Even when taking on good debt, it is still important to make sure you are able to manage your current debt load, and control your spending. Otherwise your good credit scores can spiral downward quickly into debt out of control.
Before they were famous, many truly influential men and women started by serving their country in the US military or grew up in military families.

The ABCs Of Building Military Wealth

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Debt isn't all bad. In fact, debt can be a tool you use to leverage your way to wealth while you are in the military. Even when taking on good debt, it is still important to make sure you are able to manage your current debt load, and control your spending. Otherwise your good credit scores can spiral downward quickly into debt out of control.

Here are three simple rules for credit building and debt management for successful military money management.

A. ACCESS CASH INSTEAD OF CREDIT CARDS

If you're going to buy something that doesn't go up in value, use cash. This is a powerful benchmark for controlling your spending and your debt. Items like food, clothing, a new cell phone - none of these will be an asset for building wealth. Sure, buy and enjoy these disposables.but know their place in your wealth-building plan.

B. BE RELENTLESS: KEEP A SPENDING DIARY

Most people don't have a precise idea of how much money they truly spend each month. That daily cup of coffee can add up to hundreds of dollars over the course of a year.money that could have been invested in something that will pay you back nicely.

First get a handle on your fixed monthly bills. Make a spreadsheet of all your consistent expenses including rent or mortgage, insurance, auto payments, cell phone and cable, utilities and revolving credit.

Then, identify your daily spending patterns by diligently maintaining a spending diary.

Try this experiment: for one month, write down every cent you spend. Total it at the end of the month, add it to your fixed monthly expenses, and subtract that new total from your military paycheck after taxes. How much you do you have left after paying for everything you spend on? This is your REAL cash flow statement...and may be a clue as to why you are so deep in debt.

Now consider how much you can reduce your debt by using the money you spend on consumables, to start paying down your high-interest debts.and how much faster you'll be out of debt. What else could you use that coffee-money for? Perhaps to invest in your IRA; perhaps to add to your Thrift Savings Plan. These build your wealth and will end up paying you, rather than you paying for them.

C. CREATE A 6-JAR SYSTEM

T. Harv Ecker, financial advisor and writer of the bestselling book and seminar series, "The Millionaire Mind," utilizes a money management technique called The Jar System.

In this system, your income is divided into six jars, or categories:

  1. Necessities

  2. Long-term Savings for Spending

  3. Financial Freedom

  4. Education

  5. Play

  6. Giving

Each of these categories has a distinct purpose in directing your spending and putting you back in control of your money.

The idea is to divide 50% of your monthly paycheck into Necessities, and the other 50% into the remaining jars - ideally, 10% for each jar. The amount isn't important; the consistency of adding to each jar with every paycheck is what really counts.

At first, military servicemembers with smaller paychecks may balk at the idea of giving money to charity, or "playing" with a certain amount of money from each paycheck. But according to Ecker, utilizing the 6 jars helps you to feel wealthy - and what better way to feel abundant than to give money to those in need, or purchase something that feels like play? - creates good spending habits, makes you focus on where your money goes, and paves the way for successful money management well throughout your life in the military, and afterwards.

MILITARY PAY GOES A LONG WAY

Your military paycheck may be smaller than your civilian friends and that may lead you to view money as scarce. Many young military service members fear that when it comes to money, there will never be enough. The jar system, a spending diary, and reaching for cash instead of your credit cards - these are three methods to change old beliefs about money and harness its power instead of avoiding money management.



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