Military Service Members’ “Immediate Actions” for Financial Success:

⬇ Pay Down Debt, ✔ Create a Long-Term Investing Plan, 
✔ Have an Emergency Fund

By Lori Schock, Director of the SEC’s Office of Investor Education and Advocacy

As a member of the U.S. military, you are called to serve every day in challenging environments to secure the freedom and prosperity of our nation. To meet these challenges, you engage in “immediate actions” training to better prepare yourself to respond to all kinds of threats and situations. You may also face challenges in another environment—your personal finances. On a daily basis, you may encounter hurdles and threats to your financial freedom and future prosperity. By starting early and taking immediate actions, you can help secure your financial freedom and ensure that you and your family prosper now and in the future.

The SEC’s Investor.gov has tools and resources to assist service members in preparing for the lifelong mission of financial success. 

Three immediate actions toward financial freedom include paying down high-interest debt, creating a long-term investing plan, and establishing an emergency fund. 

Immediate Action #1: ⬇ Debt – Pay Off High-Interest Debt, ⬆ Improve Credit Score

It’s important to pay off any high-interest debt. With the average interest rate on a credit card being over 20 percent, the money you’re paying on interest on an outstanding balance far outweighs the money you can normally make on most investments. Maintaining good credit and trying to improve your credit score go hand in hand when managing your debt. Once you get your debt under control, strive to live within your means and stick to your necessary spending and saving plan.

Immediate Action #2: ✔ Create a Long-Term Investing Plan

Saving and investing for the long term is the best way to achieve financial security. Identify your financial goals and create a plan that will help you meet those goals. You can use Investor.gov’s Savings Goal Calculator to calculate how much money you need to contribute each month in order to achieve a specific savings goal. 

You can build wealth over time by making regular contributions to an investing plan. The Thrift Savings Plan (TSP) provides a good foundation for your investing journey by offering low fees, tax advantages, and matching contributions of up to 5 percent under the Blended Retirement System (BRS).
 
The TSP offers a selection of stock and bond funds with different strategies and varying degrees of risk. This allows you to personalize where your money goes to take into account factors like your investment goals, risk tolerance, and time until retirement. You might also consider a lifecycle fund (L Fund), which is designed to make investing for retirement more convenient by automatically changing your investment mix and fund allocation over time, based on a target retirement date. Make sure your TSP allocation reflects your preference. The fastest way to see your money grow is to start early and take advantage of the power of compounding. For example, if you want to save $500,000 for retirement at age 65, by starting at age 25, you’d only have to contribute roughly $200 per month. If you get a later start and don’t begin saving until, say, age 50, you’d have to save more than $1,500 per month, nearly eight times the amount to reach the same total savings.  See table below for more information.

Immediate Action #3: ✔ Create an Emergency Fund

An important part of your saving and investing plan is to have an emergency fund in a bank or credit union. It can make it less likely you’ll go into debt if you have an unexpected expense. An emergency fund can start small ($25 per pay period), but as you earn more money, you can build it up over time by taking advantage of tax refunds or rank and pay increases. 

As you train to take immediate actions for our country, remember to take immediate actions for yourself and your family. Start your saving and investing plan now for a strong financial future.