what you put into it. By this point in time, you’ve already established a solid financial foundation after completing Phase 1 and Phase 2. Now, take advantage of all three pillars of military retirement - traditional TSP & match, Roth TSP, and the BRS pension - and you’ll be on cruise control to financial independence. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h4>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Next Sections</span></span></div>
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<ul>
<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><a href="https://www.militarymoney.us/p/military-education.html">Increase Your Earning Potential as a Veteran: Get a Degree</a></span></li>
<li><span style="font-family: georgia, times new roman, serif; font-size: large;"><span style="white-space: pre-wrap;"><a href="https://www.militarymoney.us/p/military-real-estate.html">Build Wealth with Military Real Estate</a></span></span></li>
</ul>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Previous Article</span></span></div>
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<li><a href="https://www.militarymoney.us/2019/02/allocate-and-automate-your-excess-income.html" style="font-family: Georgia, "Times New Roman", serif; white-space: pre-wrap;"><span style="font-size: large;">Allocate and Automate Your Excess Income</span></a></li>
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<span id="docs-internal-guid-cb598cbd-7fff-6f04-5ac0-eded8cdd1faf"></span><br class="Apple-interchange-newline" />Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4642034062994917644.post-26431499807048651082019-02-13T07:41:00.001-05:002019-03-09T11:58:34.934-05:00Allocate and Automate Your Excess Income<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaafKNKYygo1Qx4F_8u9vey7yPwVBjcCf03YVANHasJt2OXo_YUWye2vhHEh-7eu5881Ivc9wbcZuwvsTdUVK2_5SVWeuTA-GT1NQwRNwR_YRgczcGG5ytw1JmHnsruoz_i3EkqpkntIQ/s1600/Screen+Shot+2019-02-13+at+7.38.53+AM.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="866" data-original-width="1548" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiaafKNKYygo1Qx4F_8u9vey7yPwVBjcCf03YVANHasJt2OXo_YUWye2vhHEh-7eu5881Ivc9wbcZuwvsTdUVK2_5SVWeuTA-GT1NQwRNwR_YRgczcGG5ytw1JmHnsruoz_i3EkqpkntIQ/s400/Screen+Shot+2019-02-13+at+7.38.53+AM.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Time + Money: Dollars Add Up!</td></tr>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">What to Do with Excess Income</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">In the <a href="https://www.militarymoney.us/2019/01/spending-and-budget.html" target="_blank">last post</a>, we outlined, experimented with, and confirmed a budget that left a certain amount of money - your Excess Income - untouched every month. Now, we’ll figure out what to do with that money as you continue to stabilize your financial health. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Automate Your Saving with Online Banking</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As brilliant investor Warren Buffett <a href="https://www.militarymoney.us/2019/01/spending-and-budget.html" target="_blank">declared</a>: “Do not save what is left after spending; instead spend what is left after saving.” The best way to follow this outstanding advice is to </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">automate your saving</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. Specifically, you can set up your checking account so that whenever your direct deposit pay is put into the bank, the Excess Income portion of that money is immediately and automatically transferred to savings and paying down debt. <a href="https://www.usaa.com/" target="_blank">USAA</a>, <a href="https://www.navyfederal.org/" target="_blank">NFCU</a>, and all other major banks now have great online banking, and setting up automatic A) payments for credit card bills and loans, and B) transfers to savings takes only a couple clicks from the comfort of home. </span></span></div>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Allocate Your Excess Income to the Right Places</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now that you’ve identified your Excess Income and know how easy it is to automate saving it, the next question to ask is, </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">where </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">should I save it? In other words, how should I allocate my Excess Income? At this point of the journey to <a href="https://www.militarymoney.us/p/financial-independence.html" target="_blank">financial independence</a>, the goal is to </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">stabilize </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">your financial situation. As such, there are two priorities: 1) <a href="https://www.militarymoney.us/2018/12/credit-card-debt.html" target="_blank">paying down credit card debt</a> and <a href="https://www.militarymoney.us/2019/01/consumer-loans.html" target="_blank">consumer loans</a>; and 2) building your <a href="https://www.militarymoney.us/2018/12/emergency-fund.html" target="_blank">emergency fund</a>. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">The Debt versus Retirement Question</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Before getting into the details of spreading your Excess Income, I want to address a frequently asked question: is it more important to tackle debt or save for retirement? To me, this question is based on a silly premise - it implies that you can only do one of these at the same time. In reality, they’re not mutually exclusive, especially in the military. Remember, your Excess Income doesn’t include the money you’re already putting towards retirement every paycheck in your <a href="https://www.militarymoney.us/2018/12/thrift-savings-program.html" target="_blank">TSP contribution</a> (plus the government’s free 5% on top of that!). Furthermore, paying down debt is a form of saving for retirement. By aggressively paying down high-interest consumer debt, every dollar of interest you don’t have to pay due to accelerated repayment becomes a dollar you can put towards saving for retirement. In this way, paying down debt and saving for retirement go hand-in-hand. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; vertical-align: baseline;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="font-weight: normal; white-space: pre-wrap;"><i>Allocation</i></span><i style="font-variant-caps: normal; font-weight: 400; text-decoration: none; white-space: pre-wrap;"> 1: </i><span style="font-weight: 400; white-space: pre-wrap;">Pay Down Consumer Debt (75% of Excess Income)</span></span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">With high-interest consumer debt, achieving financial independence is next to impossible. For this reason, we’re going to allocate the largest portion - 75% - of your Excess Income to paying down this debt. Revisit your <a href="https://www.militarymoney.us/2019/01/spending-and-budget.html" target="_blank">budget</a> and list out all of your monthly consumer debt payments (credit card, car loan, etc). Now, next to each of these expenses, write down the interest payment. We’re going to tackle the debt with the highest interest first. So, let’s say you have $1,200 of credit card debt at 18% and $5,500 remaining on a 5% car loan, here are the steps to take:</span></span></div>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><i>Step 1</i>: Multiply your Excess Income by .75 to determine the 75% that will be allocated to paying down debt.</span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><i>Step 2</i>: Confirm the minimum monthly payment for your lowest interest debt (the car loan in the above example. Now, subtract this amount from the number in Step 1.</span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><i>Step 3</i>: The number from Step 2 is the amount of money that you will use to aggressively pay down your highest interest debt.</span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><i>Step 4</i>: Set up automatic payments. In your banking app, set up monthly payments for the amounts in Step 2 and Step 3 that will automatically be applied to your different outstanding debts.</span></li>
<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><i>Step 5</i>: Once the highest interest debt is paid off, update your monthly bill payment so that the entire amount from Step 1 is applied to the remaining, lower interest debt. Congrats, you’ve automated crushing your debt!</span></li>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">***Note: this strategy for paying down debt completely depends on </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">not adding more debt</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. If you fall into this trap, you’ve gone backwards on your journey to financial independence and need to recalculate the above numbers.***</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Allocation 2: </i>Grow Your Emergency Fund (25% of Excess Income)</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">In the first post about an <a href="https://www.militarymoney.us/2018/12/emergency-fund.html" target="_blank">emergency fund</a>, the focus was stopping your financial bleeding by getting to $500. This is a critical milestone as a financial buffer, but it’s not enough to truly keep you safe in the event of a financial emergency. Remember, the goal of the emergency fund is to keep you from needing to rack up credit card debt in the case of something unexpected (e.g. air conditioner breaks, expensive and unexpected car repair, etc). While financial advisors all seem to have different recommendations, for military members with the stability of TRICARE health insurance and regular paychecks, I recommend an emergency fund equal to three months of expenses. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Take a look at your <a href="https://www.militarymoney.us/2019/01/spending-and-budget.html" target="_blank">budget</a> - what are your monthly expenses? Multiply this number by three, and that’s a good rule of thumb for how much money you should set aside in an emergency fund. Next, automate a 25% transfer of your Excess Income into your Emergency fund. Example: if your Excess Income is $325 every month, multiple that by .25 and you get $81.25. Now, in your online banking app, set up an automatic transfer for that amount from your checking account to the savings account with your emergency fund for a payday (or divide the $81.25 by two and set up two automatic transfers each month - one for each payday. Whichever option you prefer). You’ve now set this savings on cruise control! </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Achieving the Above Goals</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So what happens when you’ve paid off your debt or reached the emergency fund goal? Reallocate the portion of your Excess Income that you’d been using for that priority to the other one. If you’ve built your emergency fund, you can now allocate 100% of your Excess Income to paying down consumer debt. If you’ve paid down your consumer debt, you can now focus on building your emergency fund. Once you’ve accomplished both priorities, you’ve completed Phase 2 and have successfully stabilized your financial health! Next, you can move on to <a href="https://www.militarymoney.us/p/financial-independence.html" target="_blank">Phase 3</a> of the journey to financial independence and begin to </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">grow and thrive!</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Bonus - How to Think about a Raise or Windfall</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Related to this post, an absolutely critical aspect of gaining financial independence is avoiding <a href="https://www.investopedia.com/terms/l/lifestyle-creep.asp" target="_blank">lifestyle creep</a>. When you come into more money, either through a promotion or unexpected windfall (e.g. big tax return, combat pay, reenlistment bonus, etc), do not look at that money as a free ticket for splurging on something. Instead, do something nice with a small portion of this bonus as a way to celebrate, but apply the large majority to your Excess Income and related priorities for financial independence. If you’re able to embrace this mentality - that a raise in money doesn’t mean a raise in lifestyle - achieving true wealth is just a matter of time. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Financial Independence is a Marathon, not a Sprint</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">The last thing I’ll say relates to time. None of the above is going to happen quickly, but that’s okay. Financial independence doesn’t happen overnight. But, if you’re disciplined and stick to a plan, it </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">will happen eventually</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<h4>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Next Article</span></span></div>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><a href="https://www.militarymoney.us/2019/03/three-pillars-of-military-retirement.html">Take Advantage of the Three Pillars of Military Retirement: Traditional TSP, Roth TSP, and Pension</a></span></li>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Previous Article</span></span></div>
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<li><a href="https://www.militarymoney.us/2019/01/spending-and-budget.html" style="font-family: Georgia, "Times New Roman", serif; white-space: pre-wrap;"><span style="font-size: large;">Track Your Spending and Implement a Budget</span></a></li>
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<span id="docs-internal-guid-fdb4a1d0-7fff-cf5e-3587-0f4754233c10"></span><br class="Apple-interchange-newline" />Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4642034062994917644.post-76514644315107953732019-01-26T09:32:00.000-05:002019-02-13T07:43:11.945-05:00Track Your Spending and Implement a Budget<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTDW6nnhi2HlJou7NsajXK2Q-Pvbu68F59z2MHBVLg6soR_r4o3qUn_gTRhHwUlzM1q82T6-kLoNVMOd02wS-hDFMYj-UsVBdxoIH5HZd4jv0Mayezd6si1kUDxW5u3GFzNF9EvanjhdA/s1600/Screen+Shot+2019-01-26+at+9.20.33+AM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-size: large;"><img border="0" data-original-height="888" data-original-width="1584" height="179" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhTDW6nnhi2HlJou7NsajXK2Q-Pvbu68F59z2MHBVLg6soR_r4o3qUn_gTRhHwUlzM1q82T6-kLoNVMOd02wS-hDFMYj-UsVBdxoIH5HZd4jv0Mayezd6si1kUDxW5u3GFzNF9EvanjhdA/s320/Screen+Shot+2019-01-26+at+9.20.33+AM.png" width="320" /></span></a></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">You Stopped the Bleeding - What’s Next?</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Ok, so if you’ve knocked out all the steps in Phase 1 of the MilitaryMoney.US Path to Financial Independence, you’ve successfully stopped the bleeding. This is only the beginning! As with tactical combat casualty care, stopping the bleeding is a critical first step, but you need to stabilize next, and that’s exactly what we’re going to do in Phase 2. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Track Your Spending </span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">To really start controlling your financial future, you need a solid grasp on your cash flow. In other words, you need to know how much money comes in every month, and how that money is spent. There are a bunch of good apps for doing this - <a href="https://www.mint.com/" target="_blank">Mint</a> is a solid, free one. But, call me old fashioned, I find a lot of these apps to be more of a distraction, at least initially. So, here’s what I recommend:</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Part 1: On the first day of the month, set yourself a reminder - either a daily alert on your phone or a nice, big sticky note next to your bed - “KEEP RECEIPTS!” Every day for that month, when you buy something, stash that receipt away somewhere safe.</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Part 2: On the last day of the month, gather any paperwork for money coming in (leave & earnings statement, civilian pay stubs, etc.). Add up all the net income for that month (that is, after taxes and your <a href="https://www.militarymoney.us/2018/12/thrift-savings-program.html" target="_blank">TSP withdrawals</a>) - only care about actual cash coming in right now.</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Part 3: Gather up all your receipts from daily spending, plus any other monthly bills (e.g. rent, insurance, car payments, memberships, etc). Divide all these payments into categories - I recommend “housing expenses,” “auto/travel expenses,” “groceries,” “eating out & entertainment,” and “other” - and make a list of the individual expenses underneath each category (Microsoft Excel and Mac Sheets both work for this, or just do it on a big sheet of paper). </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">This is a powerful activity in financial planning. Simply putting your spending on paper forces you to recognize where there are problems and is critical to taking the next step - controlling your spending. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Needs Versus Wants</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Here’s the “fun part,” especially if you’re doing this with a spouse… In each of the above spending categories, go down the list and examine each payment. Ask yourself, is this a “need”, or is this a “want”? More specifically, ask yourself two, related questions:</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Question 1: Did I 100%, absolutely need to spend this money?</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Question 2: If I answered “yes” to the above, is there a way I could have accomplished the same objective for less money? (Good example: Do I need to eat lunch? Yes. Do I need to spend $10 getting lunch out? No - <a href="https://money.usnews.com/money/blogs/my-money/articles/2016-03-08/how-meal-prep-sunday-can-drastically-reduce-your-food-costs" target="_blank">bring food from home and you can cut that spending in half</a>). </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">As you go through this exercise, put an “N” next to the “needs” and put a line through the “wants.” Now, add up all the needs both A) by category, and B) in total. </span></span><br />
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">The Housing Rule of Thumb</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">As housing typically is our largest monthly expense, I wanted to call this out specifically. Once you’ve added up all of your housing expenses, divide that number by your total cash coming in each month, and multiply it by one hundred. This is the percentage of cash coming in every month that you spend on housing. Example: </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Monthly rent</i>: $1,000</span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Average monthly utilities</i>: $100</span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Total monthly housing expense</i>: $1,100 ($1,000 + $100)</span></span></div>
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<span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><i>Cash coming in every month</i>: $3,500</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><b><i>Percentage of net income spent on housing</i></b></span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">: ($1,100 / $3,500) x 100 = </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">31%</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 700; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Some people argue that this percentage should never be more than 30% of </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">gross income </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">(i.e. income before tax withholding and TSP deductions). I’m going to tell you that, if you’re truly serious about financial independence, this percentage shouldn’t be more than 25% of </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">net income </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">(i.e. the actual cash coming into your checking account every month after tax withholding and TSP deductions). Now, I also get that you can’t just change your housing expenses overnight - leases are signed, mortgages need to be paid. But, life is long - as is the journey to financial independence. Moving forward, seek to achieve this standard, and you’ll be taking huge strides towards building your wealth. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Identify Your Excess Income </span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Back to the needs versus wants exercises, here’s the true sanity check, and it’s a simple formula:</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><b>Money Coming In - Total Needs Expenses = Excess Income (or Income Shortage).</b></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If you have an Income Shortage, you need to go back to the needs versus wants exercise. Bottom line, if more cash goes out than comes in every month, you’ll never gain financial independence. Period. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If you’ve identified Excess Income, you’re on the right path! Whatever that excess number is, write it down somewhere - we’ll tackle what we’re going to actually do with it in the next post. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Implement a Budget, Minus Excess Income</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Looking at how much you spent in each of the spending categories above, that becomes your budget for the next month. If you spent $800 on groceries, plan for not spending more than $800 this coming month. Pretend that your Excess Income doesn’t even exist - it’s not real for now. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Put it in Practice and Test it Out</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">With your budget in place, spend another month tracking all your spending. At the end of the month, do the same exercise of adding all your categories of expenses up. Have you stuck to your budget? Are there any more wants you’ve realized you can do without? If you need to tweak the plan, tweak it. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If you successfully executed the plan and spent within your budget, congrats! This is a HUGE step towards financial independence. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Excess Income from this Test Month</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If you successfully followed the budget, you have your Excess Income left over at the end of the month. For this first month, move all of that extra money into your <a href="https://www.militarymoney.us/2018/12/emergency-fund.html" target="_blank">emergency fund</a>. We’ll cover a more detailed plan for Excess Income in the next post. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h4>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Next Article</span></span></div>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="white-space: pre-wrap;"><a href="https://www.militarymoney.us/2019/02/allocate-and-automate-your-excess-income.html" target="_blank">Allocate and Automate Your Excess Income</a></span></span></li>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="white-space: pre-wrap;">Previous Article</span></span></div>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="white-space: pre-wrap;"><a href="https://www.militarymoney.us/2019/01/consumer-loans.html">Don't Take Out New Consumer Loans</a></span></span></li>
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<span id="docs-internal-guid-92e27838-7fff-813a-49df-aa4d2acc639f"></span><br class="Apple-interchange-newline" />Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-4642034062994917644.post-69226090168808512572019-01-19T18:40:00.000-05:002019-01-26T09:34:34.959-05:00Don't Take Out New Consumer Loans<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">What’s a Consumer Loan?</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">First thing’s first, it’s a <a href="https://www.nerdwallet.com/blog/loans/personal-loan-types/" target="_blank">type of personal loan</a> (as opposed to a commercial or business loan). So, it’s cash you’re borrowing from a bank, credit card company as an advance, or less reputable lender (e.g. a pawnshop) to do or buy something. Broadly speaking, the “something” people take out these loans for falls into one of three categories: personal (buying stuff like clothes or a car; paying for medical expenses), family (vacation; tuition expenses), or household (buying appliances; repairing an air conditioner; etc). So what type of loan </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">isn’t</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> a consumer one? For our purposes, mortgages, or loans secured by and used to buy a house, are not consumer loans, but more on those in the <a href="https://www.militarymoney.us/p/military-real-estate.html" target="_blank">real estate section</a>. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhasGvmYGmPeM6SWZ3kxG1Sx2hl2nc067fWe94KfjC2hdhw8xmCk7WBxCvrrEJnWO2eRulIGyT-_1Qtnmez30rXDnY5PEoqQNkRr-XCXkINYAWRiMBj5JKbKZF7N1L3Rakd4CGZEAQbrQ4/s1600/Screen+Shot+2019-01-19+at+4.31.22+PM.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="570" data-original-width="1600" height="141" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhasGvmYGmPeM6SWZ3kxG1Sx2hl2nc067fWe94KfjC2hdhw8xmCk7WBxCvrrEJnWO2eRulIGyT-_1Qtnmez30rXDnY5PEoqQNkRr-XCXkINYAWRiMBj5JKbKZF7N1L3Rakd4CGZEAQbrQ4/s400/Screen+Shot+2019-01-19+at+4.31.22+PM.png" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Yes, 35.99% Is an Insanely High Interest Rate!</td></tr>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Why These Loans are Toxic</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Conceptually, consumer loans are absolutely toxic because you’re borrowing money at stupid high interest rates (see above) to </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">buy things you don’t need with money you don’t have</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, a surefire approach to never achieve financial independence. Growing your wealth comes down to simple math. Every pay period, you need to save more money than you spend - there’s no other way. Massive interest payments on loans for unnecessary purchases can make it challenging to accomplish this. And, for those things you absolutely need some extra cash for, that’s why you have an <a href="https://www.militarymoney.us/2018/12/emergency-fund.html" target="_blank">emergency fund</a>, to keep you from falling victim to the endless, wealth-draining death spiral of consumer debt. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">A Sidebar - New Cars are Stupid </span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I apologize in advance, but I’m going to get on my soapbox here for a minute. Yes, buying a new car, especially if you have to borrow money to do it, is stupid. Basically, this is a way of telling the world you want to </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">look </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">wealthy, not </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">be </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">wealthy. When you drive a new car off the lot, it <a href="https://www.edmunds.com/car-buying/how-fast-does-my-new-car-lose-value-infographic.html" target="_blank">immediately loses 11% of its value</a>. Now, I’m not saying buy an old, unsafe, poorly functioning car - you’ll likely end up wasting just as much money on maintenance. But, unless you’re a long-haul trucker or someone who actually needs a pickup for work, a car is only for getting from Point A to Point B. Why spend an exorbitant amount of money to do that, when you can get a good, fraction-of-the-price deal on a safe, reliable used car? Remember, true wealth is not about appearance, it’s about the financial freedom to do what you want and live <a href="https://www.militarymoney.us/2018/11/WhyFinancialIndependence.html" target="_blank">your purpose</a>, and it takes discipline and smart decisions to get to that point. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">The Should-I-Get-This-Loan Sanity Check</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If you’re already paying back a consumer loan, that’s fine, we’ll tackle that debt in <a href="https://www.militarymoney.us/p/financial-independence.html" target="_blank">Phase 2</a>. But, don’t take out any more of these toxic loans! Generally speaking, there’s a very easy question to ask to see whether it’s a good idea to borrow money: will this loan make me money? More specifically, will the interest I earn from what I do with this money be more than the interest I’m charged by the bank for borrowing it. Loans can be a great way to build wealth, especially with rental <a href="https://www.militarymoney.us/p/military-real-estate.html" target="_blank">real estate</a>, but borrowing money to </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">buy stuff you don’t need is never the answer. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<h4>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Next Article</span></span></div>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><a href="https://www.militarymoney.us/2019/01/spending-and-budget.html">Track Your Spending and Implement a Budget</a></span></li>
</ul>
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;">Previous Article</span><br />
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="white-space: pre-wrap;"><a href="https://www.militarymoney.us/2018/12/emergency-fund.html">Start an Emergency Fund</a></span></span></li>
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<span id="docs-internal-guid-8da4f85b-7fff-5d51-da17-fbfa613111d8"></span><br class="Apple-interchange-newline" />Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-4642034062994917644.post-45859897802833901902018-12-31T17:33:00.000-05:002019-01-19T18:41:21.289-05:00Start an Emergency Fund<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKCENDHc0b78xSHDvF3usPOEPEKpjrX-8ZZgjFMAUhKXEO7HXEHx9dopcQjKufNyU9ezxvHcZ_MK_-I-4gW7leIxkbpjR5AW4JPGCZtDU2O1uD7ekSmvG7_IqNipFni-XeBuFe1912Mok/s1600/Screen+Shot+2018-12-31+at+4.28.13+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="Emergency Fund Picture" border="0" data-original-height="664" data-original-width="1170" height="181" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKCENDHc0b78xSHDvF3usPOEPEKpjrX-8ZZgjFMAUhKXEO7HXEHx9dopcQjKufNyU9ezxvHcZ_MK_-I-4gW7leIxkbpjR5AW4JPGCZtDU2O1uD7ekSmvG7_IqNipFni-XeBuFe1912Mok/s320/Screen+Shot+2018-12-31+at+4.28.13+PM.png" title="Emergency Fund Picture" width="320" /></a></div>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">What’s an Emergency Fund?</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If you Google “emergency fund,” more than a half </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">billion </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">results pop up (a number sure to increase every day). So, I want to clarify the definition. <a href="https://investor.vanguard.com/emergency-fund/" target="_blank">Vanguard offers a good starting point</a>: “An emergency fund is a stash of money set aside to cover the financial surprises life throws your way.” Bottom line, this is money that, in the event of some sort of financial emergency, will let you pay the bill without resorting to A) credit card debt, or B) a personal loan. </span></span><br />
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Why is an Emergency Fund Critical to “Stopping the (Financial) Bleeding”? </span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Being a former grunt, I always like to know </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">why </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">I’m being told to do something (goes back to the importance of setting a <a href="https://www.militarymoney.us/2018/11/WhyFinancialIndependence.html" target="_blank">purpose</a> for seeking <a href="https://www.militarymoney.us/p/financial-independence.html" target="_blank">financial independence</a>). So, why is this emergency fund so important to stopping my financial bleeding? In 2018, the <a href="https://money.cnn.com/2018/05/22/pf/emergency-expenses-household-finances/index.html" target="_blank">Federal Reserve Board conducted a study</a> that found that 4 out of 10 Americans could not cover an unexpected $400 expense. So, if your car breaks down, you’re stuck with a $400 bill and you’re part of this group, you have two options for paying that bill: put it on a credit card or take out a personal loan. BOTH OF THESE ARE INSANELY BAD FOR YOUR FINANCIAL HEALTH! </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As I’ve already written, <a href="https://www.militarymoney.us/2018/12/credit-card-debt.html" target="_blank">credit card interest is astronomically high</a>, and interest rates on personal loans aren’t much better. So, if you fall victim to one of these options, you’re just hopping right back on the merry-go-round of debt, because every dollar you pay towards ridiculous interest rates is a dollar that’s not going towards your financial independence. This is why starting an emergency fund right away, even if it’s a small one, is so important to your financial health - it keeps your journey towards financial independence on track when something unexpected happens. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Getting Started & Your Short-Term (One-Year) Goal</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">I get it, when you’re tight on cash already from paycheck to paycheck, starting an emergency fund can be daunting. But, you just need to FITFO (figure it the f*** out…). Here’s how: </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="white-space: pre-wrap;"><b>Step 1:</b> Open your computer and log-in to the bank account where you receive your paycheck direct deposit (don’t have online access? Get it now!).</span><br /><span style="white-space: pre-wrap;"><b>Step 2: </b>If you don’t already have one, open a savings account. </span><br /><span style="white-space: pre-wrap;"><b>Step 3:</b> In the “transfer funds” or “make transfers” section (or whatever wording your bank uses), set up a monthly, automatic transfer for the 1st of every month for $41.67.</span><br /><span style="white-space: pre-wrap;"><b>Step 4:</b> At the end of 12 months, you’ll have a $500 emergency fund, which puts your financial health better than 40 percent of America. </span></span><br />
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Using Your Emergency Fund Money</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Now, to maintain the health of this account, this money needs to be </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">sacred. </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Before ever touching a cent of your emergency fund, ask yourself two questions:</span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; vertical-align: baseline; white-space: pre-wrap;"><b>Question 1: </b>Do I absolutely, positively </span><span style="font-style: italic; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; vertical-align: baseline; white-space: pre-wrap;">need </span><span style="font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; vertical-align: baseline; white-space: pre-wrap;">(not </span><span style="font-style: italic; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; vertical-align: baseline; white-space: pre-wrap;">really want</span><span style="font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; vertical-align: baseline; white-space: pre-wrap;">) to spend this money?</span><br /><span style="white-space: pre-wrap;"><b>Question 2: </b>If yes, is there any other way (besides a credit card or loan) that I can pay this without touching my emergency fund?</span></span><br />
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="white-space: pre-wrap;"><br /></span></span>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If the answer to the second question is “no,” then you can use this money. BUT, you then need to immediately begin the process of replenishing this account, getting it back to the level where it was prior to the emergency. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Other Considerations </span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Once again, the point of this post was to simplify the emergency fund concept and give concrete steps to take </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">right now</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. In later posts, I’ll talk about the importance of growing your emergency fund so that it can cover more of life’s unexpected situations, but $500 is a great starting point. Once you have that amount, you’ve protected yourself against a financial surprise preventing you from building long-term wealth. And, while some people will argue that the low interest rates on savings accounts right now mean your money will lose <a href="https://www.investopedia.com/terms/p/purchasingpower.asp" target="_blank">purchasing power</a> every year, that’s fine for now. Later on, when you grow your emergency fund, there are other options to outpace inflation. In the meantime, what’s important is that that money’s there, ready to be accessed whenever an emergency pops up. </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><a href="https://www.militarymoney.us/2019/01/consumer-loans.html">Don't Take Out New Consumer Loans</a></span></li>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Previous Article</span><br />
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<li><a href="https://www.militarymoney.us/2018/12/thrift-savings-program.html"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Free Money: Enroll in the Thrift Savings Program (TSP)</span></a></li>
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Unknownnoreply@blogger.com1tag:blogger.com,1999:blog-4642034062994917644.post-73463211618258456802018-12-28T20:27:00.000-05:002019-02-17T14:34:22.048-05:00Free Money: Enroll in the Thrift Savings Program (TSP)<h4 style="text-align: center;">
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">***Disclaimer: In the below article, I’ve attempted to simplify some of the confusing language used to explain the TSP in official paperwork. As such, I do not go into full detail on some of the more intricate aspects of this retirement program and its tax treatment, so here’s a <a href="https://www.tsp.gov/PDF/formspubs/tspbk08.pdf" target="_blank">great resource</a> if you’d like to take a full deep dive.***</span></span></h4>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">What is the Thrift Savings Program (TSP)?</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If you’ve ever listened to a command financial brief or listened to other service members talk about the pros and cons of the Blended Retirement System (more on that later), you’ve probably heard the term <a href="https://www.tsp.gov/index.html" target="_blank">Thrift Savings Program</a> - or TSP, more likely - thrown around. Simply put, the TSP is “a retirement savings and investment plan for Federal employees and members of the uniformed services.” If you’ve heard friends in the civilian world talking about the 401(k) retirement plans offered by their employers, the TSP offers similar savings and tax benefits to these plans. </span></span><br />
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Unlike a pension, which is a </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><a href="https://www.investopedia.com/terms/d/definedbenefitpensionplan.asp" target="_blank">defined benefit retirement plan</a></span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">, the TSP is a </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><a href="https://www.tsp.gov/PlanParticipation/AboutTheTSP/index.html" target="_blank">defined contribution retirement plan</a></span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. This means that “the retirement income you receive from your TSP account will depend on how much you [...] put into your account during your working years and the earnings accumulated over that time.” In other words, the money you have in your account at retirement depends on two factors: 1) how much money you contribute every paycheck, and 2) the growth rate of those contributions with the <a href="https://www.investopedia.com/university/beginner/beginner2.asp" target="_blank">magic of compound interest</a>.</span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7ITkYg0Tc5-8xuidwkLY6TiCct0Jgi7unSVG8eULjDwy1UMNOonw7RlwP20723WJv08uVr1nzlSNn7mLCTawmE3k0d3ykXYJtwhPqzbsbszwu_SmkJbgBIwrPQWcPGWL3W3P4Ku81qpM/s1600/Image+1.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><img border="0" data-original-height="1394" data-original-width="1366" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi7ITkYg0Tc5-8xuidwkLY6TiCct0Jgi7unSVG8eULjDwy1UMNOonw7RlwP20723WJv08uVr1nzlSNn7mLCTawmE3k0d3ykXYJtwhPqzbsbszwu_SmkJbgBIwrPQWcPGWL3W3P4Ku81qpM/s400/Image+1.png" width="391" /></span></a></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Get FREE MONEY through the TSP</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Prior to the Blended Retirement System (BRS) beginning on 1 January 2018, military retirement was an all-or-nothing program. If you finished 20 years of service, you got a pension at 50% (or more with longer service) of your high-three base pay. With the BRS, you can still get that pension at 20 years, but it’s reduced to 40%. However, the TSP helps fix that all-or-nothing approach, giving you access to a retirement account that you can take with you if you decide to separate sometime before the 20-year mark. Ok, so where does the free money come in? If you either choose to opt into the BRS or are a new join who is required to use the BRS, the MILITARY WILL GIVE YOU 5% OF YOUR BASE PAY, FREE! </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhN3u4IpzNncrpUmFjN1b5MBkAAhvACM1YnmVcvaJFQFbG6gtmxWr5GYGESlguwzzzIN-iz2U2TJd90LZcRwbWpUgD3-rXdDL9xcsVkEiTDPb9vRXN4messRIKafiXKqM82jdf4kB-V3Os/s1600/Image+2.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><img border="0" data-original-height="1216" data-original-width="1494" height="325" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhN3u4IpzNncrpUmFjN1b5MBkAAhvACM1YnmVcvaJFQFbG6gtmxWr5GYGESlguwzzzIN-iz2U2TJd90LZcRwbWpUgD3-rXdDL9xcsVkEiTDPb9vRXN4messRIKafiXKqM82jdf4kB-V3Os/s400/Image+2.png" width="400" /></span></a></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So what’s the fine print? Fine Print 1: you need to be in the service for at least two months to receive a free 1% of your base pay. Fine Print 2: you need to be in the service for at least three years to receive the additional 4% of your base pay free. Bottom line, after three years of service, if you contribute at least 5% of your base pay to your TSP account every paycheck, the government will match that 5%, dumping that extra money right into your TSP account. So what’s this actually mean? If you’re an E-3 with three years of service, your 2019 base pay is $2,233.50 per month. So, if you contribute 5% of that pay every month ($111.68), the government will contribute an </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">additional $111.68, for an annual total of $1,340.16!</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> Not bad for some free money, right? </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Automate It!</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Do you have trouble saving money each paycheck? I get it - payday rolls around, and it seems like your checking account’s empty the next day. That’s why automating your TSP contributions is such an awesome option. Once you sign up, the money you want to contribute each month is deducted automatically, so you never even see it in your paycheck. If you’re anything like me (and most people), this makes savings </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">way easier</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Tax Advantages of the TSP</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">As a retirement account, you’re going to get some serious tax benefits through the TSP, too. Without going down a rabbit hole, you have two options with TSP tax treatment: a Roth TSP or a traditional one. Here’s a <a href="http://www.tspallocation.com/traditional-vs-roth-tsp/" target="_blank">great article</a> on the detailed differences between the two, but here’s the bottom line. If you opt to use the Roth TSP, you pay taxes on your contributions now, but you can withdraw this money and its accumulated growth at age 59 ½ and not pay any tax. On the other hand, with a traditional TSP, you don’t pay taxes on the contributions you make now, which saves you money on your current tax bill, but you have to pay regular income tax on your withdrawals. Here’s a good chart outlining the differences:</span></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0pPQdXwrUuxZ2pG2mNhH4Dec7NspV9OP3VBi_PGu9-ok8zpkz0QqAmpCXobqRfMsJU6KMO9JuDbhUvZWgiP94WZVEcGZMq67Jxg8gGFLt-kNciw5EkL4diEeKiNkY5bnJ92x3SvxXibE/s1600/Screen+Shot+2018-12-28+at+6.12.01+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><img border="0" data-original-height="754" data-original-width="1008" height="298" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj0pPQdXwrUuxZ2pG2mNhH4Dec7NspV9OP3VBi_PGu9-ok8zpkz0QqAmpCXobqRfMsJU6KMO9JuDbhUvZWgiP94WZVEcGZMq67Jxg8gGFLt-kNciw5EkL4diEeKiNkY5bnJ92x3SvxXibE/s400/Screen+Shot+2018-12-28+at+6.12.01+PM.png" width="400" /></span></a></div>
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<span style="background-color: transparent; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">So which one should you pick? Initially, I highly recommend choosing the traditional TSP option. Why? Because it's going to keep more cash in your pocket <i>now.</i> During Phase 1 and Phase 2 as you stabilize your financial health, two major objectives are paying down consumer debt and building a healthy emergency fund. As such, every extra dollar you keep in your pocket <i>right now</i> by contributing to a traditional TSP (and, therefore, minimizing your current tax bill) is another dollar you can put towards these financial goals. </span></span><br />
<span style="background-color: transparent; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span>
<span style="background-color: transparent; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">As your income grows and you move into <a href="https://www.militarymoney.us/p/financial-independence.html" target="_blank">Phase 3</a>, it'll make sense to start contributing to both. More on this later, but if you contribute to both a traditional and Roth TSP, you receive the up-front tax benefit of the former and the retirement tax benefit of the latter. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Boost Your Savings Every Pay Raise</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When you get a raise, it’s really easy to let lifestyle creep take over. That is, you have some more money every month, so why not spend some more money every month? FIGHT THIS URGE! Remember your <a href="https://www.militarymoney.us/2018/11/WhyFinancialIndependence.html" target="_blank">original purpose for seeking financial independence</a> and use this to stay strong with your retirement contributions. So, here’s what I recommend: every time you get a years-in-service or promotion pay raise, add an additional percentage to what you contribute to your TSP. While the government will only match up to 5%, in 2019 </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">you can contribute</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> up to $19,000 total between your traditional and Roth TSPs (more if you’re in a combat zone, and this number typically increases every few years). Using this technique means that you’ll both save much more </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">and </span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">have a little extra disposable income each month. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">What Now? Contribute 5% to Your TSP!</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">For BRS service members, you were <a href="https://www.tsp.gov/PlanParticipation/EligibilityAndContributions/establishingAccount.html#BRS" target="_blank">automatically enrolled</a> in the TSP when you hit 60 days of active service, with 3% of your pay automatically moved into your account. If you don’t already have access to your TSP account, get it <a href="https://www.tsp.gov/sitehelp/content/accountaccess/index.html" target="_blank">here</a>. Once you can actually see your TSP account, go to your personnel office and 1) ask for instructions on how to change your TSP contributions (most service members will be able to do this on their myPay accounts), and 2) follow those instructions and make sure you’re contributing at least 5% of your base pay so you get all the free money the government is willing to give! </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">What Funds Should I Pick?</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">The final thing I’ll cover is the last choice you’ll need to make before putting your TSP savings on cruise control. Within the TSP, you have a few different investment options - basically how aggressive (high-risk/high-return) or conservative (low-risk/low-return) you’d like your investment growth to be. <a href="https://www.tsp.gov/InvestmentFunds/FundsOverview/comparisonMatrix.html" target="_blank">This chart</a> gives a great overview of the different funds, but, if you’re new to investing and not familiar with a lot of the terminology, I’d recommend using the L (“lifecycle”) Funds. These funds account for how far away from retirement you are and put together a mix of stocks and bonds that makes sense for that time range. This is an outstanding choice for new investors. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Now go get that free money!</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<h4>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<li><span style="white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><a href="https://www.militarymoney.us/2018/12/emergency-fund.html" target="_blank">Start an Emergency Fund</a></span></span></li>
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<li><span style="white-space: pre-wrap;"><a href="https://www.militarymoney.us/2018/12/credit-card-debt.html" target="_blank"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Credit Card Debt? Stop Spending!</span></a></span></li>
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<span id="docs-internal-guid-10ff0266-7fff-db3c-6a1d-a5269dc3552c"></span><br class="Apple-interchange-newline" />Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4642034062994917644.post-37639147047636629332018-12-12T14:43:00.000-05:002018-12-28T20:28:15.183-05:00Credit Card Debt? Stop Spending!<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF8DxBmh33z3PiOgiT-IlEzBLzDwgdsuy-wo9C7EDOzMrk8HdBK60R9QKpCub7_E_ghyEzIQ06WO5F1CkZdPbAGlWAs5BnluLR5xm_5UsHUaIbq6DQpEV2wGDQzIICSnvRJfw-EtxuANU/s1600/Screen+Shot+2018-12-12+at+2.02.07+PM.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt="Generic Credit Card" border="0" data-original-height="610" data-original-width="960" height="203" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhF8DxBmh33z3PiOgiT-IlEzBLzDwgdsuy-wo9C7EDOzMrk8HdBK60R9QKpCub7_E_ghyEzIQ06WO5F1CkZdPbAGlWAs5BnluLR5xm_5UsHUaIbq6DQpEV2wGDQzIICSnvRJfw-EtxuANU/s320/Screen+Shot+2018-12-12+at+2.02.07+PM.png" title="Generic Credit Card" width="320" /></a></div>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></h2>
<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">So You’ve Defined Your Purpose - What Next?</span></span></h2>
<div>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Ok, you’ve set the stage for financial independence by <a href="https://www.militarymoney.us/2018/11/WhyFinancialIndependence.html" target="_blank">defining your purpose</a>, the reason why you want to achieve that level of wealth. What’s next? You need to stop the bleeding! If you have credit card debt, you’re currently hemorrhaging money. You’re giving away your hard-earned cash to companies charging you an insane interest rate to borrow money from them. More on this below...</span></span></div>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">What’s Revolving Credit Card Debt?</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If you have a credit card, you’ve probably heard the term “revolving debt.” Take a look at the below statement and you’ll see two dollar amounts: “New Balance” - $1,343.16 & “Minimum Payment Due” - $25.00. If I only pay the credit card company the second amount, the $25.00 minimum, I will still owe $1,318.16 (my balance of $1,343.16 minus the minimum payment of $25.00). This money I still owe is carried forward to my next credit card statement and is known as revolving debt. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjndl1nHjquqXeUKN4XGJjFXf5GoDQrwixQ00ZgRL1935ujuhwgLmgvRhGA8u070pI1kYS79tuvvBAhX-kAN7sGUSN7jvjCHGeSZ48uh0SftdeloP8D_G8qEASnXDPXOPCswESPN72gudE/s1600/Screen+Shot+2018-12-12+at+1.25.41+PM.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Credit Card Statement Balance" border="0" data-original-height="640" data-original-width="1140" height="223" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjndl1nHjquqXeUKN4XGJjFXf5GoDQrwixQ00ZgRL1935ujuhwgLmgvRhGA8u070pI1kYS79tuvvBAhX-kAN7sGUSN7jvjCHGeSZ48uh0SftdeloP8D_G8qEASnXDPXOPCswESPN72gudE/s400/Screen+Shot+2018-12-12+at+1.25.41+PM.png" title="Credit Card Statement Balance" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Credit Card Statement Balance</td></tr>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Why Credit Card Debt is the Worst</span></span></h2>
<div>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">If I only need to pay $25 on a $1,343.16 balance, that’s pretty good, right? WRONG! The interest rate that credit cards charge you to keep a revolving balance, known as your <a href="https://www.creditkarma.com/credit-cards/i/average-apr-on-credit-card/" target="_blank">annual percentage rate, or APR</a>, is ridiculously high. In a recent <a href="https://wallethub.com/edu/average-credit-card-interest-rate/50841/" target="_blank">report</a>, the average APR for existing credit cards was 13.08%, and 19.05% for new ones. To explain just how absurd this is, recent <a href="https://www.bankrate.com/mortgages/30-year-mortgage-rates/" target="_blank">30-year mortgage rates</a> averaged between 4% and 5.5%, and you get a house with that! </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So, going back to the above $1,343.16 balance, take a look at the below chart to see what would happen if I only paid the $25 minimum balance every month. </span><span style="background-color: transparent; font-style: italic; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">If I made no additional purchases on this card</span><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"> and made the minimum payment each month, it would take me 8 years to pay off the debt, and I’d pay a total of $2,434. That means that I would have to pay the credit card company $1,090.84 in interest (total payments of $2,434 minus actual debt of $1,343.16)! </span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><br /></span></span></div>
<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5zuEGitIAGCp6PpSJvjj-Brh-cVJFK_KklLtmhS6Eaf70nv6iEhFX4WI9HLAo8g33kTda4hVXoJajrlW3dzfXdIhxHHUrEIkUv9iyp3xwIyKHRGeSTprkAz3XDPfRo6P9ZQcxWJ7b5DU/s1600/Screen+Shot+2018-12-12+at+1.26.08+PM.png" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img alt="Credit Card Payment Plan" border="0" data-original-height="642" data-original-width="1164" height="220" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj5zuEGitIAGCp6PpSJvjj-Brh-cVJFK_KklLtmhS6Eaf70nv6iEhFX4WI9HLAo8g33kTda4hVXoJajrlW3dzfXdIhxHHUrEIkUv9iyp3xwIyKHRGeSTprkAz3XDPfRo6P9ZQcxWJ7b5DU/s400/Screen+Shot+2018-12-12+at+1.26.08+PM.png" title="Credit Card Payment Plan" width="400" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Credit Card Payment Plan</td></tr>
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<h2>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Stop the Bleeding</span></span></h2>
<div>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
<div dir="ltr" style="line-height: 1.38; margin-bottom: 0pt; margin-top: 0pt;">
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Now that you see how much money you’re wasting if you have revolving credit card debt, you need to stop the bleeding. What does that mean? If you have revolving debt, STOP USING YOUR CREDIT CARD! Take it out of your wallet or purse, lock it up in a safe, give it to a loved one you trust for safe-keeping - just do something so that you don’t use it anymore. And for you online one-click shoppers, make sure any accounts linked to a credit card are also disabled. Bottom line, before you can start crawling your way out of debt towards financial independence, you need to first stop digging yourself into a deeper hole. </span></span></div>
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<h4>
<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-variant-caps: normal; font-variant-east-asian: normal; font-variant-ligatures: normal; font-variant-position: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Next Article</span></span></div>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><a href="https://www.militarymoney.us/2018/12/thrift-savings-program.html">Free Money: Enroll in the Thrift Savings Program (TSP)</a> </span></li>
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<li><span style="font-size: large;"><a href="https://www.militarymoney.us/2018/11/WhyFinancialIndependence.html" style="font-family: Georgia, "Times New Roman", serif; white-space: pre-wrap;">Define Your Purpose: Why Do You Want Financial Independence?</a><span style="font-family: "georgia" , "times new roman" , serif; white-space: pre-wrap;"> </span></span></li>
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<span id="docs-internal-guid-41fe5b39-7fff-e124-46c9-5790ac637fdb"></span><br class="Apple-interchange-newline" />Unknownnoreply@blogger.com0tag:blogger.com,1999:blog-4642034062994917644.post-58445238468088103632018-11-30T12:21:00.000-05:002018-12-12T14:44:42.790-05:00Define Your Purpose: Why Do You Want Financial Independence?<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx5ieKRP_J37afqqBphwdq005CthXaQK45W9DSHbOkdtHsAXbf7Pe24b_tIqmPzAOWTNucaSOk6PNqsa3qDKFjSaeJnJGR8bkCckXg1tRJ8K0nBlhzv9NheJsPsGwy5KVli2hSlP5KKvc/s1600/parachute-1416417_1280.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img alt=""Dive" into Financial Independence!" border="0" data-original-height="853" data-original-width="1280" height="213" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx5ieKRP_J37afqqBphwdq005CthXaQK45W9DSHbOkdtHsAXbf7Pe24b_tIqmPzAOWTNucaSOk6PNqsa3qDKFjSaeJnJGR8bkCckXg1tRJ8K0nBlhzv9NheJsPsGwy5KVli2hSlP5KKvc/s320/parachute-1416417_1280.jpg" title="" width="320" /></a></div>
<h2 style="text-align: right;">
<span style="background-color: transparent; font-style: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; font-weight: normal;"><br /></span></span></h2>
<h2 style="text-align: left;">
<span style="background-color: transparent; font-style: normal; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; font-weight: normal;">What’s a “Purpose?”</span></span></h2>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgx5ieKRP_J37afqqBphwdq005CthXaQK45W9DSHbOkdtHsAXbf7Pe24b_tIqmPzAOWTNucaSOk6PNqsa3qDKFjSaeJnJGR8bkCckXg1tRJ8K0nBlhzv9NheJsPsGwy5KVli2hSlP5KKvc/s1600/parachute-1416417_1280.jpg" imageanchor="1" style="clear: left; float: left; margin-bottom: 1em; margin-right: 1em;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"></span></a><span style="font-family: "georgia" , "times new roman" , serif;"><span style="background-color: transparent; font-family: "georgia" , "times new roman" , serif; font-size: large; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">As this is a military blog, I figured I’d start with some military lingo. In a five-paragraph order, the most important element is the mission statement. This statement - in simple and digestible fashion - tells all parties involved the who, what, where, when, and why of an operation. And, every mission statement is divided into two parts: task and purpose. The task is the who, what, where, and when of the mission. While this is certainly critical information, the most important part is the purpose, <span style="background-color: transparent; font-style: italic; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">the reason why we’re conducting this operation. </span><span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">As the situation on the ground changes, the tasks we’re expected to accomplish can change, too. However, the reason why, the purpose for doing something, never changes and drives individual initiative and ingenuity on the battlefield, regardless of how chaotic the situation becomes.
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large; font-weight: normal; white-space: pre-wrap;">Define Your Purpose: The First Step to Financial Independence </span></h2>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">So what does purpose have to do with building wealth? Life is long, things will inevitably change - sometimes for the better, sometimes for the worse. To tackle these changes, the short-term tasks we need to accomplish in our day-to-day lives will change as well. However, to truly accomplish financial independence, people need to be guided by much more than the whims of everyday life. This is why the first step to achieving financial independence is </span><span style="background-color: transparent; font-style: italic; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">defining why you want this independence</span><span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. What is your purpose? What do you want to do with your life that will drive you every day, regardless of what life throws at you, to continue seeking the wealth that will give you this precious status of freedom? Without this guiding purpose, it is near impossible to truly build long-term wealth. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">The “Lottery Experiment”</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">Okay, so I get that the above is kind of abstract, so here’s a good, concrete method to help you define your purpose. Imagine that today you won the lottery, we’ll say it was the Powerball - $1 BILLION! Now, some variations of this experiment ask you what you’d do </span><span style="background-color: transparent; font-style: italic; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">tomorrow</span><span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">. But that’s silly, because we’re all human, right? I know I’d go out and spend like a drunken sailor (no offense to my USN brother and sisters…) for a few weeks. So, here’s the question: if you won the lottery and knew you could stop working immediately, </span><span style="background-color: transparent; font-style: italic; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">what would you do next year? </span><span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">You’ve gotten all the impulse spending out of your system, now ask yourself, </span><span style="background-color: transparent; font-style: italic; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">what will be the reason I get out of bed every day? What will I do to fill every day? What will be the aspect of my life that gives me true joy and happiness? </span><span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;">When you’ve answered these questions, you’ve found your purpose. Who knows, maybe it’s one of the following:</span></span></div>
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<li><span style="white-space: pre-wrap;">Spending more time raising your children. </span></li>
<li><span style="white-space: pre-wrap;">Traveling with your loved one to learn as much as you can about each other and the rest of the world. </span></li>
<li><span style="white-space: pre-wrap;">Mentoring children through programs like </span><a href="https://www.bbbs.org/" style="white-space: pre-wrap;" target="_blank">Big Brother and Big Sisters</a><span style="white-space: pre-wrap;">. </span></li>
<li><span style="white-space: pre-wrap;">Starting a charity that helps solve a problem that’s particularly close to your heart. </span></li>
<li><a href="https://www.moneycrashers.com/ways-volunteer-give-back-community/" style="white-space: pre-wrap;" target="_blank">Volunteering in your community.</a><span style="white-space: pre-wrap;"> </span></li>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Bottom line, to achieve financial independence - and receive the true happiness that comes with it - you need to be guided by a purpose greater than yourself.</span></span></div>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Stay the Course</span></span></h2>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Now that you’ve defined your purpose, you need to stick with it - let it guide you through the ups and downs of life. As you face obstacles - a particularly challenging deployment, a set of PCS orders across the country, separation or retirement from the service - don’t let these minor bumps derail your path to financial independence. Remember your purpose, and let it motivate you to achieve true freedom in life. </span></span></div>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;"><br /></span></span></div>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Questions? Thoughts? Recommendations for another topic? Let us know in the comments!</span></span></h4>
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<span style="background-color: transparent; font-style: normal; font-weight: 400; text-decoration: none; vertical-align: baseline; white-space: pre-wrap;"><span style="font-family: "georgia" , "times new roman" , serif; font-size: large;">Next Article</span></span></div>
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<li><span style="font-family: "georgia" , "times new roman" , serif; font-size: large; white-space: pre-wrap;"><a href="https://www.militarymoney.us/2018/12/credit-card-debt.html">Credit Card Debt? Stop Spending!</a></span></li>
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<span id="docs-internal-guid-59f2de1d-7fff-4e27-b5b0-4ac301c0f1a5"></span>Unknownnoreply@blogger.com1