The Easiest Path to Financial Independence – Start Saving Early

Military compensation and the lifestyle

One of’s more prolific posters, SamClem, has a very insightful comment on the military’s care and feeding of its members:

“The military has a highly paternalistic compensation and social structure. The medical needs of you and your family are tended to. Have another kid? We’ll give you a bigger house. Having trouble paying your bills? Your boss will see that you get counseling. Getting fat? The system will ‘help’ you get thinner. The collective will see to your needs in exchange for your loyalty and service.”

The military is also concerned that you be financially responsible, but your chain of command doesn’t have to care whether or not you manage to become financially independent. As far as the culture is concerned, “debt free” is good enough even if you’re living nearly paycheck-to-paycheck.  The military will tell you about preparing for retirement, and you’ll be offered ways to save for financial independence, but you’ll have to do your own retirement planning. You’ll have to apply the resources in ways that the Department of Defense never imagined. The decisions you make in your 20s and even 30s will have a large impact on your financial independence in your 40s.

However, finances may not always be your top priority. Life decisions like education, marriage, and family involve far more important considerations than “just” money. Of course if your decisions happen to give you a head start on financial independence then time (and compound interest) will take care of the rest. So although the military may happily subsidize your lifestyle with a bigger base house, savings-plan deductions, or other benefits, you’ll need to take the reins and do your own planning. It might be better in the long run to save additional funds in taxable accounts, or to build equity by owning an off-base home, or even to invest in rental property. Your basic military skills (and the transition assistance programs) will help you start a bridge career, but you’ll have to use your own initiative and planning to achieve retirement.

Many decisions will be made for you during your military career– duty stations, training, deployments, and how to handle combat. You’ll also be making your own life decisions: a college degree, finding a partner, buying a house, starting a family, and leaving the military for a bridge career or early retirement.

If you consistently make your military career the most important aspect of your life, then those life decisions may be made for you by the military. That’s not a bad thing, especially if you’re a great leader who makes the military their avocation, but SamClem’s “collective” may not always reward your devotion in the manner you’d intended. The vast majority of veterans enjoy the military as a profession for only a few years and only a few stay for 20 years.

The work/life balance is a perpetual struggle, and it’s important not to be so focused on work that you miss the life opportunities around you. If the military is not your avocation and you’d rather make your own life decisions, then you’ll need to stay alert for opportunities that will lead you to financial independence. We’ll talk more about dealing with the “fog of work” in another post, but the first step is to start saving.

Start saving early

There’s not enough space in this post to discuss all the subtle nuances of budgeting, saving, and investing.  (We’ll get to that in other posts, and until then you can peruse the books & websites in the “Recommended reading” section.) 

Thousands of other books handle the details of how to save for different situations, what types of investments you should allocate your money to, and how your portfolio should change with age and life situation. More libraries and server farms tell you how to change the way you feel about money, how to safely use debt, and how to decide what type of investor you are. The best of those resources are frequently discussed on websites like This book is only going to present the principles and show you how to get started.

All the financial retirement books, websites, and TV shows boil down to one piece of advice: save money. The size of your retirement portfolio depends on the amount of money you’ve put into it and the length of time that it can grow. If you save more money then you won’t need as much time. But most of us will never have an opportunity to save hundreds of thousands of dollars a year, so the most important factor becomes time. The only way to maximize that time is to start saving now. Even $50 per paycheck starts a habit that will grow for the rest of your career.

The race to retirement is a marathon, not a sprint, so it’s no problem to start at a slower pace. Most military retirees will grow their portfolios for a minimum of 20 years. The first year or two of paychecks may only support a small amount of savings. Once the saving habit is formed, however, it’s easier to keep up with it through every pay raise and promotion.

The “savings mindset” is far more important than a dollar amount or the percentage of a paycheck. The key is to spend money only on the things that add value and joy to your life and to save for the goals that will add even more value. Spending a dollar today may bring value, for a few happy moments or for many months of pleasurable use, but that dollar invested at 6% for 20 years will more than triple in worth.

The spending question is not “Can I afford it?” The saving questions are “Which do I value more? Do I want to enjoy this today, or do I want to save the money for retirement?” Another way to evaluate spending is in terms of work: “Do I want to work xx hours/days/weeks to pay for this, or would I rather save the money for retirement?”

Focus on the financial decisions that have a big impact on the budget. Jeff Yeager, the author billed as “The Ultimate Cheapskate”, claims that saving money doesn’t start with a $3 cup of coffee. Many financial authors and websites describe how the “latté factor” adds up when a small daily expense is invested and compounded for 20 years. However this is such a small expense that you’re unlikely to deliberately avoid spending it and even less likely to put it into savings. You’ll probably end up spending it somewhere else, or you’ll spend your whole day discovering $3 temptations. Even worse, every day you’re denying yourself a small pleasure that you’re not putting to work for you somewhere else– so why suffer needlessly?

Instead of agonizing over small daily expenses, consider your fundamental lifestyle choices that will have an immediate and large impact on your savings. Start with your housing costs, which continue to rise as the average American family spreads out over more living space than ever before.

Do you want to rent or own a luxury condo or McMansion in the expensive part of town, or would a more modest home (closer to work) serve your needs better? If you’re going to spend most of the next year in the desert or at sea, do you really need a costly place to store your stuff? If you’re living closer to work, could you spend less time commuting and maybe even bicycle or walk? If you’re not spending a lot of time commuting, then do you really need a hot sports car or a haul-anything truck? Can you buy a cheaper (used?) vehicle and drive it into the ground? These decisions will save you hundreds of dollars a week, far more significant than the $3 cup of coffee.

While you’re considering what’s important in your life, see if your spending matches your values. The only way to understand your progress toward retirement is to track your spending. You want to save money, invest it, track the progress of those investments, and reach a portfolio size that supports your lifetime spending. The only way to calculate how much you’ll need to reach your goal is to know how much you’re spending. The only way to build a budget and to understand your expenses is to track your spending.

Tracking your spending is critical, but the way that you track it is up to you. Retirees use just about any method– expensive budgeting/accounting programs, free software, spreadsheets, handwritten notebooks, or even cash in envelopes for different spending categories. You have to develop a habit that works for you— saving receipts during the day and entering them onto a computer that night, entering purchases in a notebook as you go about your daily routine, or simply spending until that envelope runs out of money and then waiting until it’s refilled by the next paycheck.

If you’re not already tracking your spending, then start with a small step:  write down everything that you spent money on today– cash, debit card, credit card, and even automatic electronic fund transfers from your bank account.  You have to start somewhere, and you can start today.

Next post:  why frugality can help, and how it can hurt…

Related articles:

Military retirement: how much can I really spend?
Military retirement spending: how much will I need?
Retirement budgeting

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WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

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