How to Achieve Financial Independence in the Military

22:09This is average American household spending for one person households. And this is from a year ago. This person is spending about$46 ,000 per year across a large number of buckets, including housing, transportation, food, alcohol, personal insurance and pensions, health care, entertainment, apparel and services, education, and then a miscellaneous bucket. But our E1 through E3 does not pay for housing. So this$18 ,222 that the average one-person household spends on housing goes to zero. The smart soldier who is making$23 ,000 per year does not buy a$35 ,000 pickup truck. in this time period. So if this person simply buys a Corolla, for example, I found a Corolla that is less than an hour from Fort Bragg, formerly Fort Liberty, and this is for 5 ,500 bucks.

22:56This will do just fine for our 19 year old recruit for probably the duration of their service here. It's got 162 ,000 miles on it and will require minimal maintenance. There is no need to spend more than this over the course of those eight years. And I think we can drastically cut this transportation expense from$6 ,300 a year to$3 ,000 a year and be very comfortable. I have a question for David. Do you even need a vehicle when you're on a base? No. So you could have$0 in transportation if you wanted to. I will say it depends on the installation. But for the first four years that I served, especially in Japan, but then in Japan and in San Diego, at both duty stations, I was walking distance for everything.

23:42And they try to build it out to where like within a five to 10 minute walk in both installations for my first three and a half years I served was gym, chow hall, medical, my unit, my barracks, all of it, pool. And so I did not have a car for the first two years. And then when I went to San Diego, I blew all my deployment money on a Harley that I didn't need, but I didn't need the Harley. I just rode it on weekends for fun. And honestly, Yeah, you could Uber or mooch rides with friends and you could absolutely get rid of that completely. But it's also depending on the base, like Bragg is huge. So unless you want to be stuck at, you know, a little tiny hub and never leave, you're going to want some kind of ride or a friend to mooch off.

24:20I thought about doing it one way where like, oh, you could put all these to zero or very close to it. But I want this soldier to live a reasonable life during this period, right? And that Corolla will get them around during this, not in particular style. but be able to do all the things that they really want to do, I believe, on the budget that I've constructed here. That's my hope based on your feedback, David. It sounds like you could go much lower than this. And obviously these would look different if you're deployed overseas. So next I have food. I have a nice picture of the chow hall here, the DFAC dining facilities.

24:51I believe that's the short four here. And the food budget, I believe in theory I could put at zero for this person. But I believe that despite not receiving BAS, this person will want some variety from the chow hall during their time here. So I gave them a budget of about$200 a month to eat offsite. And this is for a single person. That seems like a pretty reasonable budget here, considering that the bulk of their food will be paid for by the chow hall. How am I doing here? I'd say you're spot on. Yeah. People will inevitably, at least on weekends, go out and Great. $422 in alcohol,$1 ,000 for personal insurance and pensions.

25:29Soldiers don't have to pay for pensions and they have very cheap insurance options. So you should, you will not be spending anywhere close to a one person household's dollar outlay on insurance and pensions here. Correct? Yeah. I'd argue it's probably like half of that. Perfect. So we can even go, go lower. I have a conservative estimate here. Soldiers don't pay for healthcare. So the$4 ,000 that a single person might pay for health insurance and healthcare, on a given year or potentially more is going to go to zero for our soldier. Soldiers don't pay for education. So the 824 bucks that the average American pays for education is going to go to zero for the soldier.

26:00There's a lot of free resources, I believe, for soldiers. And if they choose to begin getting college credits and degrees, they can do that with spare time for free or for the bulk of it paid for. For free. Yeah. Tuition assistance will cover you for I have a friend who got his doctorate all the way through on tuition assistance and then still had his GI bill for when he got out. Well, I believe that one of the things that soldiers and I have in common is a love for beer. Beer makes me happy and is an important part of life. And I know our soldier is 19 and would never drink, of course. But I have decided to reallocate some of this budget to reflect shared values here.

26:36And I've increased this very uncomfortably low$422 alcohol budget per year to$3 ,000 per year. That's a large number of cases of natural light for our soldier here. once they turn 21, of course. I've modeled that as if they were going to drink at 19. I don't know why. So I put that into the model here for this. And I've also said that this soldier deserves to live a little bit. So I've increased our entertainment budget. I've nearly doubled it for the average one-person household to$4 ,000 a year to let them live a little bit. So how's this, David? Is this a fair budget? I think that's reasonable.

27:07I mean, that's 300 bucks a month, give or take, for, or I guess if you count both, it's probably 600 bucks a month, right? So yeah. This allows this soldier to live from a fun perspective better than the average one person household by a considerable amount. Once we exclude the housing and transportation. Which is good because we do be partying. And I saw the your apparel. There's actually a clothes, a clothing allowance. So like it would be for like personal clothes. Sure. But like your your military uniforms are every year on the year anniversary. you get a clothing allowance that's supposed to be enough to, you know, replace your main items and cover whatever.

27:45Now it's probably not quite that, but it's like six to 800 bucks that you get. So you could theoretically erase that outside of like civilian stuff. So I think that's a good low number. Yeah. Awesome. So this all totals to about$18 ,000 in spend. Once we've bumped up our alcohol and entertainment budgets, not counting some of the other savings opportunities that we briefly discussed here in my model. And I believe that I've zeroed out the allowances here in my model because they're not gonna go to our soldier. They're just gonna go straight on through back to the military for the housing and food there.

28:18But I've said this soldier over three years, and they're, sorry, this is supposed to read E2. This does reflect the E2 pay. But this says the soldiers in year one, E1 and E2, and year two is an E2, and year three is an E3, are gonna get this level of income, about$90 ,000 in aggregate. And their expenses, with pretty good lifestyle, I believe, relative to the average American, at least, in terms of their ability to spend on the fun things in life, are going to be about, what is it,$44 ,000. And that's going to enable them to save after tax$31 ,000 in cold hard cash. That assumes no tax advantage, retirement, nothing in the TSP.

28:49This is just cash that could accumulate in our soldiers' bank account. Is that realistic, David? I think so, yes. And it's also not like you've already pointed out, it's not accounting for any special duty pay, a deployment, the results in a tax exempt combat pay status for a period of time. Like in my first, when I E3, E4, for me, I was in Afghanistan for seven months, tax exempt pay plus hazard pay plus whatever. So, and then on top of this, one thing that we haven't even mentioned on this is all of this is assuming that this person also chose a job that had no bonuses. And there are like, if you go like the nuke program in the Navy, that's like a 50K bonus that you're going to get the day you graduate MLS school.

29:26Now it's taxed, but I mean, even still, that's a chunk. You know, I know guys E2, E3 who have$50 ,000,$75 ,000 set aside, depending on that. So like we are like, just for those listening, like this is the like absolute bare minimum of like income potential. I'm learning all these different things. And again, I'm not an expert on the intricacies and nuances of all these programs. You are. That's why I'm glad to have you on today telling me about these things. This is the base case that I've modeled after a good amount of research, but it's just nothing replaces actually living and breathing this stuff for years.

29:56And I'm sure it's front and center for folks like you that entire time really doing this stuff. So I appreciate you saving me from any embarrassing misses here, like in these other opportunities that I don't know about. All right. So this person can save$31 ,000 and they're set up to start actually earning pretty serious coin in the next couple of years following this promotion to E4. So at E4, the pay bumps pretty dramatically. I think it's about$24 ,000 difference in terms of this number,$34 ,000, to the number that they're going to collect between their annual basic pay and all of their allowances, which I pay about$58 ,000 here.

30:31And that's only going to continue to climb as they go out there with their service commitment. I have them getting promoted to E5 in year six and then staying at E5 through the end of their eight-year commitment. Which, again, very conservative because I was E6 at year, I think, seven or eight. And I was in one of the slowest promoting jobs in the Marine Corps. How much do you save in the military? We'll be breaking down the expenses you won't need to worry about after this. AutoTrader is powered by auto intelligence, the hyper-personalized way to buy a car. Auto Trader's tools sync with your exact budget and preferences to tailor the online car shopping experience totally to you.

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33:49All right, let's cash back in. So let's review where I'm at so far. Soldiers earn very little during the first three years. We have little, we're going to put that in context a little bit, but their expenses are also super low. Everything that you could think of almost is going to be covered or could be covered by a smart soldier during that first three-year period. Most recruits are between 18 and 24 years old, with the average being about 19. First three years of military service, I'm really thinking of as a college alternative to some degree. Their peers are in college during that period of time, right?

34:19The same people in that same age bracket, many cases are in college racking up debt and or not earning income, certainly not income close to what the soldier is able to earn and then keep. Because of this dynamic, we have a very simple strategy. There's not really a need for this like complex layer of it. It's just keep expenses low and don't blow our pay. That's it. That's the whole goal for the first three years. And this E3 to E4 transition is a critical milestone with a huge bump in pay and allowances, a huge increase in the amount of cash coming into this recruit's life. But it also comes, more importantly, perhaps with freedom to live off base, resulting in the option to, again, receive those allowances.

34:59All this correct, David? Yes, sir. All right. I also want to call out this concept of earning very little in context here. So our median 21-year-old in America is earning 20 grand a year. Our average is earning$25 ,000, and the top 10 % are earning$46 ,000. Our age 19 E1 recruit is earning$25 ,000. This is not counting the allowances, right? If we count the allowances, this number is much higher, but they're not seeing this. They're not feeling this hitting their paycheck or bank account, so I've excluded it for the purpose of this discussion. That progresses this way until they're age 21 year.

35:33Our recruit, when they're age 22 and get promoted to E4, they're going to be earning$58 ,000 per year, which includes your BAS and BH, which puts them well above the average, well above the median, and a little bit shy of this top 10%, which I'll put to the discussion point earlier, this is not an elite level of income, but it is a serious compensation amount compared to the average or median person of that same age bracket. And this progresses nicely through age 26, where they continue to be above this level. We spent this time setting the stage for years one through three, right? Years one through three, there's nothing really to do here except get promoted to David's point.

36:14Do what you got to do. Keep your expenses super low, you know, or even put a reasonably high ceiling for these entertainment and alcohol budgets or whatever the fun stuff is, but make sure you keep the rest of the expenses low and are actually accumulating cash. And I think a great target for this is at least$30 ,000 by the time you hit E4 with little to no personal debt. If you can do that, I think you've set the stage for this next phase of the journey, which I think is where we can really begin to start moving toward financial freedom in years four through eight. And this is where we're going to see expanding income, especially in the sense that cash is coming into your life with the allowances.

36:50You should see your cash position expanding pretty rapidly. You should see your freedom and flexibility increasing with choices like where you live and what you drive and what you eat playing a bigger part in this. And you're have that optionality to get ahead. I want to introduce this concept though, because as you receive the allowances for housing and food, you are then actually responsible for paying for your housing and your food. So we have to add these expenses back into our model here in order to get an accurate picture, right? That brings our spending total pretty substantially up here to this much higher number from a spending perspective.

37:26So we have to figure out how we can address that housing situation. And so I found, this is where I want to introduce the concept of house hacking, right? A soldier who is house hacking could potentially live for free or for very cheap near these bases. There's a steady stream of very qualified tenants by definition near these large military installations. And so I went to the very biggest one, Fort Bragg in North Carolina, formerly Fort Liberty, and I found a home for sale. This is a three bedroom, two bath home, just a few miles away from the base that is for sale as of last week when I put this together.

38:00And I looked it up and I saw that rooms rent for$600 to$900 in the area. This is not the nicest house. It is one of the cheaper ones, frankly. So I'm assuming that this will rent for$600 a room for two roommates. I assume that you get a 6.4 % VA loan, which was the then current interest rate as of last week. And I assume that you have the following expense allocations for maintenance, personal utilities, vacancy allowance, and CapEx allocation. And if we are getting two roommates at$1 ,200 a month in rent, and we can reduce our cash cost of living to a ridiculously low number. We may even be able to live for free if we're doing a lot of this maintenance and capex work ourselves.

38:36How am I doing here, David? You're doing great. This is an easy base hit. Awesome. So I did more Excel modeling and put this into a, how would this impact our soldier over 10 years, this single decision, right? Can I just do this real quick because you were going to have a significant chunk of people who get on this webinar and they're like, housing is so expensive. I live in San Diego. As succinctly as possible, I will tell you that if you go with a duplex or a fourplex, you can use 75 % of the rent that's coming in to qualify for the mortgage. And you can qualify to a point my buddy bought a$1.2 million fourplex in San Diego County as a single E5.

39:10So I just want to throw that out there that the numbers scale for expensive markets because you're going to have a whole bunch of, it's not possible in my market. And that's wrong. As a real estate agent, I'm going to jump in and say, if you don't believe David, even though he's right, you should reach out to a lender in your area and start talking to them, asking them questions about the loan process and get a really good lender who works with the VA program all the time. I don't live in an area that we have a lot of VA loans. There's a lot of misinformation about the VA loan. Get a lender who works with this product all the time, not just somebody who says they can do it.

39:47I will say that I have an amazing VA lender that I would love to recommend to you. It is illegal for the lenders to kick any money back to me to recommend them. I just want to prevent you from having a horrible experience. And I'm sure David from military2millionaire.com also has some great lenders as well. Is that right? Where do you think I got my lender? I was going to say, I'm pretty sure that both of you have done a refi or a loan through a lender that I introduced you to at one point or another. And this is another thing like this. There are financial communities out there for military. There's like we are not the only people who nerd out about finance and not the only people who have attempted to help out military members with this.

40:28There are communities that are dedicated to this with true experts. You should definitely go seek those out from military to millionaire. David's community is one of those. We are just friends. We don't have any financial affiliation with from military to millionaire. Just let me know where to send the check. I put together a very simple model here as well for housing. And I said, you know, I assume that, hey, this person could rent a place and spend$1 ,200 a month on rent, which I think would be very common for someone stationed near Fort Bragg, for example, getting that$16 ,000 or so in BAH.

40:57They could buy a place like that house and get no help from roommates. They would qualify it without any rent coming in. Or they could house hack. And you can see the drastic difference in cash coming out of their lives if they're a house hacker, renter, or homeowner. By the way, I assumed a$7 ,200 cash outlay in my model per year, and that's what I'll put in later in the deck, which is more conservative interpretation of the numbers on this previous slide, just in case those are for folks that are wondering. And then the net worth impact is also very substantial because the house hacker is actually building wealth because that cash coming in from the renters, plus the loan amortization, plus the appreciation of the property, is actually helping them turn their housing situation into a net worth creator for them, which is not usually the case in housing.

41:44Whether you rent or buy, you're usually spending money on housing. It's an expense that comes out of your life. You're just losing less wealth as a homeowner over very long periods of time in many cases. So a house hacker can live ridiculously cheaply. I put the housing cost here at$7 ,000 a year instead of$18 ,000 a year. And that brings us to if we just stop here, we say this new person, they're going to spend the full, by the way, average food budgets. This assumes that your food budget is going to be consistent with the average American's household spending for a one person household. So I did not touch that number here.

42:18I moved it back up to the average number because that will come back into your life when you move off base. But if we stop here, you're going to accumulate$192 ,000,$192 ,000, not$195 ,000,$192 ,226 over an eight-year service commitment, but without investing anything. That assumes a 0 % return. And you'll also have a rental property, one rental property, this first house hack, which you've probably moved out of as you've moved to different locations at that point. But you'll have this one house hack that has built$41 ,000 in equity, right? Does this seem achievable, David, still? Absolutely. So how well can we invest that nearly$200 ,000, right?

42:54Well, if we stick our cash in an index fund and earn 10 % a year, not using any tax advantage accounts, that bumps that number to about$210 ,000 in wealth that can be generated, which is a nice bump, but I think we can do a little better on that. What if we serial house tacked? And to your point, I went to the three largest military installations in the country. This one is outside of Fort Bragg, right? This one is going to be Fort Campbell. This is a triplex for sale. This is a duplex in Killeen near Fort Cavazos. Did I pronounce that right? Who knows? They keep changing names. And then this one is near McCord Air Force Base near Seattle, Washington.

43:30This is actually a duplex for 480 in Tacoma, Washington. So these would not be the nicest properties in these areas, but they seem to surface to me to be serious candidates for further investigation for a house hacker. So I think this is possible in all those. I did not do San Diego because it was not one of the top three largest ones. I'm sure there are a lot of folk stations in San Diego. That's a harder market. And I think that one of the things you can do if you're serious about this is cash accumulation is the game, right? How much of this, the more this number piles up over your years, the more options you're going to have with respect to being able to take over a mortgage, bring some cash, bump that down.

44:07fix things up or otherwise find advantages or opportunities in the area that you're going to be deployed. Well, and this also assumes that, like you said, serial house hacking, like there's a very good chance that this person could be at, you know, three to four duty stations in that eight years, if not more, and they could use the VA loan two to three times, maybe more depending on, and they wouldn't even need to use it after that. You do it twice and then you could go conventional, but I mean, depending on remaining entitlement, and we're not going to get overly complex in this, But just looking right there, if you bought the Campbell one and then the Killeen one and then you move to Washington, I can tell you based on county loan limits that you could buy all three of those zero down because the Washington's county loan limit is probably a million dollars.

44:47By the time you got there, you'd still have enough entitlement to buy all three at each PCS duty station. Remember, this recruit is$30 ,000. So they could put down 5 % on this property and use an FHA or low down payment conventional loan on these first two. Let's say they got stationed at Fort Campbell, then Fort Cabazos for a year or two each. And then they bought this one. And in year five or six, they're stationed in San Diego. Well, now we can use the VA loan and we've got all this income from our rentals that we can add to our basic pay and BAH and BAS that helps us qualify for that$1.2 million property.

45:22That's how that compounds pretty nicely for this person. You might even want to save the VA loan, depending on what your strategy looks like and how long-term you're thinking, and just put down a low down payment conventional, for example, on this because you have that cash. That's what I did on this house. We haven't talked about assuming a mortgage, but we're starting to get into more of a buyer's market. This is a rare in practice, but in some markets that are deep buyer's markets, you may find that you can assume a loan. VA loans are assumable. They come at the opportunity cost of the person you are assuming the mortgage from, from using another VA loan on the future or using that amount of their VA loan towards that next credit.

45:57If it is a veteran buying the house, they can take over the entitlement from the original owner, and then that person can restore their entitlement and use it again. It's not a has to, but it is a can. If it is a non-veteran assuming a VA loan, which is possible, then the veteran would lose their entitlement. Awesome. So even better. And I think that you'll find during your time in the military that you will be looking at properties near bases that you're stationed at or duty stations that you're stationed at, that there will be sellers who have VA loans. And you may be the highest bidder. That price, that 3 % mortgage that is assumable may allow you to pay more for that property, making you a very compelling buyer.

46:37There is a lot of paperwork that goes along with this. It takes a while to do. So it's a little bit rarer in practice than I had hoped for a few years ago. but this is an option available to folks. And if you're serious about it, you may find opportunities here and there during your time in service. You'll also need to potentially have a lot of cash because let's say that the VA loan on a property is 300 grand and you're buying it for 350. Somebody's going to come up with that 50 grand. So that's why it's so important to save your pennies early in this journey. So that these options emerge for you in years four, five, and six.

47:05All right. We also have a live-in flip. This is Mindy's favorite strategy. You could do the exact same. Let's say we take that property and forget renting it out. This first house hack, I said, the$157 ,000 place in your Fort Bragg, and you put some money into it, fix it up, make it nice. Well, if you live in that for two years, you can sell it and pocket the capital gain tax free. If you don't live in it for two years, you could potentially rent it out for much higher rental. Maybe those room prices go from 600 to 900 bucks a month in rent. So this is a very powerful play to put in place as well in combination with a house hack or two.

47:36I have a question for David. does this two-year limit apply to service members when they're being transferred to another base? Okay. So the intent to occupy is a whole thing and people try to, gurus try to teach around it, but it's reasonably assumed to be one year as far as the VA goes. But if you get orders to PCS or to move or whatever, or like something that changes your situation, then you can move out of the house. No problem. Oh, I meant the tax part. Oh, that's, see, that's what I was raising my hand about. This is one of the coolest things ever. So the section 121 exemption, which everybody knows, or at least some know is like the day that you sell the house, if you had lived in it for 24 cumulative months prior to that sale within the last five years.

48:18So two out of the last five years, you lived in the house, you're exempt from up to 250 for single half a million. If you're married, the military gets a 10 year extension. So if you bought the house active duty and you sell it within three years of leaving service, you just had to occupy it for two of the last 15. And so my buddy, for example, bought a house in 2014, moved out of it in like 2017, sold it in 2022, would not have met the two out of the last five, netted$517 ,000 in capital gains because this was in San Diego County in North Park, if you're familiar. And because he was active duty, he got to write off the full half a million and paid capital gains tax on$17 ,000.

48:55Pretty rad. Yes, that is a strategy that I have used. I'm going to give you one more bit of updates. It's Natalie Kaladi told me that it's$250 ,000 per person on title that is capital gains exempt. So if you have, let's say, an 18-year-old daughter who has been living in the house and you put her on title as well, now you've got$750 ,000 in tax-free capital gains. I also want to call out something here on this live-in flippin' house hack concept. Like San Diego, people poo-poo San Diego, right? And it's too expensive. I cannot possibly afford it there. But again, if you're able to figure out ways to qualify for that, for example, by having several house hacks and some income, the appreciation in markets like San Diego can be very powerful.

49:42And there's some rules that are very interesting. So, for example, let's say that I'm a Navy submariner, right? And I'm going to be out for many months on tour here. And I buy a property in San Diego. Well, San Diego has got – you've got to have a license in order to do short-term rentals, for example. But think about that. Is there an opportunity there for a sailor in San Diego who's going to be out for months in a row to buy a house, have it be a short-term rental because it's their primary residence, right? And they're able to get a preferred status on these licensing. They're able to rent it out as a tier two or tier three short-term rental.

50:21And they're going to have very limited competition in whatever area that is for short-term rentals because the area typically prohibits them except to owner-occupants. Are there opportunities like that in some of these more expensive markets that are there for the creative and prepared soldier? I would say yes. I actually, my last two years in the Marine Corps, I was stationed in Oceanside, north San Diego County. I ended up renting just because of where the market was at the time. And I rented a four-bedroom, three-bath house. And I got the landlord to agree that I could sublet bedrooms. And so I had two bedrooms on Airbnb out of my house even while I was in it.

50:58And I paid, I think it was$3 ,000 a month in rent. And like$2 ,500 of that, I got back through Airbnb. It was great. I'd say Airbnb. And then my buddy John was also a, he hates if I use the word tenant. So we will not use, we will not call him a tenant. He was a paying roommate. But I loved, I love that guy. That was fun. That was good times. That's, I think, where this creative aspect here, you have the concept of the house hack. You have the concept of the live-in flip. But rent by the room, renting out portions of a duplex, short-term rentals, these are all variations on this theme. And depending on where you are stationed, you may find that there are oddball or creative rules that allow for immense profits, especially for the owner-occupant.

51:39Go looking for those where you are stationed, and that may make the price palatable, right? And by the way, you don't have enough money to buy a place in San Diego. Well, I'll tell you what. Let's not use me personally. But let's say you want to buy a place in one of these more expensive markets, and you're in E4, right? And you spent the last four years accumulating$65 ,000 in cash when most people are broke. And you read a bunch of real estate books and are active in that community. And you want to buy an$850 ,000 to$900 ,000 duplex in San Diego County, make part of it a short-term rental and the other half a true long-term rental for that because you're taking advantage of that owner-occupancy exemption for the half that is a short-term rental.

52:21Guess what? You're going to have good odds of raising money. You know who's not going to be able to get financing for that is hopeless. The dude is broke as an E4 at that same point in time. Right. There's a that's a there's a story behind accumulating sixty five thousand dollars as an enlisted soldier over a four or five year period. That is very compelling, I think, for the right private investors. If you go seeking them and make this a part of your your journey. I'm not going to name drop, but I've got friends who have done exactly that as E4, E5s. That's someone to bet on, right? Like something, some discipline was in this person's life for years to prepare them to put that down there and they need another 60 to 100 grand to do that.

52:56I bless you. They have reasonable odds of getting that. So some parting thoughts here, right? I believe that the theme here is to set yourself up for this several hundred thousand dollar outcome after an eight year service commitment. You really got to drastically cut your expenses like housing, transportation, and your day-to-day items there. spend only on what you value. You need to build this huge liquidity position because it's going to expand your optionality, especially in areas like real estate, as you have more and more cash. I want to invest primarily outside of the TSP because again, taxes are just not a major factor on this journey for our enlisted soldier in the first eight years.

53:31So there's not really this major tax advantage from investing in the TSP. And I believe that the house hack and live-in flip is going to be far more powerful from an optionality standpoint. But again, after we crest this kind of$50 ,000 mark, I would not be opposed to investing in the TSP. It's just, it's not a big difference in these first couple of years. It makes a much bigger difference over longer time periods. And I would recommend the TSP for someone who is less aggressive taking that middle path. Just some caveats there. We're going to concentrate and buy a handful of large, aggressive, carefully researched investments, perhaps in real estate.

54:00And we're going to obsess. This is not going to be a one-off thing. I'm going to buy some real estate in three years. I'm going to read a bunch of books on real estate. I'm going to join these local networking groups each place in that I'm stationed, maybe a couple of online ones as well, and really immerse myself in this world of finance. And I believe you can substantially crush this$250 ,000 net worth number over this eight-year service commitment that we've created here in a pretty substantial portfolio. Might look like hundreds of thousands of dollars in wealth saved, hundreds of thousands of dollars in real estate equity, plenty of runway, all that kind of good stuff.

54:31So how am I doing with this so far, David? No, I agree with your assessment. Let's also briefly touch on officers. I know know about 18 % of service members are officers. I have a whole separate one for officers that is different from this, but I want to call out that officers earn elite pay across the country. They complain about it and don't realize this, but graduates of the U.S. Naval Academy in particular, they earn the fourth most on a early career and mid-career scale out of all universities in the United States of America. It's an incredible amount of money that these folks are making.

55:03This is from two years ago. This has only gone up since then. I couldn't find the most recent data set, but this is an incredible amount. West Point's up there as well, and I don't think that Air Force Academy is too far behind here outside the top 10. This day one after graduation pay is like$48 ,000 plus another$34 ,000 in allowances for a total of$87 ,000 day one after graduation pay for these officers, and that bumps up to like$122 ,000 in just two years following that and their promotion to O2. And they can house hack right away.

56:02first eight years from a first E to year four of service for an officer in the military. It's all going to depend on the person, but the opportunities are there for sure. But I will call out that the officer, once we get past year three or four or so, is still going to start to run away with it. That's where the income really begins to get incredible. And an officer that's really intentional about it will start to see that compound super meaningfully without it before we even get to house hacking and that kind of stuff here and hundreds of thousands of dollars of wealth after five years, if they keep their expenses very low and are very intentional about this.

56:30And I believe in this book, this does include a model which includes a few house hacks during this officer's journey, by the way. And that's all she wrote. I love it. One thing I just wanted to touch on real quick, just this is total random sidebar. But I think like investing near military installations, especially these huge ones where like, you know, Fort Bragg is not going anywhere, creates a nice spot where people are super worried about a recession. But like if the vast majority of that market's income comes from military installation that is going to stay there, it creates a much softer landing point for a market turn because the driving force of revenue is people whose pay isn't going to change and they aren't going to get laid off, which is great and allows you to create that buying opportunity on the downswing.

57:13And then simultaneously, people are always worried about tenants. By and large, being a military person, your tenant pool of military people is going to be a better tenant pool than none. And that's not because civilians are nasty and service members are great. That's because 90 plus percent of service members have a security clearance. They've passed background checks. They've got guaranteed job. They fit the mold for who you would want on a basic criteria unless they just screw up their credit. it. And if they totally screw up as a tenant, every landlord I know asks for their commands info and can call their boss and be like, yo, your dude just like destroyed my house for no reason.

57:50Not that that's necessarily, I don't know if that's ethical, depends on how you work through it, but like it's an option and most kids or app, you know, whatever are going to behave decently because they don't want the reputation of trashing somebody's house. There's all these other qualitative items here. And I am sure that there is, there is exactly what you just said. There And maybe also risk if there's a bunch of new construction going in one of these areas that could cause prices or rents to go down with it. So there's more work to be done for people that are interested in this. But I think the opportunity is fully there for service members, enlisted or officers to really come out with an immense head start compared to their median or average counterparts that are not in service.

58:30One of the huge advantages is this ability to just model everything. You just know exactly what's going to happen. so you can plan around that and make your decisions and bets in the context of those rules. Whereas I think, you know, like other folks can get ahead from an income perspective in a way that service members can't, but it's going to be less predictable in some ways, and they're going to play by a different set of rules. So absolutely, someone who goes and crushes it outside the service can get ahead. They can pace far ahead of a service member in terms of wealth if they go all out.

58:57But man, this is a good opportunity if you just don't blow it for a lot of service members. Scott, I have a couple of questions, one for you and then two for David. Up at the very beginning, you had the cash flow neutral screen where it said these people are buying liabilities that they think are assets. I would just like you to clarify what that means. I know what you mean, but I'm not your target market for this presentation. Classic example of this is the house, right? This is straight from Rich Dad, Poor Dad. I really appreciate his take on this concept, right? The house, for example, if you buy a standard house and do not rent it out, is going to take money out of your life every month.

59:35You're going to pay the mortgage bill. You're going to pay the utilities, the insurance. You're going to pay the taxes. You're going to pay for maintenance. And you're going to have to repair major systems every decade or so around the house. That's taking money out of your life. People consider a house an asset on their balance sheet, and it is technically an asset. But it's not an asset in the sense that it's putting money into your life. And we're talking about acquiring financial assets here, right? A car is similarly not an asset. The less you spend on your car, the richer you're going to be.

1:00:03The less you spend on housing, the richer you're going to be over time. We want to acquire assets that put money into our pockets. A rental property, for example, is an asset if you buy it right and make the right assumptions here because it should generate more income from rent than the costs to maintain the property inclusive of that mortgage and the maintenance. It should appreciate in value and you should amortize that loan over time. and that puts money into your pocket. So same thing with stocks or bonds or other traditional investments. I agree with all of the above. And I would just like to say for anyone who decides to follow me on social media after watching this, I did sacrifice on the vehicle front for like a long time.

1:00:40So don't judge me for the brand new Corvette Z06 I'm driving. I earned it. That's the thing is, this is just the beginning of this journey, right? I didn't like the model is a tail. I know, I know. I just, someone's going to get over there and be like, this guy He was just telling me to buy a Corolla and he's in a - But that's it. I drove a Corolla. I was in the military, but I drove a Corolla for many years. I had a 1988 Volvo 740 Turbo that fell apart on me. You do that until the wealth begins to compound past that several hundred thousand dollar mark, right? Once you get to this 250,$350 ,000 mark that I think a lot of people can get to in their time and service, then the investments begin to compound if you keep at it.

1:01:18And you're going to look up one day, maybe in your thirties, maybe your early thirties, this enlisted soldier. And you'd be like, I'm a millionaire now. And guess what? That asset base can buy your fancy schmancy car or your fleet that David now has, I believe that are pretty fancy and you drive it. And that's the point. Prior to a year and a half ago, the most I'd ever paid on a car was 12.9. And that was, I don't think I'd ever bought a car that was newer than six years. And that 12.9 bought me a diesel Jetta station wagon that looked like a mom mobile, got 40 miles a gallon and I drove 140 ,000 miles on it in three years.

1:01:55So yeah. Yeah, I agree. A hundred percent. The car is the fastest and slipperiest slope, I think for young service members, because they want the high interest Mustang. Yeah. And by the way, like this, this is an asset base in a business that you've built because of this foundation that you poured. It sounds very similar to what I described here, different, different types of journeys, maybe even some mistakes that slowed that journey unnecessarily. Then I call up this guy, David, and I say, can you go over this presentation real quick before we air it? And he says, sure. Picks up. He's in freaking Barcelona, just ran with the bulls, several cocktails deep.

1:02:29And he's flying back the next day to his house in Missouri with this fleet of fancy cars purchased from the asset base that has been built up over this time. This is the start. And then, of course, it's going to take you another five, ten years to compound it into millions, right? This is just the beginning of that journey. But I believe that this person who set up for that after eight years has a very good shot at getting to that millionaire mark. The opportunities and options expand so geometrically from that point that it's impossible to model out. You know, I could just drag it across, but it's impossible to model out exactly where those options will take you at that point.

1:02:59All right, Mindy, you said you had two for me. I have two for you. You mentioned something about the savings deposit program that has a 10 % yield. Yeah, this is a it's just a savings account that is it's offered when you're deployed. So it is a 10 % guaranteed backed by the government savings program that is for anybody who's deployed. You can put, I think you can put up to 10 grand in it and the entire time you're deployed. And until you pull it out, it earns 10%. And you can put it in as a direct deposit from your bank or you can front load it by like writing a check up to whatever your base pay amount is until you've got 10 grand or whatever.

1:03:33You can put$10 ,000 in there while that's only for being deployed. Oh, and it's tax exempt. Tax exempt. when I come back from deployment, if I don't pull that money out, is it still earning 10 % or is that only during my deployment? Don't quote me, but I believe so. I can't remember how long I left it in there. Because I would never, ever take that out. I'll take the$10 ,000 at 10%. Yeah. I can't remember if you have a time limit on that or not. I yanked it right away to go buy a Harley. Okay. So if you're a service member and you have this option, take advantage of it and then let me know if you have to pull it out after you come back.

1:04:09But the Harley was less than 7 ,600. Yeah, the Harley was great. The Harley, I put 11 ,000 miles on that in four and a half years, three and a half years. And it was not a great financial decision, but it was a great life experience decision. And realistically, owning the Harley was less than most cars people buy, and the gas was cheaper. And in California, and if I was an entrepreneur, here would be my justification. In California, you can lane splits. You don't have traffic, which means you save an average of 30 to an hour every commute. Time equals money. But I wasn't an entrepreneur at the time, so it just meant more time to drink beer.

1:04:38But, you know. And then the second one is the service member program to reduce debt where it goes down to 6 percent. S-C-R-A, Service Member Civil Relief Act. OK. Is that automatic or do you have to apply? No. I mean, you have to notify them, but it's federal. It's a federal act. Yeah. Or debt that you had prior to service. Now, a lot of installations or banks will actually honor it on debt even after the fact. In fact, there are some things, I don't know if this is still going on, but for a little while, you could apply for a personal loan through Amex. And then the day you got the loan, you could send them your SCRA stuff, even if you were already in the service, and they would just waive your interest on it.

1:05:17And you'd have interest-free whatever for a little bit. I don't think they're doing that anymore, but there's a couple installations that will still work with you even after the fact. But the act basically says any debt you had prior. And I don't actually know if it includes mortgages, but credit card, auto loan, all of that stuff for sure, just cut to 6 % flat the day you join. Okay. So yeah, if you are listening to this episode and this is something, oh, I do have some debt, it's not going to be automatic. You have to let them know, but let them know so now you're not paying so much interest and then bust out those debts.

1:05:49Yeah. And then take all the interest you would have been paying and put it into the paying it down. Yeah. Because I could see somebody listening to this and saying, oh, okay, so now they're going to change it for me, right? You have to do the work. Yeah, you got to go apply. All right, David, this was awesome. Scott, thank you so much for sharing all of this information with our listeners who are either military or have military members in their life. I hope they learned something new and I would love feedback from you about what you learned or how great this presentation was. Mindy at biggerpocketsmoney.com, Scott at biggerpocketsmoney.com And David, what's your email?

1:06:25Go to thebestpodcastguest.com and it has my contact info on my social media. I'll make it even simpler. We're going to create a new URL at biggerpocketsmoney.com slash military. And this will have all the resources we discussed today. We'll have our presentation, links to where you can find out more about David and all the great resources at From Military to Millionaire and other sources there. It'll have the presentation. Like I said, it'll have the Excel spreadsheet with the quick math. I have it for both officers enlisted. And you can download all that right there and get a link to the episode here.

1:06:57I'll make a few corrections based on our conversation today as well before uploading. I love it. Thanks for having me on, guys. All right. That wraps up this episode of the Bigger Pockets Money podcast. He is David Perret from Military to Millionaire. He is Scott Trench from Bigger Pockets Money. I am Mindy Jensen saying Semper Fi. Semper Bye. Goodbye, Semper Fi.