The Military Money Manual

1. Embrace Financial Independence (FI) as Your Ultimate Goal

If your assets are 25–33 times your annual expenses, you are financially independent.

Define your freedom. Financial Independence (FI) means your invested assets or passive income can cover your lifestyle expenses, making work a choice, not a necessity. This state offers profound freedom to pursue passions, spend time with loved ones, or simply enjoy life without the pressure of a paycheck. The "4 percent rule" suggests you can safely withdraw 3-4% of your portfolio annually without running out of money, translating to needing 25-33 times your annual expenses saved.

Calculate your number. To achieve FI, first determine your annual expenses. If you spend $40,000 a year, you'll need $1 million to $1.32 million invested. This formula scales to any desired lifestyle, from "lean FI" (minimal expenses) to "fat FI" (extravagant spending). Military pensions or Social Security can reduce the amount you personally need to save, as they contribute to your annual income.

The ultimate endgame. The point of all this saving and investing is freedom—freedom to choose how you work, where you work, and what you work on. It's about having control over your time and life, allowing you to pursue what truly brings you joy and satisfaction, rather than being tied to a job you dislike.

2. Master the Nine Principles of Financial Success

After over a decade of deep financial research and personal investing, I’ve distilled everything I’ve learned about money down to these nine principles.

Foundational rules. These nine principles are timeless guidelines for achieving financial independence, applicable to anyone regardless of age, rank, or financial situation. They form the bedrock of a robust financial strategy, ensuring you build wealth systematically and avoid common pitfalls. Adhering to these principles will accelerate your journey to financial freedom.

Core actions for wealth. The principles guide you to:

• Spend less than you earn: The fundamental rule for saving.
• Avoid debt: Debt makes you work for lenders, not yourself.
• Pay down high-interest debt ASAP: Eliminate costly interest working against you.
• Save a three-month emergency fund: Create a buffer for life's unpredictability.
• Maximize tax-advantaged accounts: Leverage government incentives for retirement savings.
• Savings rate beats rate of return: Your effort matters more than market fluctuations.
• Keep investments LADS: Low-cost, Automatic, Diversified, Simple.
• Spend money on what matters most: Align spending with your values, not societal pressures.
• Buy income-producing assets: Make your money work for you, not just for consumption.

Discipline for freedom. These principles emphasize discipline and intentionality with your money. By consistently applying them, you shift from a reactive financial stance to a proactive one, building a fortress of financial independence that protects and grows your wealth over time.

3. Prioritize a High Savings Rate Over Market Timing

The most important factor when it comes to achieving rapid FI is your savings rate, not your investment return rate.

Your controllable lever. While investment returns are largely out of your control, your savings rate is entirely within it. This rate, calculated by dividing your total annual investments by your total annual income, is the single most powerful determinant of how quickly you reach FI. A higher savings rate dramatically reduces the time needed to achieve your financial goals.

Accelerate your timeline. The relationship between savings rate and time to FI is exponential:

• 10% savings rate: 45 years to FI
• 25% savings rate: Less than 35 years to FI
• 45% savings rate: Less than 20 years to FI
• 50% savings rate: 17 years to FI
• 80% savings rate: 6 years to FI

Focus on what works. Trying to "beat" or "time" the market is a futile exercise for most investors, even professionals. Studies consistently show that actively managed funds rarely outperform simple index funds over the long term, especially after accounting for fees. Instead of chasing elusive market gains, concentrate on consistently saving and investing a significant portion of your income into low-cost, diversified funds.

4. Leverage Tax-Advantaged Accounts (Roth TSP/IRA) for Growth

Money invested in a Roth account can grow untaxed for the rest of your working life and be withdrawn untaxed in retirement.

Maximize tax benefits. Retirement accounts like the Thrift Savings Plan (TSP) and Individual Retirement Accounts (IRAs) offer significant tax advantages designed to encourage long-term savings. These accounts allow your money to grow more efficiently by either reducing your current taxable income (Traditional accounts) or allowing tax-free withdrawals in retirement (Roth accounts).

Roth for military advantage. For young military members, Roth accounts (Roth TSP and Roth IRA) are particularly powerful. Contributions are made with after-tax dollars, but all growth and withdrawals in retirement are completely tax-free. This benefit is amplified for military personnel deployed to combat zones, where pay is already tax-free due to the Combat Zone Tax Exclusion (CZTE), creating a "triple tax-free" advantage.

Contribution limits and strategy. You can contribute to both your TSP and IRA annually, with separate limits for each. In 2021, this was $19,500 for TSP and $6,000 for IRAs. Prioritize maxing out these accounts, especially the Roth options, to build a substantial tax-free nest egg. If you're in the Blended Retirement System (BRS), contribute at least 5% to your TSP to receive the full employer match, which is essentially a guaranteed 100% return on that portion.

5. Keep Investments LADS: Low-Cost, Automatic, Diversified, Simple

Consistent, automatic savings poured into my simple and diversified index funds at low costs have been the cornerstone of my successful investment portfolio.

The LADS framework. This acronym encapsulates the most effective investment strategy for the average investor:

• Low-cost: Minimize fees (expense ratios) as they significantly erode returns over time. TSP funds and Vanguard index funds are excellent examples, often costing less than 0.05% annually.
• Automatic: Set up regular, automated contributions to remove emotion and market timing from your investing decisions. "Time in the market beats timing the market."
• Diversified: Don't put all your eggs in one basket. Invest in broad market index funds that own thousands of companies, spreading risk across the entire economy.
• Simple: Avoid complex, speculative investments. Stick to what you understand, like a "Three-Fund Portfolio" of US stocks, international stocks, and bonds.

Why LADS works. Studies consistently show that low-cost, passively managed index funds outperform the vast majority of expensive, actively managed funds over the long term. This strategy minimizes the effort and stress of investing while maximizing your chances of achieving market-average returns, which are more than sufficient for FI. Warren Buffett himself advocates for this approach.

Implementation in TSP/IRA. For the TSP, utilize the Lifecycle Funds (L Funds) that automatically rebalance for your age, or combine the C, S, and I Funds for stocks and F/G Funds for bonds. For IRAs, Vanguard's Total Stock Market Index Fund (VTSAX), Total International Stock Market Fund (VTIAX), and Total Bond Market Fund (VBTLX) are ideal.

6. Build a Solid Financial Foundation for Military Life

If you’ve just joined the military, these tactics will help you build a solid footing.

Smart spending choices. Establishing a strong financial foundation involves making intelligent decisions about your major expenses. For transportation, opt for a reliable, five-to-ten-year-old used car like a Honda Civic or Toyota Camry, paying cash if possible, to avoid depreciating assets and high loan interest. For housing, renting is often more flexible and financially sound for military families due to frequent Permanent Change of Station (PCS) moves, avoiding the high transaction costs and risks of homeownership.

Optimize daily finances. Manage your money effectively by:

• Online banking: Use FDIC-insured online checking and high-yield savings accounts with no fees, and create separate sub-accounts for different savings goals (emergency fund, travel, etc.).
• Budgeting: Implement an "anti-budget" by setting an aggressive savings goal (e.g., 50% of pay) and spending what's left without guilt, or use apps like Mint or YNAB for detailed tracking.
• Lifestyle inflation: Consciously live below your means, aiming to live at least one rank below your current pay grade to save more as your income increases.

Debt and insurance. Avoid "dumb debt" like credit card or payday loans, which carry crippling interest rates. If you have high-interest debt (above 6%), prioritize paying it off quickly using the debt snowball or avalanche method. Ensure you have essential insurance: auto (shop around, reduce coverage for stored cars), renters/homeowners, and term life insurance (SGLI/FSGLI are excellent, avoid whole life).

7. Capitalize on Unique Military Financial Benefits

The advantages military service members have in the travel hacking game are unparalleled.

Deployment opportunities. Deployments are prime opportunities to supercharge your finances. With Combat Zone Tax Exclusion (CZTE) pay, your income is federal tax-free, making Roth TSP and Roth IRA contributions "triple tax-free" (tax-free in, tax-free growth, tax-free out). Maximize the Savings Deposit Program (SDP), which offers a risk-free 10% annual interest rate on up to $10,000. Use this time to pay down debt and drastically cut expenses.

Blended Retirement System (BRS). If you joined after 2017, you're in the BRS, which combines a smaller pension (2% per year of service) with a 5% TSP employer match. This match is a guaranteed 100% return on your first 5% contribution, making it crucial to contribute at least that much to your TSP. The BRS also includes continuation bonuses at the 10-year mark, offering additional financial flexibility.

Military travel hacking. Military members and their spouses can uniquely benefit from travel hacking due to the Servicemembers Civil Relief Act (SCRA) and Military Lending Act (MLA). Many premium credit cards waive annual fees for military personnel, allowing access to valuable perks like airport lounge access, free hotel nights, and significant welcome bonuses worth thousands in travel. This can fund vacations and accelerate FI by reducing travel costs, but always pay balances in full to avoid interest.

8. Understand That FI Buys Freedom, Not Happiness

Financial independence will not make you happy.

Happiness is internal. While FI provides immense freedom and choices, it is not a direct path to happiness. The author emphasizes that "Wherever you go, there you are"—your internal state, habits, and relationships are more critical to well-being than your net worth. Delaying self-improvement until after FI is a mistake; continuous personal growth is essential.

Time affluence. FI grants "time affluence," the ability to choose how you spend your days, which is a significant contributor to happiness. However, true contentment also stems from cultivating gratitude, kindness, and strong social connections. The "Science of Well-Being" course from Yale highlights that material possessions often lead to "hedonic adaptation," where new things quickly become old and boring, failing to provide lasting joy.

Intentional living. The goal of FI is to liberate your future self from the necessity of trading time for money, allowing you to focus on what truly matters. This means being intentional about creating a post-FI life that aligns with your values, rather than assuming wealth alone will solve all problems. Use the freedom FI provides to invest in experiences, relationships, and personal passions.

9. Harness Compounding in All Aspects of Life

Most of your greatest experiences and joys in life come from small, frequent investments over long periods of time.

Beyond financial growth. The principle of compounding isn't limited to money; it applies to all the best things in life. Small, consistent efforts in relationships, fitness, health, and hobbies accumulate into substantial, positive outcomes over time. Just as a small investment grows into a fortune, daily investments in personal well-being yield immense dividends.

Consistent effort pays off. Consider how:

• Relationships: Daily acts of kindness, listening, and quality time build deep, lasting bonds.
• Fitness: Regular, moderate exercise consistently improves health and energy levels.
• Skills: Practicing a hobby or learning a new skill for a few minutes each day leads to mastery.

Internal locus of control. Embrace an "internal locus of control," focusing on actions and outcomes you can influence, rather than worrying about external factors. In life, this means consistently investing time and energy into what matters to you, trusting that these small, frequent efforts will compound into a rich and fulfilling life.

Last updated: October 24, 2025