The information below in quotes is from the last paragraph on the main page.
“If you are a new federal employee hired in the last 12 months, you can obtain a free FERSGUIDE subscription to help you start your federal career out right. Just email us your name, preferred email address, agency name, and your EOD to newhires@fersguide.com and you will receive an email from us with a username and password good until 11/30/2020)”.
Thanks @Madison85. I read that to mean if you’ve been a federal employee for less than 1 year. I’m getting ready to retire, so don’t meet that criteria 
I suspect @mathmom ’s son will, so good resource.
@mathmom, if your son is in the Navy, he has access to excellent financial advice and planning both through his branch resources, the advice given by posters here, and USAA which does an amazing job of taking care of the financial needs of service men and women. He is eligible for a VA loan to purchase a house which a seems to be the one of the best rackets going. Our son is in the Army. In his case, his BAH (Basic Allowance for Housing, a stipend separate from his salary and adjusted for COL per post) covers all but a few hundred dollars of his monthly mortgage payment so, in effect, the government gave him the money to buy the house and is pretty much paying it off. He owns his car, so his monthly expenses are less than half his salary and he, too, is investing all of the remainder. Even though his military compensation will always be less than what he could make in the private sector, he has, perhaps, a higher percentage of disposable income to work with than he might if he had to pay rent in an area that typically attracts his skillset. So, even with the less competitive salary, I now understand why they say that officers live well.
I suspect your son has these same resources and advantages available to him, and it sounds like he knows how to defer gratification which is, arguably, the best tool to help him get where he wants to go financially. Good luck to him!
Umm…maybe things have changed… My dad was an officer and we qualified for free/reduced school lunches! On-post housing was assigned by rank, not size of the family. I slept under the stairs in a storage room at one post.
@CountingDown: I would think that it would be harder to manage a family. For a single young man with no encumbrances and a brand new house, he’s doing very well.
Being able to defer gratification, or not having gratification wants that are expensive*, may be the biggest reason for differences in personal financial management outcomes. The effect of knowledge of investing and the like only matters if you actually have money to invest.
*including in aggregate – numerous small spending items can become expensive in aggregate
A subtopic of deferred gratification - As it applies to credit cards, only use them for convenience, never for credit. If you can’t write a check for X, don’t buy it. Pay them off 100% each month. Forget about same as cash for 12 month deals. If you are late at the end of the term you’ll end up paying 20%+ interest for the whole term (on the remaining balance).
One of DH’s professors from undergrad used to tell his students that if they remembered nothing else from his class, it would be to live well below your means. We took that to heart and have been doing it over 35 years. We told our kids as they were growing up why we spent/saved the way we did and they have adopted it as well. They know that’s how they had choices for college. They also know that it was how were able to weather the loss of my income and the expense of ongoing large medical bills.
We talked a lot about insurance coverage (of all types) because stuff happens…
We also sing the praises of Vanguard and USAA.
I totally agree with this.
I am not in the camp of putting away as much in 401k or other deferred tax savings for people in their 20s. For most people, their earning power is probably lowest in their 20s. I wouldn’t be surprised if many of our young adults’ tax rate may be higher when they retire (due to more assets and income). Right now is the time they need to save up for housing, childcare, and various other emergency events. I would make sure they have enough money saved for what they need now. I think to max out on employer’s match in 401k is good enough for now.
^ Agree with a lot of that. Not a fan of just maxing out 401k. Always get the full match as that’s free money and 100% gain, but I prefer shifting to a roth IRA (if eligible) after that for younger folks. The goal is to leave it alone but you can always get those roth contributions back without penalty pre 59.5 (long way out for a 30 yr old).
Have seen way to many people lock their resources up and end up borrowing from their 401k thanks to “life happening”. Bad habbit is formed and often those loans become distributions as they’re never fully repaid (but that boat looks nice on the trailer…)
Diversification isn’t just about asset classes. It must include tax structure. Good to have both qualified and non qualified buckets.
I’ve enjoyed and shared the following books with my kids. Extremely informative in layman terms. I’ve also recommended them to many of the younger guys at my job. Amazed at how they spark conversations.
David Bach’s the “Automatic Millionaire”
Jonathan Clements “How to think about Money”
Erin Lowry “Broke Milennial”
@oldfort, you make a very important point about saving up for housing, kids, and emergencies as something young people should be doing in addition to saving for retirement. The FIRE movement advocates talk incessantly about saving early and drastically for retirement, but we don’t all want to retire at 40 and live the rest of our lives in a low cost-of-living area. It’s important to start retirement savings early, but balance is a good thing, and there is a lot of life to be lived before we get to retirement age.
Some employers do have a Roth option for 401(k).
I have had SEP and an IRA through USAA, but they just got out of the business. The tax free housing allowance is what is making it so easy for him to save right now, and also since his girl friend (now newlywed wife) has been living with him since early March and they are still in a one bedroom apartment, I think their living costs are much lower than average. He became an officer in 2016 and recently re-upped as the middle of a pandemic did not seem like a good time to be looking for a job. He’ll be overseas next year if all goes as planned. She hopes that she’ll be able to go back to dissertation research (which involves travel in Asia and came to a crashing halt this spring.) I will remind him that the Navy actually should have good resources.
Certainly not investing advice, but the biggest financial lesson I learned aboard ship was the unofficial money lending system. Borrow $20 and you owe $25 on the next payday, no matter how soon it comes. Miss that and you owe $50 on the next payday. I joke that the best training for my Wall Street career wasn’t Wharton but risk managing my book of loans to the members of the Deck Division. Got to the point where I made multiples of my pay on a monthly basis.
I’ll add Dave Ramsey’s “Total Money Makeover” to the list of books.
Solid advice about when, where and how much to invest as your wealth grows.
Although i disagree with a lot of Dave Ramsey’s comments, I think he provides good, VERY GENERAL, ideas regarding debt. His investment advice is WAY over simplified but it’s a radio show and must appeal to a large audience. He has helped many people wrap their heads around debt management and creating new financial habits which is great. I applaud that.
I completely disagree with his view on life insurance (full disclosure - am a financial planner who believes in owning permanent life insurance for many reasons. An appropriate blend is most likely the right answer). That said, I like that he gets people to think about owning life insurance (in any form) upwards of 10x their income. Just get it in place and decide what you really want / need later.
“There really aren’t any good short-term investment options right now – the stock market is risky and CD rates stink.”
I disagree. I have most of my money in Fidelity growth stock mutual funds. These funds hold shares in big, successful companies that continue to grow year after year despite ups and downs in the overall economy. They’re essentially non-cyclical and recession-proof. Think Apple and the like. The returns have been spectacular—up 28% so far this year, up 39% last year, up 19% over the last 10 years, with no downturns. Growth stocks tend to be much less volatile than the market as a whole, and they produce higher average rates of returns. Of course, there’s some risk in any investment in stocks, but it would take a total meltdown of the entire economy to put a dent in these rates of return. That’s highly unlikely to happen.
I also have significant chunk invested in blue chip bond funds. With the exception of so-called junk bonds, corporate bonds are generally less risky and less volatile than stocks. Again I use Fidelity mutual funds to diversify and hedge agains the risk that any particular corporation will default on its bond obligations… The Fidelity Corporate Bond Fund has returned 13% so far this year, 7% over the last three years, and 6% over the life of the fund. Not as spectacular returns as growth stocks, but these are very solid rates of return with a very low risk.
The third category I invest in is blue chip municipal bond funds, mostly investing in extremely low-risk AAA-rated municipal bonds and those close to that mark. As a Minnesota resident, I invest in Minnesota munis which are tax-free at both the federal and state levels. These reliably return 4% to 5% tax-free, which in my tax bracket is the equivalent of a 7% or 8% return on an investment in tavble bonds. Again, very solid rates of return, very safe, extremely low risk, zero volatility.
All these investments are less risky and less volatile than the overall stock market with rates of return that beat all h*ll out of CDs.
Perhaps it is best to think of life insurance as potentially replacing the value of your labor* or existence** to your financial dependents if you die. Then it should be relatively easy to figure out whether you need life insurance and how much you need for how long.
Including unpaid household labor that would otherwise have to be hired if you can no longer provide it because you are dead.
*If you have a pension or some such that pays contingent on you being alive but would be reduced or eliminated for your financial dependents when you die.
I agree with most of the posts above. A couple of things I’d advise. Don’t put all of your money in a 401K. Someone like your son who obviously saves a lot should have multiple vehicles for investing including real estate, retirements and even cash outside of retirement. In addition, I am NOT a fan of mutual or other index funds. I find the fees silly and find the upsides are taken by the funds managers. We never qualified for Roth IRA’s so I can’t comment on those.
Having investments at a young age often means he will meet his retirement goals early. We were pretty surprised at how money starts to feed on itself. Last point, diversify. We did really well in tech funds in the 90’s and 00’s as one of us was in that field. But it got dicey. Now we are invested in many fields. Our advisor has told us to make sure we have enough cash outside of 401K to chose how we pay ourselves in retirement. Use a FA. They are worth every penny. Make sure they are NOT connected to a firm ( ML, AMEX etc) and are paid solely on independent thought. Check their bona fides. A good firm will also work with your attorney/CPA.
We are in our ealry 50’s and can retire now. We don’t micro-manage our $ but check it when things go crazy ( like earlier this year). It’s mainly because we started to save early on, never took from retirement funds, went slowly moderate/moderate high risk, and kept an eye on the FA without interfering day to day. Many friends of ours were too risk averse so they didn’t buy real estate after they got burnt or they invested in no risk money market style CD’s. When you are young you should take more chances. As you get older you should take less. Just makes sense.
I love strong blue chip dividend stocks. They continue to grow and they are moderate risk.
Also, enjoy life. Don’t know what I would be thinking right now if we had never travelled or done fun things when we were young. Tell your son to spend some of his money. Saving money is great but you also have to enjoy the days you have. 50% savings seems crazy, IMHO.