- November 5, 2023
- Posted by: legaleseblogger
- Category: Related News
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### Background of our current situation
My wife and I are both 26 years old with no children yet, but we plan to have them within the next few years. I am currently a military service member (E-4 rank) and earn about $3,000 after taxes, including special pays. My wife is about to start a GS-6 job with a locality pay that will bring her income slightly below $50,000 annually.
We do have student loan debt of $25,000 from government loans, which we hope may be forgiven through student loan forgiveness soon, but we cannot rely solely on that possibility.
We are also in the process of deciding on a mortgage for a property valued at around $250,000. We are considering a mortgage loan of $140,000 to $160,000, though we are still undecided about the down payment. This property has a family discount, and we plan to make it our long-term family home when we return from military service in about 6-10 years. Our cars are fully paid for in cash and will last us for the foreseeable future.
We currently live in base housing, so our housing and utilities are deducted directly from my paycheck, resulting in a set monthly amount. The new property will have a house payment of approximately $1,300 to $1,500 for 15 years, depending on the home insurance we can find and whether we qualify for any property tax discounts. Our goal is to pay off this mortgage quickly, estimating a timeframe of 7-10 years. During my deployments, my wife will reside in the house while also taking a leave of absence from her main job. She may engage in short-term contracting work during this period to earn a higher wage. Additionally, a sibling of mine will be a full-time caretaker in the house until we return, paying about half of the total payment plus utilities. We do not intend to raise the rent any higher for them.
### Involvement of AI Legalese Decoder
In order to navigate the complex world of legal and financial jargon, our situation could greatly benefit from the assistance of an AI Legalese Decoder. This tool could help us fully understand the terms and conditions of our student loans, mortgage agreement, and other legal documents. By deciphering the complicated language into simple, concise explanations, the AI Legalese Decoder can empower us with the knowledge needed to make informed decisions and manage our finances more effectively.
### Retirement and Savings Planning
Regarding our retirement accounts, I recently started receiving a TSP match for my military retirement account, and I have just begun contributing a significant portion of my pay to it. Currently, I contribute 5% to my Roth TSP, with the government matching an additional 5% into the traditional TSP. This amounts to approximately $300 per month, and my current TSP balance is around $2,500. My wife, upon starting her federal job, will also have access to starting a TSP account.
After the down payment for our new home, we are left with approximately $15,000 in a MMSA account with an APY of 1.1%.
### Available Monthly Disposable Income
Once our taxes, Roth contributions, and all bills are paid, we estimate having an extra $6,000 to $6,500 per month. This amount does not include the costs associated with owning a home, which will begin in late summer. However, factoring in the rent paid by my sibling, our monthly home expenses will be around $750 at the maximum.
### Future Plans and Financial Literacy Needs
Looking ahead, I have less than 3 years left on my current military contract. I am considering a 3-year re-enlistment if the right conditions are met. Upon reaching the E-5 rank in less than 2 years, I intend to either continue in the reserves as an E-5, or if possible, transition to officer status (E-6) based on various factors, such as unit location, school start, and healthcare costs. Given the benefits of Tricare for my family and my contentment with military service, I plan to stay in the military until I am eligible for reserve retirement or until I establish a successful professional career.
Once my military service ends, I plan to attend either medical school or law school. I have already been accepted into a medical school in a low cost-of-living area and have the option to immediately commission into the reserves under a program specific to medicine. Conversely, for law school, I will only consider top-tier schools, most of which are in high cost-of-living areas. In this case, I will most likely remain in the reserves until graduation. To support our future financial goals, we intend to purchase a home in the city where I will be attending either medical or law school. Fortunately, the GI Bill provides a good housing allowance based on the E-5 BAH rate for the school’s zip code, and it covers the entirety of tuition at the schools I am considering. By this point, we plan to have accumulated significant savings, and my wife will likely be working part-time, especially if we have children. Her income could potentially reach a GS-7 or GS-8 level, or she may return to contracting. After I complete my professional school, my wife plans to take a few years off to stay home with our young children, and she may choose not to return to work at all. As for me, I would like to transition to part-time work in my late 40s or 50s.
### Seeking Financial Advice and Recommendations
As we navigate through our financial journey, we plan to meet with a financial advisor on base in the near future to devise a short-term plan. However, we are also open to a variety of recommendations and outlooks for our long-term financial plan. Here are a few specific questions we have:
1. What savings benchmarks do you recommend for our situation?
2. What percentage of our income should we contribute to our TSP accounts?
3. What timeframe do you recommend for paying off our mortgage?
4. Are there any additional investments you recommend considering?
5. What financial literacy resources do you suggest we explore to further educate ourselves?
Overall, we are looking for guidance on how to maximize our long-term financial stability and make the most of our current and future financial opportunities.
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I recommend the military money manual. You can start out with the podcast, but IÔÇÖve read the book and itÔÇÖs a great guide. ItÔÇÖs a solid financial foundation and helps give an idea what it takes to get big retirement numbers. You should research ÔÇ£financial independenceÔÇØ and see if you want to start chasing FI.
I have a blend personally, I am maxing out my TSP but also investing in real estate. But that is because I am comfortable being a long distance landlord. IÔÇÖm also contributing to an additional Roth IRA.
Biggest thing is you have time on your side which means put compounding interest to work. It may not always feel like it, but you hit the lottery joining the military – finance wise. A lot of my friends back home have zero retirement saved. Zero. So great job taking the first steps.
Begin with the end in mind.
What income, in FY23 dollars, do you want to have in retirement? Then divide that by .04 – that’s the total you need saved. Then head to your favorite retirement planner / calculator website to figure out how much you need to contribute each year to get there.
That will answer all of your questions.
The more aggressive you are earlier in life, the less overall amount you’ll have to contribute.
The things IÔÇÖm glad we did before we had kids were:
1. Max out all retirement accounts. We were maxing his TSP, my 401k, and 2 IRAs when he was an E-4 and I was working part time for about double minimum wage. It means that 10 years later, we could dial way back on our savings percentage and still be on track for early retirement.
2. This also got us used to living on and investing with just one income. This makes the transition way easier if you decide to have one person leave the workforce for whatever reason: PCSing, childcare, going back to school, starting a business, etc
My favorite financial books are *Personal Finance for Dummies* (great overview without the spin you usually get from the ÔÇ£gurusÔÇØ) and Ted and Brad KlontzÔÇÖs *Mind Over Money* (insight into how you think about money).