Another Check to UC Berkeley

I just mailed off another $1,500 to Berkeley for my son's education. I am very grateful that, so far, we haven't had to borrow any money to pay for college. California gave our family the in-state tuition rate as military members living in California.

In 2009 we expect the New G.I. Bill to kick in, which should pay for his tuition. Since I have more than 10 years on active duty, I shouldn't incur an additional active-duty commitment to accept the money. I've read that if you have at least 6 years of active service, you can transfer your benefit to your dependents, but it incurs a 4-year service commitment for you.

The G.I. Bill covers the enrollment fees of the public universities. If you select a private college, you'll have to make up the difference. Also, dependents are not entitled to living expenses, which military members themselves would be able to collect.

All in all, we're very grateful for the benefit. It came just in time for our family.

Military Coupons

There's some garbage here, but there are a few good deals to be had at militarycoupons.com.

Looks like 3.9% in 2009

According to various sources, including the Federal Times website, military members will be receiving a 3.9% raise in 2009. In addition, Congress has recommended that raises from 2010-2013 be 1/2 percent higher than the employment cost index. That would make military raises predictable and would likely outpace inflation.

Recall my "Really Painless Retirement Savings" post. By just setting aside your raise you'll save a significant amount of money changing your monthly budget.

Saving like our Korean Friends do

In the Saturday, Sept 6, 2008 issue of the Korea Times, the front page story read "Private Spending Drops for 1st Time in 4 Years." The story went on to say that people were spending more on telecommunication and medical services, but less on clothes and shoes.

The punchline of the story was that the people of South Korea are saving more of their disposable income now in response to a sluggish economy. How much do they save?

31.9 PERCENT.

Compare that to the United States, where our savings rate has been close to 0. Here's the chart from the US Bureau of Economics Analysis.

Some economists believe that our savings rate numbers don't tell the whole story. They argue that the American net worth continues to dwarf that of the rest of the world.

The problem with that argument, however, is that it assumes that Americans are prepared to deal with the downturns in the economy without raiding their other forms of wealth, like the value of their homes, in order to ride out the storm.

The fact is that the current headlines throughout America are telling us that we are totally unprepared to deal with the downturn. We are raiding our equity, our retirement accounts, and our meager savings to sustain our excessive standard of living.

The Korean savings rate has inspired me to increase my own savings rate. We were already saving 20%, but we'll increase it to 32% in honor of our hosts while we are stationed here.

The Automatic "Military" Millionaire

David Bach's "The Automatic Millionaire" gives the average person a real plan to develop wealth. In the book, Mr. Bach points out that people really waste a lot of their money, or at the very least, don't think too much about where their money goes. By setting up a simple direct-debit investment plan, you can save before you spend, and then limit spending after that to prevent accumulating excessive debt.

Now, consider the tools available to military members. First, consider the Thrift Savings Plan. You can save up to $15,500 in 2008 in your TSP account. The money is taken out of your military pay before it goes to your direct deposit account. In addition, the money goes in pre-tax, deferring your tax payment. This gives you the benefit of having more money invested in your account for a longer period which can lead to dramatically bigger returns when you withdraw the money.

Second, you can save through allotments. Allotments are set aside from your military pay before it gets deposited. They can be deposited to a bank or brokerage account automatically. The drawback is that the money is deposited at the end of the month instead of on your usual pay days. While losing interest on 30-days of principal might not seem like a big deal, over 30 years it could start to add up. For many people, however, setting up a reasonable allotment is a very disciplined way to regularly invest their money.

Beyond allotments, deployed military members have access to the Savings Deposit Program. This exceptional program allows military members deployed to combat areas to deposit up to $10,000 of their unallotted pay into the account during their deployment and for 90 days afterwards. This account earns 10% APR and is guaranteed by the US Government! It's a great way for combat veterans to return home with a good pile of cash.

Military members have some great ways to build wealth automatically. Once set up these programs can be further set on autopilot by setting up systematic investment purchases within brokerage accounts, or fund purchases within the TSP. By starting early, these automatic steps can easily make military members millionaires later in life.

Your Valuable Benefits

Annually the military will send you a summary of military compensation. This four page document is designed to communicate to military members the value of military service by highlighting the benefits that are delivered to them without fee. Some of the biggest include:

• Health Care
• Low cost dental insurance
• Tax free housing and subsistence allowance
  
• 30-days paid leave each year, with up to 60 (or more) days carried over each year
• Access to commissary and base or post exchanges
• World class fitness centers

The document points out the tax savings that many military members receive. Many states that have income taxes, for example, do not tax military pay earned outside the state. For many military members, this benefit alone is worth thousands of dollars.

Military retirees will also receive many of these benefits after leaving the military. Health care, however, has been under attack for military members as Federal budget deficits have grown. Military retirees still enjoy excellent health care at reasonable costs, but all Americans need to pitch in to ensure that those who have paid the price for freedom are not forgotten.

I always save my annual benefits summary. It's a great reminder that the country does appreciate the sacrifices that military members make, and puts its money where its mouth is!