Military Finance Report

Monday, September 1, 2014

Started from the Bottom Now...Wait..I'm Still Here

 A lot of my readers really enjoyed one of my previous blog posts, "Started From the Bottom", where I quoted a famous hip hop song by Drake. The target audience was for young junior enlisted, but was general enough for anyone just starting out in the finance world. But some readers reached out to me and they were concerned about being over 30-years old and having very little flexibility to start improving their finances. They felt like they were at the bottom and couldn't go anywhere. Here are some steps to take if you're at the bottom and nearing the breaking point with your finances.
  • Find flexibility. Most people feel like they have no flexibility with their finances. They've reached a point where there is no money left over between paychecks and they may even be adding more to their credit cards each paycheck just to get by. This is the standard negative snowball effect which will ultimately lead to bankruptcy. You must stop this process. A good way to find additional savings is to track everything you spend for 30 days. Inevitably, you will find some savings; whether it is: not going out to eat one night, reducing your cable or phone bill or finding a cheaper alternative to a routine expense. Use the flexibility you find to stop using your credit cards each paycheck.
    • Finding this flexibility is the single most important step. A lot of people start to feel "suffocated" about their financial position and they ignore it making it worse. Track everything for 30 days and find the flexibility. I know it's there. Contact me at bjone6@gmail.com anytime and I'll help you find the flexibility (for free, I'm not selling anything, absolutely free). 
  • Pay down your credit cards. Some people find themselves having no money after they pay their normal bills and their credit cards. You must pay down your credit card debt quickly, even if it's only adding $5 to your minimum payment. This extra $5 will go straight to the principal and it will start building momentum to paying of the credit cards quicker. You'll start noticing the minimum payments go down and you'll start to open positive options in your financial life.
  • Seek assistance. If you're a military member, go see your First Sergeant or your service-specific Family Readiness center. The Family Readiness Centers are an underutilized benefit we all have in the military. They employ or have access to professional money managers who could help you with your finances for free. Financial advice in the civilian world could cost $50-$200 an hour.  If you're financial situation is really bad, they can grant you a no- or low-interest loan to help prevent bankruptcy.
Starting from the bottom can be difficult but there are many ways to get out. If you're staying up late at night because you're worried about your finances then you need to find help. Finding flexibility and paying down your credit cards can be a slow process but it'll be worth it when you can finally say, "Started from the bottom, now I'm here."

Saturday, August 23, 2014

Why I'm Not a Billionaire Yet...

To date, I’ve been unsuccessful at “beating the market” and becoming a self-made millionaire/billionaire through investing. In some years, I’ve beaten the market and professional investors; however, over 12 years of investing myself, I’ve managed to barely get a decent return compared to inflation. If I had put all my money into an Exchange Traded Funded (ETF) and have done no research or any active managing, I would have a significant higher rate of return. Here are some lessons and some recommendations I’ve learned which I’m hoping could help other self-managing investors.
·         Investing takes time. To be successful at investing, you must do a significant amount of research, all the time. You have to read books, stay current on events and research all types of market patterns, ranging from coffee prices, labor disputes, droughts in Russia to major political changes. The more you know about an investment’s “circle of influence” the better you’ll be at making a decision on when to buy. Personally, I do not spend the appropriate amount of time it takes to be extremely successful. Those who are successful make it a priority in their lives.

o   Recommendation: I recommend going to SeekingAlpha.com, Fool.com and Morningstar.com and Marketwatch.com to keep you updated.

·         Investing takes patience. One of the causes of losses in my portfolio has been a lack of patience. I jump into investments without sufficient data because I was impatient and was hoping to “get rich quick.” Or conversely, I’ve sold out of stocks because I was impatient with the slow rate of return. You have to be able to shut down your emotions while making investment choices. My obsession with becoming a millionaire has stopped me from being able to shut down my emotions. I recently joined some young people doing quick options and penny stocks and my emotions got the best of me and I jumped in without controlling my emotions. I’ve lost quite a bit of money doing the same thing with other investments.

o   Recommendation: Don’t jump into any investment unless you are fully prepared. Know where your entry and exit points are. Know how much you expect to profit from each investment.

·         Investing takes persistence. Gone are the days when individual investors can invest and forget. If you are going to manage your own investments then you must be active. This doesn’t mean day trading but it does mean spending a lot of time each day evaluating your investment objectives. I don’t have persistence and if I do, it’s inconsistent. If I pick some good investments, I start to become complacent. If I lose too much money, I’ll become disheartened and turn away from investing. My lack of persistence has left me on the sidelines during bull market runs and left me holding on while all my stocks dropped during bear markets.

o   Recommendation: I recommend checking your news sources daily and then focus on your strategy’s results on the weekends. Utilize trackers to measure your performance and compare to the market or similar investments. You may have earned a profit but was it less than a passively-managed strategy? This persistent evaluation will keep you on track with your goals and help make minor corrections at the correct time.

·         The power of dividends. For almost a decade, I had ignored the power of dividends. I spent most of my time trying to find the next Apple (AAPL). Many investors who focus primarily on dividends may never see their portfolio totals skyrocket in a couple of days or months, but over time they will consistently match or exceed the market because the dividends are reinvested during bear markets and then the stock rebounds giving you more capital gains and more dividend income. Many “boring” companies also increase their dividends throughout the years. So your $1,000 investment earning a 4% dividend 10 years ago but would now be getting an 8% dividend because the company kept increasing its dividend yield.

o   Recommendation: When using stock filters always consider dividend yield and dividend growth. If you are investing in mutual funds, consider high-yield or income based funds.
 If you are looking at becoming a self-made millionaire/billionaire in the stock market, then I hope this has helped you. But even for those just starting out, I hope this information has helped.

Sunday, July 20, 2014

The Four Letter Word Killing Your Finances...Fees


In 2013, banks charged over $30 billion dollars in overdraft fees and were caught posting the highest charges first, to expedite the overdraft situation.[1] While overdraft fees can be controlled by closely monitoring the balance in your bank, what about other fees? Every January and July you should go through your financial statements and see if you’re being charged any fees you might not know about. Eliminating fees and maximizing rewards, where you can, should be a semi-annual task for your finances. Here are some common fees to look for.

  • Overdraft fees – Overdraft fees are the worst. You inherently don’t have money and then you have to pay even more money if you were to find yourself in that situation. The fees can be over $30 regardless of the amount overdrawn. Imagine if it were an interest rate. You could have to pay $30 for a $3 charge leaving you with an instant 1000% interest rate. The best way to avoid these fees is to monitor your bank account daily or weekly. You don’t have to balance to the penny, but checking your online account daily can be very helpful to make sure you don’t overdraw your account.
  • Minimum balance fees – Ever since the financial crisis of 2008, these fees have become rare. But a lot of times people won’t read the fee breakdown or the bank simply won’t make it easy to find the fees. Reviewing your statements monthly can help you identify the fees. If your bank is currently charging you those minimum balance fees, then change banks immediately. Most banks no longer charge those types of fees, so finding a new one shouldn’t be a problem.
  • ATM fees –USAA doesn’t charge a bank fee for using other ATMs and will refund you up to $15 a month in ATM fees (USAA serves military members and their dependents). A lot of people may be getting double charged and may not know it. If you use a non-bank ATM, the ATM may be charging you a fee and then your bank may be charging you a fee also. Some people can be losing $4-$7 each time they take out $20. This will quietly, yet quickly, drain your account and you may find yourself with overdraft or minimum balance fees because you weren’t tracking the ATM fees. To avoid these fees, find banks that don’t charge these fees or try to utilize your bank as much as possible to avoid the fees.
  • Statement fees – In an effort to do the right thing and “go green” many banks will charge upwards of $3 to send out paper statements. It’s marketed as a positive initiative, but I assure you, it is a money-making scheme. You may have to go paperless with your bank to avoid these fees.
  • Annual fees – These are common with credit card companies. Some credit cards offer fantastic rewards while charging an annual fee. You’ll have to do the math to determine if you’re making a profit with the rewards after the annual fee. If not, then switch credit cards to avoid those annual fees. That being said, I pay more in annual fees because I have the Air Force Club card which donates money to the Morale, Welfare and Recreation Fund. Also, when I first joined the Air Force, it was considered a professional courtesy for NCOs and Officers to be club members. But generally speaking, you should try and find a credit card without an annual fee.

There are many types of fees you should avoid. A quick search through your financial statements can help you identify these fees and then eliminate them. I helped one Airman (E2) recapture $25 a month by reducing all the fees. This was several years before the 2008 financial crisis, so hopefully everyone saw a decrease in the fees they were paying.



[1] http://www.forbes.com/sites/greatspeculations/2014/05/29/banks-hike-overdraft-fees-after-regulatory-clampdown-hits-revenues/

Thursday, July 10, 2014

Started from The Bottom, Now We’re Here…

Time is the most valuable commodity in our life. For your financial success, starting early is the best decision you can make. Regardless of your age, it’s always a good time to start planning for financial success. For those young 17/18 year olds just entering the military, the future is limitless. Here are some quick steps to start right now (complete in order listed).
·         Establish an emergency savings account. $1K-10K depending on how much bills you have (no more than 6 months’ worth of bills saved)
·         Reduce/eliminate debt. Reducing or eliminating debt is the bed rock of financial success.
·         Max out available tax-sheltered investments. Start an IRA and max it out. If you have additional funds, consider starting your Thrift Savings Plan (TSP). I usually don’t recommend saving all your money in retirement savings because you should have short- and medium-term goals you will need to save for.
·         After the IRA is maxed out, then start saving more in a taxable accounts or max out your TSP. Start investing in everything after you have an emergency savings account established, your debt is reduced/eliminated, and you’ve started saving for retirement. Buy stocks, mutual funds, gold and houses.
I enlisted in the military at 17 with no prior financial knowledge, absolutely no money and only two or three pairs of clothes. In the beginning, there weren’t as many resources available for me to learn from and I paid a lot of fees. But the banking industry has changed and information is available 24/7 and fees have been significantly reduced. After 15 years in the military, and following the steps above, I now have zero debt and have a significant amount of money saved up. I started from the bottom and now I’m here. At my 10-year mark, I crossed over to the “dark side” and became an officer. I hope to retire when I’m 40-years old. I’m not going to lie and say it was easy, but it’s worth it. It’s hard to see your friends spending all their money right away and having nice clothes, nice cars and a big house. But time can be just as cruel and it can be rewarding and after 15 years, I’ve seen time catch up to the big spenders and take everything away.
While blogging, I’ve met a junior enlisted, military-finance blogger, who’s well on his way to becoming financially secure. His investing style is focused on dividends. At the end of his military career and all the reinvested dividends, he will have no problems in the retirement years. Like his blog title states, he’s starting from bottom and he’ll soon be here. Go check out his blog and watch his net worth sky rocket: www.startingfromzeroblog.com/
There’s no reason you can’t do the same. Start today!

Wednesday, June 25, 2014

Military Spouses At-Home Business Success Stories

I’ve recently discovered that our military spouses are finding success and wealth with in-home businesses. Being stationed in Germany for four years, where jobs for our spouses are typically hard to come by, I noticed the direct-sell companies like “Pampered Chef” and “Stampin’ Up” were prevalent. Success often brought huge discounts and free products within the company. I’ve also noticed more military spouses are finding success in Multi-Level Marketing businesses too. Even more recently, I’ve noticed military spouses involved in photography, graphic design and craft businesses.

Companies like “Pampered Chef” are considered direct-sell companies. The companies, and the spouses who work for them, focus on selling the products first and foremost. The workers will host cooking shows to showcase the products. As a military husband, I was pleased to be the benefactor for some of these shows with all the leftover food. As a secondary money-making venture, you can invite friends to become Pampered Chef consultants and earn money from recruiting. I personally know a spouse of an E-5 who is now known as an Advanced Director. We haven’t talked about annual income, but according to the Pampered Chef compensation plan, she could be making anywhere between $10K and $80K a year. (http://new.pamperedchef.com/make-money#)

Companies like “*Wake Up Now” are considered Multi-Level Marketing companies. These companies focus on recruiting people to become Independent Business Owners (IBO) first and foremost while a secondary emphasis is placed on their proprietary products. They require monthly subscription costs from each IBO and then your upline makes money, but the company ultimately makes the money on these subscription costs. Now, while they’re literally pyramid schemes, many spouses have done well and are making a lot of money with them. A military spouse I know is making $1K a month passively after recruiting several people under him (military spouses can be males too). (https://hub.wakeupnow.com/resources/cmsHubResources/286.compensation_guide.pdf) 

Small businesses like photography, graphic design and crafting are great. There are usually no start-up costs and the owner is in full control. Facebook, Pinterest and Instagram are great ways to advertise and there are low barriers of entry, unless there are many spouses in your circle operating the same type of business.
The downside to these businesses, and can also be found with any small business, is when you’re starting out you usually depend on your immediate friends and family to support you. As one of my friends eloquently put it, it then becomes a Friend-2-Friend or Family-2-Family business and you’ll quickly notice that no one will want to talk to you anymore. If the business doesn’t start well, you’ll become desperate as the monthly costs go up and you’re not earning the income you’d hoped you would. Most at-home businesses fail because people jump in too quickly and have unreasonable expectations. For every one success story there are three failures with some spouses having hundreds of dollars of unused product they have to ship every PCS, reminding them of their failure.
Regardless, our military careers often uproot our military spouses and sometimes bring them to places where job opportunities are hard to find.

A lot of spouses have found wealth and success in starting at-home businesses. Do you have any success stories from your at-home business? Are you currently an MLM operator or want to use my blog to advertise? E-mail me at bjone6@gmail.com and we can discuss advertising space.

Here are some interesting Military Spouse success stories:
Spouse hosts “Trunk Shows” for artists:
http://www.military.com/spouse/career-advancement/military-spouse-jobs/spouse-owns-successful-home-based-business.html

A Spouse’s Article on Forbes about MLM success:
http://www.forbes.com/sites/chicceo/2012/09/27/is-mlm-a-bad-word/

A Military Spouse’s Success Story about Rodan + Fields:
http://www.militaryspouse.com/articles/money-maker/

*FULL DISCLOSURE: I’ve been researching and contemplating running a Wake Up Now MLM.

Sunday, June 8, 2014

The Power of Referrals

Being in the military means dealing with change. Frequent moving around involves frequently opening up new accounts with banks, service providers and utility companies. But do you know there is a way to cash in on all this?

Several companies often offer referrals to benefit the existing customer and the new customer. If everyone in the military started taking more advantage of these referrals, then we could really start making some money off our frequent moves.

In 2014, my family and I moved to Barksdale AFB, Louisiana. We bought a house and established our utilities by using the ones recommended to us by friends. But if the Housing Office or some private organization on every installation had a running list of referrals, then once you inprocessed, you could choose your service providers and then you would be provided a "referrer's" name to use, so both people make money. This list would be even more beneficial to those coming back from an overseas assignment since they would have to establish all new accounts versus transferring like CONUS-to-CONUS moves.

Here are two examples of what I'm talking about. But review the services you currently use and then look up the potential referral money you can pursue.

Dish Network: My family loves Dish Network. If someone refers a friend to Dish Network, they both get $50 off their next bill.

Internet Service Providers: Our local area uses Sudden Link for cable modem service (faster/cheaper than the DSL offered here). Their refer a friend gives $25 to both the referrer and the one being referred (is that considered a referee?).

Referral programs are important outside of frequent military moves too. Most banks and brokerage companies offer referral programs too. Here is an example from one of the banks I use:

Capital One 360: This is a separate bank I use solely for my emergency savings account. This bank, formerly known as ING Direct, pays both people $20 if customers open a bank account with $250 or more. If you are interested in this bank while reading this post, use this link to set an account with $250 or more: https://r.capitalone360.com/V1AVDPYTUb

I'm going to see if one of the private organizations I regularly participate in would allow me to establish this program. A new member to a unit could simply choose the service providers they would like to use, contact me, and I could provide a name, on a first in/first out basis, and both would benefit.

Friday, May 2, 2014

End of the Fiscal Year Discussion

Have you ever wondered why at the end of the fiscal year (30 Sep) it seems like your organization purchases items they don’t need? Have you ever wondered why money isn’t available during the fiscal year for mission essential items but then there is plenty at the end of the fiscal year? These things happen because 1) the constitution sets limits on when funds (appropriations) are available and 2) the political environment and economic situation is so messed up causing delays in normal budget processes.  Regardless of your rank, you can play a pivotal role in stopping this.
Appropriations – Many people ask why funds are only available from 1 Oct – 30 Sep. The reason is because this is how the government was set up by the constitution. Funds are appropriated to the Department of Defense for specific reasons. The funds most of use day-to-day is called Operations and Maintenance funds and they are only good for one fiscal year. We must “zero out” all those funds during the fiscal year or else they won’t be available for use anymore (sort of, but for this conversation let’s just say the funds are unavailable). There are other types of funds that are good for 2, 3, 5, 10 years and some with no expirations.
But it is important to note that budgeting is not easier, or better, for those multi-year appropriations. In my personal opinion, we have more budgeting problems in the multi-year appropriations then our normal one-year funds. The one-year cycle gives current commanders the visibility and control to either make good use of the funds or abuse them on non-mission critical expenses.
Budget Cycle – For our normal Operations and Maintenance funds, the funds are good from 1 Oct – 30 Sep. In a normal political and fiscal environment, units would have their funds sometime in October. Commanders at all levels could execute the funding as appropriate. In April/May, Headquarters would perform Mid-Year reviews to ensure the units are spending correctly and see if there is any excess or additional funding needed for or from other units. By law, on 31 Jul, units at all levels must be 80% spent (or obligated). Sometime at the end of August, your local finance office will assume command of all funds not designated for a specific purpose to ensure your base/post/station can execute the funds by 30 Sep. And finally, by 30 Sep, all funds must be spent.
Unfortunately, due to the inadequacy of our political and fiscal situation, we start the fiscal year in a Continuing Resolution Authority (CRA). This means that units must stay at the previous year’s spending cap and can‘t spend money on new projects. After 15 years in the military, I’ve concluded that each New Year ALWAYS has new surprises, but they have to be deferred until the CRA is over, sometimes causing more expensive future problems. Lately, Commanders haven’t received their budget until Mar-May. This only gives Commanders less than 6 months to execute their missions appropriately before the local finance office assumes control over the funds. During CRA and the short time Commanders have funds available, this may be the reason why you don’t have funds when you needed them. It could be simply they don’t have the funds available at that specific time. If this happens to you in your unit, then you need to get with your Resource Advisor/Resource Management team and make sure you have a solid spend plan to forecast your requirements and to ensure cash availability.
Unfunded Requirements Listing - Sometime halfway through the fiscal year, units will generate an Unfunded Requirements Listing to track all the requirements of the unit. At the end of the fiscal year, units may get additional funding to buy down items on the list. A good commander will put most of the money for mission requirements but it is important to spend a portion on Quality of Life initiatives. Commanders at each level will prioritize which requirements are the most important. This is where the problem usually comes from. Some commanders will prioritize non-essential requirements OVER essential requirements. There could many reasons but most aren’t as malicious as the stories seem. Commanders often have better visibility on issues and the direct impacts to the Wing. So it may seem like the wrong choice in your circle of influence, but the Commander may have a better sight picture. Unfortunately though, and despite plenty of opposition, I’ve seen Commanders spend a lot of money on items not essential and, while they may be permissible, waste money that could have been spent on much needed items.
What can you do to stop the wasting of money? Regardless of your rank, you have a part in the process. If you are junior in rank, then you can make sure your bosses are keenly aware of the requirements you need.  You can maintain a “wish list” of the items you need to complete your mission. Do all the leg work to be prepared to purchase the item, so you only need funding to execute. Sometimes the first prepared is the first to receive money. If your rank allows you to be in the prioritization discussion, and then make sure you voice your concerns about what truly is mission essential. Some Commanders make decisions based on the “squeaky wheel” or the” most recent requirement” and they need your insight to what is actually mission critical and what isn’t. If you are a decision maker, then listen to your subordinates on what is truly mission critical or not. If you are a commander, remember that the “Gucci” days of infinite funding are gone and large expenses may be taking away from the core mission.
Personal Story: I remember being in communications- electronics maintenance and needing some parts, $30K total) that couldn’t be purchased under normal supply conditions. We were told we couldn’t buy them because there wasn’t any money. But at the end of the fiscal year, the unit Commander purchased several $20K glass display cases to hold squadron memorabilia. Two things could have happened there: 1) My message of mission critical parts never got to the commander in the appropriate forum or 2) The commander chose the glass display cases versus mission-critical parts. Either way, from my point of view, in my circle of influence on the mission, it seemed like money wasted.
Have you experienced any good or bad funding decisions?  Leave a comment and let me know.