My name is christian. Welcome to my channel, my passion is personal finance and my goal is to help you create a path to financial independence. So a quick background on my military service. I went into the marines when i was 17 right out of high school and i enlisted as an infantry rifleman. I did a few deployments in the infantry and after those initial deployments i got motivated to get into more of an elite unit. In 2006 right after marine special operations command was created. I decided to level up and i jumped over there and became a marine writer mos 0372 and i ended up spending the rest of and majority of my military career and special operations. Now, unfortunately, for the 10 plus years i was in, i didn’t invest any money. No thrift savings plan, no ira, nothing. This was really foolish of me. Most people that join the military are young. So, with respect to investing this is great because in the military you have steady, reliable income, you can count on and if you’re smart, you can start investing early, even if it’s just a little, you can increase your investment amounts as you progress in your career, the Importance here is get started. Most people in the military have benefits that reduce their required monthly expenses. Things like your housing allowance and being able to eat your meals at chow hall, so investing in the military should be easy and manageable for most service members.
So why didn’t i contribute to a tsp or do any type of investing when i was in well in 2002, as a private, we didn’t make a lot of money back. Then it was a little over a thousand dollars a month and the thought of money coming out of my already small paycheck seemed crazy to me, especially because now that i was making my own money, i can buy things crap really. I was too worried about spending money. I wanted all of the things and i got caught up in materialism after my ridiculous monthly spending. I really didn’t have any money left over to do anything. I lived paycheck to paycheck as a young marine. That was a very short sighted mindset, though, and had i been counseled properly, i would have understood that, as you naturally gain rank during your time in the military your paychecks raise and your income increases you may deploy and get extra pays, such as per diem or Hazard duty, pay or special duty pays and if you decide to stay in and make it a career, there’s potential for re enlistment bonuses, you can use all those opportunities to increase your investing contributions. So as an example in 2006 i decided to re enlist and i got a 28 thousand dollar reenlistment bonus. It was about 18 000 cash after taxes, and i have really no accountability as to where that money went. I mean i bought a car and a tv and got some tattoos, but after that i really couldn’t tell you where that money went.
I should have been way smarter with that money and invested at least a little bit. So, as an example, let’s just say that i blew 8 000 on it, you know, got a car or got a tv or whatever, and i decided to invest 10 000 of it. I want to run a couple examples to kind of illustrate the potential of even just a small 10 000 investment and where that could be today had i invested let’s, say 5 000 into amazon stock and 5 000 into google stock. So we can go to the motley fool for this, and if we look down here, we can see that google was trading for about 168.92 in march of 2006. So we’ll jump over to the calculator and do 5000 divided by 168, and that would have got us 29 shares today’s. Google share price is 2593, so let’s do 29 times 2593 and we’re going to get a total of 75 000 so that 5 000 investment into google would be 75 000 today. So if we take a look at amazon stock price back in 2006, we can see it fluctuated a bit here. So if we go down to reference this chart, we can see that it was in the 30s towards the middle of 06. So we’re, just going to use a share price of 35. jump over to the calculator and 5 thousand dollars divided by 35, would have gotten us. 142 shares of amazon stock amazon is currently trading at three thousand seven hundred and fifteen dollars per share.
So 142 times 37.15. 527. 000.. So if we add both the google and the amazon price together, we’d be at a grand total of six hundred and two thousand seven hundred and twenty seven dollars, woulda coulda shoulda. You can start small with fractional shares. So if you’re a young, e1 or e2 not making much, you can still invest small amounts, but the fractional share purchasing feature. Most brokers offer now here’s an example of the last stock purchase i made and, as you can see, i bought in a dollar amount, not a share amount, and this amount got me 10.7 shares of altria stock. Ultra is one of my favorite dividend: paying stocks and i’m going to be doing a dividend. Investing video in the near future so be looking out for that. So you can start small. You don’t have to have a lot and one of the most important factors of investing is time. If you’ve watched any of my videos, you’ve heard me say this multiple times and it is a big deal. I would have a significantly more amount of money right now had i started when i was young and after i first enlisted and had i known then what i know now and if you know me you know i love doing compound interest scenarios. So let’s do a couple quick ones: we’re going to run two quick scenarios, one assuming that we start investing right as soon as we get in the military, let’s say: 18 years old and we have a 20 year career.
So we invest from age 18 to 38.. The next scenario we’re going to run a little differently and say that you still went in at 18 and retired at 38. However, you didn’t get smart with your money until you were about 30 and only invested that last eight years of your military career. So, back to my favorite compound interest, calculator let’s set up the scenario, starting with an initial deposit of zero and we’re, going to assume a 10 annual rate of return, and this this scenario is going to be. For the you know, the person who invests throughout their whole career for 20 years but let’s just say for the first 10 years of their investing. They were only able to afford 250 dollars a month to invest, let’s calculate that first and then, after that, we’ll do the remaining 10 years and we’ll bump up the amount. So, after 10 years with 250 a month that 10 rate of return comes out to 49 965., so for the remaining 10 years now, we’re, starting with 49 000 we’re gon na leave the rate of return. The same at ten percent run it for remaining ten years and we’re going to bump up the amount to 500 because now you’re a little bit later in your career, and you can probably afford that. We’Ll calculate it and that’s going to come out to 227 thousand dollars now for scenario two, so you only have eight years of service remaining, but you start investing and let’s say you were able to afford 500 a month towards those investments.
What would that look like one thousand dollars so that’s a pretty big difference? Seventy one thousand dollars to two hundred and twenty plus thousand dollars so there’s some incentive to get started as soon as you can now let’s get into the easiest investing option for most military members: the thrift savings plan, the thrift savings plan is basically the 401k for The us government and military – and this is a really good option for most service members. In my opinion, the benefits of the tsp are, you can automate your investments, meaning that they can be pulled directly from your paycheck, and that way you never see that money and it’s automatically invested for you, and by doing this every month, you’re, essentially dollar cost averaging, Which is a great investment strategy and the tsp has decent funds with solid track records of appreciation and there’s, both the roth or traditional option so let’s go to the thrift savings plan website and do an overview of all the different options. So if we go to the website, which is tsp.gov, we can see that this website is actually pretty user friendly. The user interface is pretty straightforward and it really has all the required information that you need. I really do recommend you going to the website and looking into each of these sections, so you can fully understand how your money is invested. So if we scroll down here, we can see that it’s going to give us a basic rundown on all of the different fund options.
There’S two different types of funds that you can be invested in life cycle funds, which are also called target date. Retirement funds and individual funds and all of the individual fund options – are index fund options. So it’s going to give us a description of the lifestyle fund and, as you can see, there’s many different types in there based on year. The idea of this type of fund is that you select the year, you think you’re going to retire and then the fund invests itself. Accordingly, it starts off with more risky investments to begin with and then becomes more conservative over time, and once you get closer to your retirement there’s, a few different individual fund options as well. For me, this is the area that i would go to so, as we can see here with the g fund. This is basically a bond fund, a government bond fund moving down to the f fund. This is another bond fund, but it’s an indexed bond fund and it has many other types of bonds other than just government bonds. The c fund, as it reads, is a fund containing stocks of large and medium sized us companies, and the s fund is a fund containing stocks of small to medium sized u.s companies and then there’s. The i fund and the i fund is a international fund. I want to focus on the c fund and the s fund, because bond funds aren’t returning much of anything right now and that’s, something you may want to consider later on in life more as a preservation of wealth and then with respect to the ifund i’m.
Just really not a big fan of international funds, because i don’t have a good idea as to what’s going on outside the u.s, and i think you shouldn’t invest in anything you don’t fully understand. The c fund is basically an s p. 500 index fund. You get exposure to many areas of the market and it holds the biggest best performing companies in america reference. My last youtube short video. I did one in particular two in s: p 500 index fund i’ll link it at the end of the video. The s fund is more of an aggressive index fund that holds small to medium sized companies, and the benefit to a fund like this is that small companies have more potential for growth and therefore higher appreciation, as opposed to bigger, more established companies. So, potentially, a higher performing higher risk fund. Another thing you should be paying attention to with these funds is their expense ratios. As you can see, the c fund has a 0.051 percent expense ratio, and the s fund has a point: zero, six, eight percent expense ratio. So the s fund is a little more expensive overall, i think the tsp is a pretty good option. If you want, you can make your contributions, roth, meaning you get tax on your contributions now, instead of upon withdrawal in retirement – and i think this is a great benefit because you always want to invest in the most tax advantaged manner. More.
On roth verse, traditional in a future video, i highly encourage you to go to tsp.gov and learn as much as you can about this investment option. What fund would i invest in and why? Well, if you’ve watched any of my previous videos, you probably already know the s – p 500 index fund option is probably my choice. That would be the c fund and maybe a mix of the c and the s fund. If i got started really early, then towards the end of my career, i’d, probably shipped out of the s fund and probably put everything back into the s p 500, which is the c fund now how much money should you be allocating monthly? The tsp has a max annual contribution of nineteen thousand five hundred dollars similar to a 401k. So short answer is, i would be striving to max out this account annually that would be about sixteen hundred dollars a month invested, not something that’s, probably realistic for somebody. First, starting off in the military but possible after you have gained some rank and been in for a while. So if i could do it over again, what would i do differently? Well, first things: first, i would have started my tsp immediately and contributed to it, even if it was only fifty dollars a paycheck and any increases in pay, such as rank increases bonuses or money saved from being on deployment, i’d, invest all or majority of those increases For example, whenever i got into mars we were receiving level 5 special duty pay, which is about 375 extra a month.
I could have been saving that extra money. I didn’t need it and i was used to living without it, so it shouldn’t have been a problem. Investing it and then with respect to the tsp. If i got to a point where i was maxing out, my tsp, i would have opened another separate brokerage account and started a roth ira trying to max that out as well. Had i been smarter with my money when i was in the military, i probably would have been able to retire and never work again before the age of 40. that’s crazy, which would of course mean i’d be retiring. This year, idiot and that’s. My take on investing and being smart with your money while serving in the military. Thank you for watching. If you got value out of this, please like comment and subscribe and share this video with someone you think can get value out of it as well.