I used to think that earning more money would fix all my problems. I was dead wrong. You can’t earn your way out of a bad financial plan (or lack of a financial plan).
This is why earning a promotion, getting a side gig, or other form of extra income only offers temporary relief. Eventually, sometimes before the promotion, your spending grows, and the cycle continues. It took me a long time to realize that making more money wasn’t the answer.
The Status Quo: Living Paycheck to Paycheck
I used to count the days until each payday because I knew I would run out of money. We used credit cards to fill the gap until payday. Then I’d pay the minimum payment and start the cycle all over.
This “worked,” but pretty soon all my credit cards were maxed out. This was bad, but I didn’t do anything about it. Each time I deployed or got some “extra” cash, I paid some things down, but I returned to my old habits.
Some people continue this debt cycle their whole life and end up with nothing to show for their time in the military. They leave with a few good (and not-so-good) memories, VA benefits, and the debt they’ve accumulated. Or, if you’re like me, the question of whether to reenlist felt forced because our monthly bills had increased way beyond what they were when I joined.
A Leaky Boat (Financial Plan)
I recently spoke at MilMoneyCon about this. I used an analogy of a leaky boat. Imagine joining the military is like getting in a boat and heading across the ocean (sometimes literally for my Navy, USMC, and USCG friends). You head out searching for something new, something better in life. You don’t know what you’re looking for, but you plow straight ahead and never look back.
Water Starts Filling the Boat
Next thing you know, there’s some water (expenses) in the boat. You’re not sure where the water came from, but you need to get the water out. You grab a cup (income) and start bailing water out.
You start adding people in the boat (spouse, kids, pets), and the water starts coming in faster. The front of the boat dips closer and closer to the waterline. Now you’re frantically launching cups of water out. Eventually, you find a bucket (promotion or pay raise), and the panic subsides for a bit.
It’s Hard to Keep Up
But the water keeps coming faster. No matter how big your bucket is, it’s getting harder and harder to keep the water out. By this time, you’re desperate to get relief. You start getting others in the boat to bail water (spouse income) and rig up a hose to siphon some water out (side gigs, risky investments, loans). You’ve even attached some pool floaties to the side, you know, just in case.
Nothing seems to slow the flow of water into the boat.
You’re Going Nowhere Fast
You’re stuck bailing water out and can’t even think about where you want to go. Your only focus is finding more ways to get water out of the boat (more income). You’re going nowhere.
You end up tired and wet and wishing you had a bigger bucket (income) while earning more than you ever have.
Stop to See What You’re Missing
The irony is that if you’d turned around and looked, you’d see the boat’s drain plug had fallen out shortly after you left shore. The water was coming from the hole (spending, debt). You could have made a plug (budget, financial plan) to stop the water, but you were too distracted by trying to make more money.
My Lack of a Financial Plan
I spent my first six years in the Army in a cycle of overspending fueled by debt. I focused on growing my income and ignored the real problems, and our financial health got worse.
I can still see the woman’s face at the apartment complex when I asked to pay our rent with a credit card. She wasn’t surprised. The worst part was that I had no idea how I was going to pay off the credit card.
We Were Debt Free Once Before
Just a few months before that, my wife and I were completely debt-free. The Surge in Iraq gave me 15 months of tax-free combat pay to pay off debt. The extra $3,000 for the last three months of the deployment was just enough to pay off my Jeep.
However, I didn’t have a plan or a system to improve my financial life. We went right back to digging financial holes. I didn’t change until the tail end of my deployment to Afghanistan three years later.
My Financial “Awakening” in Afghanistan
My “Ah Ha!” moment was in a stinky tent in Afghanistan. I was sorting through bank statements and was shocked at how much interest I was paying on my truck loan.
I finally understood the missing variable in the equation – my lack of awareness and spending habits. This helped me learn how to measure key financial metrics, make a plan with my wife, and eventually become debt-free.
You Can Break the Cycle
An effective plan is all it takes to leave the military better off than when you started. It can be a simple plan. You only need to do three things:
Sometimes these feel hard, really hard. However, you have lots of resources available to help you along the way. You aren’t the first or last to start this journey.
I also try to share as many success stories as I can, so everyone knows they’re not alone. In the beginning, we just don’t know what we don’t know. I hope you’ll take a hard look at your financial plans and take action to gain control of your financial destiny. Also, this article started as a newsletter. If you enjoyed reading it, you would really enjoy my newsletters on the 1st and 15th of each month. You can sign up here or use the form below.