Military Finance Report: October 2013

Monday, October 14, 2013

The Federal Budget and You

The Federal Budget is comprised of four components: 1) Tax Revenue (or Receipts) 2) Spending (or Outlays) 3) the difference between the two known as a Surplus or a Deficit and 4) The National Debt.  You are part of all four and here is how each one affects you on a daily basis.
  • Taxes - The top three sources of income for the government is the Income Tax, Social Security Tax and the Corporate Income Tax.  Your attitude towards these taxes depends on your political ideologies.  But for financial planning purposes your goal should be to minimize the taxes you pay.  One of the advantages of a being a military member is that only your Base Pay is taxed; our BAS, BAH, deployment and travel entitlements are not taxed.  Another way to minimize taxes is to contribute to a Traditional or ROTH Thrift Savings Plan (TSP) and/or an Individual Retirement Account (IRA).  For the difference between the two, please read my article here: Should I Invest in Traditional or ROTH TSP?  In fact, every decision you make should be to pay the least amount of taxes throughout your lifetime to maximize your earnings.  Each year the government spends more than it gets in tax revenue, which increases our national debt, and we can assume that your income taxes will go up in the next 1-50 years so you need to do what you can to take advantage of today's tax rates. 

  • Spending - The top four sources of spending in order or most amount spent is Department of Health and Human Services (includes Medicare/Medicaid), the Social Security Administration, the Department of Defense, and the Interest on our National Debt.  Again, your attitude on the importance you place on the different reasons for spending depends on your political ideologies.  But one thing in common is that both main political parties have been/are increasing the size of the government.  This increased spending compared to tax revenue generates a National Deficit (often confused with the National Debt).

  • Surplus/Deficit - The difference between Spending and Revenue is what generates a Deficit or Surplus condition.  It's common knowledge that the U.S. Government has ran a Deficit almost every fiscal year (1 Oct - 30 Sep) for several Presidential terms.  At the end of the fiscal year the Deficit is added to our National Debt.

  • National Debt - The National Debt has become a common discussion and worry for our current generation.  Large National Debts that become unsustainable have been one of the causes of civilization collapses since the Roman Times.  The interest on the national debt is the fourth largest expenditure for the federal government.  If our financial uncertainty becomes worse, the interest rate at which we pay for the National Debt will go up and every dollar we pay on the national debt is either one dollar that can be returned to a taxpayer or the federal government can spend elsewhere.
You are a taxpayer and are critical to these four components.  The only way to stop generating a Deficit is to cut spending or raise taxes.  Over the last two decades it seems that only increasing taxes has been approved and thus we all face higher taxes in the future if spending can't be cut.  It is important to see your role in this process and watch it carefully because it directly impacts your personal finances. (Q99VSR8GSWXG)

Thursday, October 10, 2013

How to Set and Complete Financial Goals: Work in Reverse

A lot of people have difficulties setting goals and then completing them.  I read a lot of biographies and self-improvement books as well as practice this theory myself and I think one of the best ways to set and complete goals is to work in reverse.  Think about 60 years from now or think about your obituary (seems a little morbid right?) and then set goals of what and where, financially or otherwise, you want to be at that point.  Once you’ve done that, then work in reverse on what you need to do to get to that point and then start completing each task in order to get to your goals.  Instead of just preaching about, I will let you know mine goals; letting people know about my personal life is something I rarely do.  My goal at 60 or when I pass away is to build a multi-headed Empire.  I want to own everything.  So here is each task, how I plan to get there and where I’m at now.  The goals are incredibly high, so if I miss a mark I still hope to achieve major success.

· Hedge Fund ManagerI would like to retire as a hedge fund manager.  I want to own so many investments, including all possible types of assets, that I can affect political policy, change corporate strategies.  I want to own stocks, bonds, gold, art, real estate, land, etc.  To get to that point I have to have displayed success with my own portfolio, once I retire from the Air Force, I will have to work up the corporate ladder and then sell myself to potential investors.  I’m currently an Air Force Finance Officer and plan to get my CPA, Accounting Certification, or the required mutual fund/stockbroker licenses.

· Real Estate Empire – I want to own several properties and land in several cities in several states.  My goal is to be a major player in America’s real estate future.  At 31, I’m starting late in the game, but my wife and I plan to purchase our first house when we PCS to Barksdale AFB, Louisiana.  I will have to keep purchasing homes at the right time, taking advantage of the greed-to-fear cycles American continuously has.  To have a real estate empire, I’m going to have to learn a lot about multi-property management and ensure I balance the risk-to-reward ration that I’ve been comfortable with.

· Media Empire – A person’s relevancy is increasingly becoming more dependent on his or her success on social media.  I DO NOT want to be famous at all.  I would like a large following of people who share my values and/or want to learn from my mistakes and successes.  I want to educate people on what I believe (some may call it brainwashing) through normal media, social media and fictional novels.  Frequency and persistence is the key to success in forming a solid following.  Currently, I have this blog, Military Finance Report, that I try to spread around.  I’m frequently offer financial advice and discuss politics on my personal Facebook page.  Lastly, I self-published my own fictional novel called Blood Flows Like Wine, that I’m currently re-writing.  I hope to make a series out of it called, The Vampire Wealth Chronicles, and is a covert and overt attempt at pushing my ideological beliefs through fictional Vampire novel.  Check out the books Facebook page at and the Twitter page @vwcbooks.  You can purchase it on Amazon here: or on Smashwords here:

This is just a small sampling of what my future goals are.  As you can see, I set the main goal in the future, then I identify all the milestones needed to execute each one and then I start completing each milestone.  I continuously review them and check my progress and adjust as needed.  Your goals can have shorter time horizons or not be as grandiose.

Tuesday, October 8, 2013

Government Shutdown Lessons Learned

I have refrained from publishing my personal opinion on the Government Shutdown, what led to it and who is to blame, but I thought it was necessary to publish some lessons learned from it and how it impacts your personal finances.

· Emergency Savings - I joined the military because of the "security" and the "guaranteed paycheck", among other benefits.  This is no longer a benefit and the security of our pay has been affected by Sequestration, the Government Shutdown and we'll see from here.  It is required by law that military members must be paid for services completed; however, there is no law that states when we must be paid.  Luckily for us, Congress passed the Preservation of Military Pay Act to ensure we got paid.  For this reason, having an emergency savings available would help alleviate any short-term disruptions to your pay.  If our pay was delayed for a long time, you could rely on this emergency savings.  Having an emergency savings account is usually the top of any personal finance recommendations.

· Tuition Assistance (TA) – If you’ve been waiting for the “right time” to start college, then you may miss the opportunity to take advantage of 100% TA, or no TA with the current Government Shutdown.  Decreased budgets, Sequestration and the Shutdown have all proven that TA is an expense that will be continuously looked to reduce or get rid of.  During a Chief of Staff of the Air Force Visit recently, he told our base that there are strong discussions that will most likely to reduce TA to 75%.  That means you will have to pay the remainder or use some of your applicable GI Bill.  Bottom Line: You should start taking advantage of the college benefits now before this benefit goes away.

· Separating/Retiring from the Military – Ensure that if you are planning on separating or retiring from the military that you’ve done considerable planning ahead.  Make sure you aren’t making the decisions based off of one bad assignment.  Civil Servants are an extremely valuable part of our Military’s total team and have provided the continuity while the military was engaged in Iraq and Afghanistan but as the wars wind down and we get into worse financial constraints, our civilian personnel will be primary targets for reductions.  Sequestration and the Government Shutdown has shown that hiring freezes, furloughs, reductions in annual price index raises and other entitlements are top tools for budget reductions.