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The Automatic "Military" Millionaire

David Bach’s “The Automatic Millionaire” gives the average person a real plan to develop wealth. In the book, Mr. Bach points out that people really waste a lot of their money, or at the very least, don’t think too much about where their money goes. By setting up a simple direct-debit investment plan, you can save before you spend, and then limit spending after that to prevent accumulating excessive debt.

Now, consider the tools available to military members. First, consider the Thrift Savings Plan. You can save up to $15,500 in 2008 in your TSP account. The money is taken out of your military pay before it goes to your direct deposit account. In addition, the money goes in pre-tax, deferring your tax payment. This gives you the benefit of having more money invested in your account for a longer period which can lead to dramatically bigger returns when you withdraw the money.

Second, you can save through allotments. Allotments are set aside from your military pay before it gets deposited. They can be deposited to a bank or brokerage account automatically. The drawback is that the money is deposited at the end of the month instead of on your usual pay days. While losing interest on 30-days of principal might not seem like a big deal, over 30 years it could start to add up. For many people, however, setting up a reasonable allotment is a very disciplined way to regularly invest their money.

Beyond allotments, deployed military members have access to the Savings Deposit Program. This exceptional program allows military members deployed to combat areas to deposit up to $10,000 of their unallotted pay into the account during their deployment and for 90 days afterwards. This account earns 10% APR and is guaranteed by the US Government! It’s a great way for combat veterans to return home with a good pile of cash.

Military members have some great ways to build wealth automatically. Once set up these programs can be further set on autopilot by setting up systematic investment purchases within brokerage accounts, or fund purchases within the TSP. By starting early, these automatic steps can easily make military members millionaires later in life.

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