Recently, I was asked to speak to a group of three-degrees (sophomores) at the Air Force Academy about FIRE. It reminded me yet again that though I’ve been exploring this path for years, the gateway concepts are still mind-blowing for the young audience I interact with everyday.
So, here is my 45-min introductory seminar, boiled down to the basics.
1. YOU CAN DO THIS
Ever wonder why the children of fighter pilots often become fighter pilots, Olympians produce more world-class athletes, and the Mannings have an unrivaled QB legacy in football? Arguably all of these feats are the stuff of unattainable dreams for most of us – I can no more imagine myself an Olympian than an astronaut. And the reason for this “bloodline” success isn’t one simple thing: genetics, access to the best coaches, exposure, and lifestyle all play a role.
But psychologists will tell you that one thing unites all of these groups: belief that they can achieve the impossible. The children of Olympians not only know that some people, somewhere, in some hazy and unattainable future will win Olympic medals… they have an Olympian right in front of them, a tangible example of ultimate success pouring cereal into their bowl each morning and tucking them into bed each night.
Being financially independent – I use the term “millionaire” for my cadets, though a million dollars isn’t what it used to be – works the same way. For most 18-22 year olds, the idea that they could have a million dollars is so ephemeral as to be unreal. And we don’t work toward things that are unreal.
That means the literal first step in becoming a millionaire is to KNOW it is possible. And it is! In fact, it’s all but guaranteed in a military career if you simply stay in long enough (hello, pension!), not to mention all the benefits you’ll accrue across your career that help you save and invest more than the average person.
If that doesn’t convince you, maybe this will: on the literal day after graduation from a service academy, a brand new 2Lt stationed at, say Goodfellow AFB in San Angelo Texas for intel school, is making the following:
Monthly | Annually | |
Base Pay | $3,477.00 | $41,724.00 |
BAS | $280.29 | $3,363.48 |
BAH | $1,005.00 | $12,060.00 |
Total | $4,762.29 | $57,147.48 |
This $57K per year the literal moment you graduate puts you instantly in the 43rd percentile of US household. That means you make more money than 42% of American households. On Day 1.
And your earning potential in the early years grows quickly. In two years, you’ll get both a rank and time-in-grade pay increase, making $4,563/month in base pay and $1,239/month in BAH as a 1Lt. Two years later, your pay will bump up significantly again as a Capt: $6,185 in base pay and $1,422 in BAH each month. That means that conservatively (because I’m ignoring annual cost of living increases and the fact that you’ll likely move away from Goodfellow for somewhere more glamorous and expensive, and also imagining you temporarily stay single without children), you will be making $94,647 per year – only four years after graduation.
That puts you in the 64th percentile of all US households – you will be making more money than two-thirds of America after only four years of service.
And to underscore the point further: in terms of global income, you start in the top 24% of global incomes on graduation day (that means 76% of the world is poorer than you) and by the time you pin on Captain, you are in the top 10%.
Finally, if that isn’t enough to convince you that being a millionaire is well within your reach, just look at the current (2022 dollars) value of the military blended retirement pension: if you stay in 20 years, retire at Lt Col making $5k per month in pension, and live 40 years… unadjusted for inflation you will receive more than $2.4 million!
So, there’s really no excuse for not being financially independent on a military salary… believe it, know it, and you can do it!
2. The Three Key Elements of FIRE
I hope by now you feel empowered that this is possible – you may not have had millionaires pouring your Cheerios, but you have selected a lifestyle through military service that makes financial independence a near certainty… IF you’re smart with your resources.
So, how do you do it? FIRE can be boiled down to three basic concepts:
increase your income,
decrease your expenses (aka, live below your means), and
save/invest the surplus like crazy.
The first step always seems difficult on the escalator of military pay. The good news: you will receive annual cost of living increases in your salary, with significant pay increases like clockwork as you increase in rank and grade. The bad news: the literal best and literal worst Captain in the military makes the exact same pay… so performance and merit do not translate into more money.
That said, when I ask a group of soon-to-be-LTs how they can increase their income, they have a wealth of ideas. Specialty pay, like flight pay or hazardous duty pay, can boost your salary by a little or a lot. Recruitment and retention bonuses are another way to increase income if you go into a high-demand career field. And while you may not be able to leap career fields to follow the money, learning a language and testing high enough is entirely within your control and can earn you some bonus cash each month. Volunteering for deployments may get you extra pay (like family separation allowance) and sometimes has the added benefit of getting you tax exempt status on your whole paycheck. And of course, early promotion is thrown out as a faster way to scale the ranks and make more money, sooner.
One thing I steer young LTs away from are side jobs. There are ways to get a second job as a military officer, but they are subject to commander approval and legal review. They are more common for the enlisted corps, who make quite a bit less than Os, and usually you’ll have to demonstrate not only that it won’t impact your military work, but also that you need the money. At nearly $100K per year as a brand new Captain, that may be a tough sell. And you really don’t want to be the LT handing out lattes at Starbucks to your aircrew… awkward.
However, there is a world of extra income available to you in the form of passive income. This is income you don’t have to work hours to earn – it’s literally passive. The most common form of passive income are dividends – money paid out to you for owning certain stocks. But as a military member, don’t overlook the passive income available in buying and renting real estate! That’s one of the ways we made our money – see this post on our approach to real estate for more!
The second key principle of FIRE is to decrease expenses, also known as “live below your means.” You already know a hundred ways to do this, so I’ll just highlight two here.
First, get a housemate. Seriously. You can check out this link for more info, but the bottom line is that your BAH (inside the US) is static, so if you can split rent with another LT (or 2, or 3) then you all can save hundreds of dollars per month.
The second way to keep expenses low also isn’t rocket science. You saw in the discussion above how quickly your income is going to increase. But guess what – unless you get married and have kids, your expenses aren’t going to increase as fast as your income. So every time you get a raise, just automatically invest that money. Don’t spend it; don’t use it. You didn’t need that $200 before, so you don’t need it now. Save it. Invest it. Every. Time.
The last key principle of FIRE is to save and invest your surplus. I’m not a financial advisor, so I’m not going to go into depth here. I’ll say again that real estate was the ticket for us, but there are tons of folks who have had good growth from stocks or ETFs or mutual funds. The main point here is that all that surplus money you’ve gained from keeping your expenses low and increasing your income smartly shouldn’t stay in a checking account… make it work for you and reap the power of compound interest.
3. You were tailor made for this lifestyle.
You gotta start by believing – knowing – that financial independence is right there for you… you just have to seize it. You need to know the principles of FIRE to smartly grow your income, lower your expenses, and invest for growth. You've already made one of the smartest decisions possible by entering the military.
But the last thing you should know is this: you were tailormade for this journey.
You are smart, efficient, tough learners who will thrive in a military environment. You have survived on chow hall food and MREs, lived in dorm rooms and tent cities, shared communal showers with only cold water and spent many a night without air conditioning. The mild austerity that FIRE asks of you – hey, get a housemate, don’t buy the brand new F350, save that raise – is nothing compared to what you are capable of enduring. You have the discipline to stick to a savings plan and a budget, the intelligence to roll your eyes when the other LT rolls up in a tricked out $80k truck, and the grit to eat peanut butter and jelly for one more day.
If you do so, the rewards are beyond worth it. You will be able to live the lifestyle you and your family dream of so much sooner than you think, able to invest in the things that give you joy. It’s worth it – and you can do it!
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