Question: If you were to just stuff money away in a mattress for 20 years, how much would it take each month to become a millionaire?
Unfortunately, you will not even make that much each month until you are an E-7 with 14 years of service or an E-8 with 10 years of service (based on the 2017 pay-scale without raises or special pay). So, how are you supposed to become a millionaire if you won’t even make a million dollars over the course of a 20-year career? Not to mention that you will have bills, responsibilities, and possibly even a family to care for?
Bottom Line Up Front (BLUF):
1. You must live on less than you earn.
2. You must stay debt free.
3. You must invest your money in assets.
1. You Must Live on Less Than You Earn
The foundation for good financial habits is living on less than you earn, but if you are earning only $500 every two weeks, then how can you possibly save enough to become a millionaire? You must bring in more money!
Getting at least one side gig that makes additional money every month is crucial to having enough money to live on, stay out of debt, and invest in assets. Most enlisted have a lot of spare time on their hands when they get off work in the evenings, and they spend that time doing things that are not productive, cost money, or both. Use that time to bring in a few extra dollars. Love to play video games? Get an account on Twitch and get paid by people who enjoy watching you play. Have time in the evening to do surveys and other online tasks? Check out Amazon Mechanical Turk where you can get paid for completing various tasks for clients. Have a special skill that people will pay for? Check out Fiverr.com, Upwork.com, Freelancer.com, or any number of other freelance sites where you can earn extra money working for other people. Bonus points if you can use skills that the military taught you to earn extra money. There are a lot of different ways to make money in your spare time that do not require you to get a second job. You just have to find them.
Many military spouses do not have jobs outside the home because they are taking care of young children (plus, childcare seems to cost as much as the spouse would make working outside the home which makes getting a job kind of pointless), but they can also find a side gig that makes some extra money every month. If you and your spouse both have side gigs, or if you both work on the same side gig and make double the money, then you are moving in the right direction. Side gigs are crucial to getting and staying out of debt and having extra money to invest in assets when you are an enlisted service member.
2. You Must Stay Debt Free
To keep as much money as possible, you must ensure that you are not paying out money that you do not have to. Interest on debt is money that you cannot afford to lose if you are trying to become a millionaire.
We have been programmed to think that we must have the newest and nicest toys, and there are plenty of people around military installations just waiting to prey on this programming. You can defeat this programming and these predators by saving your money and paying cash for whatever it is that you need or want. This goes for buying groceries, cars, and even a house. Yes, you can save up enough money to buy a house. When it comes time to buy a house, bonus points if you can buy an asset (see below) like a duplex or quadruplex. It is possible to buy a home as an asset where you get paid rent AND get your housing allowance every month. Finding ways to maximize the utilization of your assets is thinking like a millionaire.
Side note on credit scores: For most purposes, you do not actually need one! If you want a good credit score, then there are very simple, and interest free, ways to get one, but for now know that if you are paying cash, then people do not care what your credit score is. For most young people, it does not make sense to start incurring debt and buying on credit simply to establish a particular credit rating. Cash is king. Period.
3. You Must Invest Your Money in Assets
What is an asset? An asset is any investment that generates money. A single-family house that you live in is NOT an asset until you sell it. Houses take a lot of money to keep up, so your home takes money away instead of generating it. However, if you own a rental home, then it IS an asset as it generates income every month if you have a good renter in it.
What else is an asset? The Thrift Savings Plan (TSP) is an asset because your money generates more money in the form of interest that you earn instead of interest that you pay. Mutual funds, Certificates of Deposit, and even savings accounts are assets. Keep in mind, though, that not all assets are created equal. While a savings account is an asset, the percentage of interest that it generates is very low and below inflation which means that you should only keep as much money as absolutely necessary in a savings account (enough to cover basic emergencies, for example).
During my transition out of the Army, I met an E-7 who was retiring, and this gentleman owned a dump truck in another part of the country. This dump truck was a significant asset for him as it generated over $10,000 profit every single month. He hired a guy to drive the dump truck and keep it up, and together they ran a profitable business while the E-7 was still in the Army. I would have never thought of owning a dump truck as an asset, but it was (and still is) a great asset for him that he built his retirement on.
When finding assets, you can go the traditional route of investing your money solely in mutual funds, TSP, or rental properties, or you can take some of your money and go less traditional routes, like dump trucks, barber shops, or other unusual investments. In whatever way you choose to go about it, you must invest in assets in order to become a millionaire because an asset puts your money to work making more money which you can then use to invest into more assets. This is a snowball that starts out small but very quickly gains size as it rolls downhill faster and faster.
Bringing it All Together
You can become a millionaire before leaving the military, but you must be focused, determined, and smart about your goals and how you use your money. Keep in mind, though, that even if you do not reach that million-dollar mark before leaving the military, if you are debt free and investing in assets, then you are better off than 97% of the military, officers included. Just keep to the path and you will eventually become a millionaire or even multi-millionaire. I guarantee it.
Josh Davis is a retired U.S. Army First Sergeant. He is Ranger qualified, Airborne qualified, and SERE-C qualified. He is the recipient of the Expert Infantryman Badge, the Combat Infantryman Badge, the Bronze Star, and numerous foreign jump wings. He has a B.A. in Religion from American Military University and a M.A. in Human Services Counseling with a Life Coaching cognate from Liberty University. He lives with his wife and three kids in Buford, GA where he works as a freelance writer and is a barbering student.