What A Retired Army Colonel Taught Me About Money

As a military member myself, I’ll be the first to say that most active duty service members have no idea what they’re doing when it comes to their finances. It’s true that most people in general don’t have a clue, but it almost seems worse in the military. That being said, when I do meet someone in the military who shares my love of finances, it’s an automatic friendship. Enter my friend Eric. A retired Army Lieutenant Colonel and now a financial advisor for First Command.

What a Retired Army Colonel Taught Me About Money

With 20+ years in the service, Eric knows a thing or two about the military and he also knows about money. That’s a rare combination, which is what makes him so interesting.

Here’s what this retired Colonel taught me about money…

The Life of Eric

Eric enlisted in the Army at a young age. He quickly decided that he wanted more out of the military and wanted to give more back to the military so he obtained his Bachelor’s degree and commissioned as an Officer in the United States Army.

He served 22 years on active duty and retired as a Lieutenant Colonel (O-5).

After retiring from the military, he was still young so he decided to go to work for First Command. First Command is a financial advisory company geared toward, but not exclusively for, the military. However, when I say geared toward military, I mean that they really want to help our military get their finances in order. They actually offer free financial planning for military members.

I was first introduced to Eric through my commander. My commander knows I’m a finance nerd, so he thought Eric and I would have a lot in common. He was right and here is what I quickly learned from him…

1. The Science and the Art

I’ve heard a similar idea, but I’ve never heard the terms the “science” and the “art”, as applied to finances. Here’s how Eric explained it to me…

When you make a financial decision, no matter how big or small, you have two sides to it. There’s the science, which is the actual, real, mathematical hard numbers – this is the decision “on paper”. Then you have the art, which is the more emotional side – how it makes you feel and the emotional benefits.

When you make a financial decision, you should consider both. Now I’m not talking about being emotional versus being logical. Successful investing often requires you to block out your emotions and use pure logic. I’m speaking more about purchases and spending. You’re always going to have two sides to every purchase.

And it’s okay to go with the art sometimes.

Here’s an example, as it applies to situations of debt reduction. Consider the debt snowball and the debt avalanche. The avalanche will generally save you more money by paying less overall interest, but the snowball will create small wins in the beginning, which helps you to stick with it. And like most things, a good method that you stick with is better than the best method that you don’t.

2. There is Always an Opportunity Cost

Opportunity Cost – The cost of an alternative that must be forgone in order to pursue a certain action. Put another way, the benefits you could have received by taking an alternative action. (Investopedia)

We recently had a pretty serious mechanical issue with one of our vehicles, so we decided it may not be worth fixing and we should looking into buying a different vehicle.

I decided to run the idea by Eric and get his input. Of course, he had some very insightful advice.

I told him that we hated debt and wanted something we could pay cash for, no matter what. He said that he understood and then asked me how much we had saved for the purchase. I told him right now we really only have around $5,000 specifically to go towards a new vehicle.  We have investments, an emergency fund and other savings, but that was all that was designated for a vehicle.

That’s when he brought opportunity cost into it. He said “Kalen, you have a wife and four kids and I know you want to buy something reliable. $5,000 may or may not get you into a reliable vehicle and you never really know how long a vehicle like that will last.” “Everything has an opportunity cost”, he said. He went on to say, “You have to decide whether you’re more comfortable with the opportunity cost of buying a cheap vehicle (opp cost: little reliability, potential break down, possibly having to pour money into it) or whether you’re more comfortable with the opportunity cost of buying a vehicle that’s a few years old with low miles and still in great condition (opp cost: debt for a short time period)”

It seems simple and he laid it out in a way that was more clear than ever. He actually completely shifted my thinking. I used to be 100% against debt no matter what, but I can now see that sometimes debt actually makes more sense than the alternative, especially in a situation like I just mentioned. I have really good credit, so I could get an extremely low interest rate on a nice vehicle and end up paying less than a couple hundred dollars in interest over the entire length of the loan. Think of it as a $200 comfort tax; it might just be worth it.

Similar to paying off a mortgage, this is like how it sometimes makes more sense to invest rather than paying extra on your mortgage, depending on each interest rate (More on that herehere and here).

3. Benefits CAN Outweigh Pay

When my commander introduced me to Eric, I initially told him that I would love to be a financial advisor and I was considering applying to work at First Command. Eric’s response surprised me.

He said “you remind me of me when I was your age and I felt the same way, but don’t do it yet – do your 20 and then join First Command after you retire”. If you don’t know what “do your 20″ means, Eric is basically telling me to stay in the military for 20 years so I can retire.

I admit that I was a little disappointed that he told me to wait. That’s four times longer than I planned to wait to start my financial career, but then he explained it to me. He said “I did my 20 and retired. Now I have a pension coming in from the military; that’s the equivalent of earning 6% off a $1 million nest egg – and that doesn’t even include my actual retirement investments.”

That’s when it really hit me. Benefits can really outweigh pay or money in general.

I’ve added up my income before, including housing, food allowances, insurance, education benefits and everything else we are so lucky to have in the military. As a lower ranking Enlisted member, I make the equivalent of a fairly high six figure income, when benefits are weighed in. Benefits really do have their…benefits.

Now I’m not saying that you should count on a pension, even from something that seems as secure as the military, but if you can work towards that or something similar, it may benefit you more than just earning more money would.

The bottom line is this: Don’t disregard benefits. Add your benefits into your income to figure out your “real” pay. Weigh different job opportunities with benefits included.

Final Words

I love learning from others, especially those who are more knowledgeable than I am. That’s the best.

It’s important to seek out mentors and teachers that you can learn from, but it’s also important to remember that we can learn from everyone. We can always either learn what to do or what not to do.

I’ve developed a friendship with Eric, so you may even see a part 2 in the future. I hope you took something away from this!

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Alexis Renault 7 years ago Member's comment

Really interesting, thanks. Looking forward to that "part 2!" But the main take away for me was that I should find a job which offers a pension. And finding jobs like that are pretty rare these days. Any other tips?

Godfred Klugah 7 years ago Member's comment


Soham Rastogi 7 years ago Member's comment

If you do not have a job that offers pension, Take a SIP i.e. systematic investment plan or ULIP, unit linked Insurance plans. There are many products in the market like these. You will have to look around a bit, but if you keep investing even 1/10th of your income monthly, the earnings would give you something similar to pensions by the time you stop earning.

Soham Rastogi 7 years ago Member's comment

Kalen, I loved the article. Got me thinking how I can pitch my idea to investors.

Derek Aryeetey 7 years ago Member's comment

very interesting thoughts...I have and will learn a lot from the part of regarding benefits more than physical income. Thanks for the advice

Victoria Asusual 7 years ago Member's comment

what is this title, makes me go: oh, well, keep it to yourself