Achieving Financial Independence While Serving in the Military

Photo by Benjamin Faust on Unsplash

Stuart Grazier is quite an accomplished individual having served 13 years (and counting) in the military, while at the same time climbing out of debt and creating a real estate business from scratch.

Stuart’s money journey started when he graduated from college and got a job in the Navy. He was living in San Diego at the time and I’ve heard Stuart in multiple interviews describe how he was spending money like it was going out of style at this point in his life.

He accumulated about $40,000 in debt. $10,000 in credit card debt and $30,000 for the purchase of a truck.

All things considered, that is by no means an insurmountable amount of debt, but like many people right out of college, Stuart did not have a great handle on his money at this point.

While deployed in Iraq, Stuart at the opportunity to take Dave Ramsey’s “financial peace university”. This is a 3-month course where people learn how to get control of their money and pay off all their debt.

Dave’s major focus is the elimination of all debt (including mortgage debt). As You’ll see Stuart was able to take the core message of how to save money but after his “bad debt” was paid off, he focused more on investing his extra money rather than paying off his mortgage.

This was when Stuart changed his money mindset and began moving down the path towards Financial Independence.

Stuart was able to identify and take advantage of a financial opportunity that was available to him as an active member of the military. That is, the tax-free hazard pay he received during his tour. He used every penny of his hazard pay off debt. Stuart managed to pay off $10,000 in credit card debt and $30,000 auto loan during his deployment.

He was off and running.

Thinking About money leads to Talking About Money.

Learning how to manage money is a necessary first step to turning your financial life around. Stuart took that first step by completing the Dave Ramsey financial schooling.

Knowing how to manage money is meaningless unless you take what you learned and put it into action. If you are married or cohabitating with someone, that means getting them on board with your plan.

After taking the Dave Ramsey course, Stuart began having more frequent discussions with his wife about what he was learning. It was not until he got back from Iraq that they sat down and created their first budget together.

This is a big financial milestone in a relationship. Sadly, this also puts them in the minority as 60% of people do not use a budget.

During their discussions about money and finances, it became clear to Stuart that he was the “money nerd” and his wife was the “free spirit”.

These are terms, Dave Ramsey came up with to describe peoples approach to money. The money nerd is the person in the relationship who saves every single receipt, loves spreadsheets and making pie charts. The “free spirit” is not bad with money, they just are not as rigid and don’t feel the need to put everything down into a spreadsheet.

(In case you were wondering: While I do work with spreadsheets all the time, in our relationship I am the free spirit and Tricia is the nerd by Dave Ramsey’s definition at least. Don’t get me wrong I nerd out on money and investing all day long, but when it comes to organization and saving all our receipts, Trish has me beat hands down.)

Willing to Sacrifice

Before Stuart’s first deployment he bought a house in San Diego in 2005 with a friend. It was a large house that he and his friend lived in along with several roommates. Although he did not know it at the time he had just executed his first “house hack”.

Once he and his wife got together, she moved into the house with him and lived there during his deployment. They kept the roommates around and the rent they received from the roommates was enough to cover the mortgage. Once he got back from deployment, they kept the roommates.

I should note here that while this makes perfect sense, very few married couples would be willing to do this. How many married couples do you know who own their own home and choose to have roommates? Probably none. It is a sacrifice that very few are willing to make, but it helped set Stuart and his wife up for long-term financial success.

At this point, they had zero out of pocket housing expenses. This allowed them to be able to comfortably live off Stuart’s paycheck and save and invest every penny of his wife’s paycheck.

They sat down with a financial advisor and began investing in mutual funds and before long became interested in Real Estate. So, Stuart started going to real estate investor meetups, reading bigger pockets. Stuart was drawn to the idea of investing in real estate by becoming a private lender.

A private lender is someone who steps in and provides a loan to a real estate investor who isn’t eligible for traditional financing from a bank. Typically, the private lender uses the property as collateral for the loan. It’s not uncommon for private lenders to receive double-digit percent interest for loaning the money.

Private money lending is a more passive form of real estate investing. Unless the borrower defaults and the lender needs to take over the property, they are “hands off” when it comes to the property.

In Stuart’s first deal he loaned a house flipper $25,000 to complete a real estate flip. On that deal, he made a 12% return. Stuart continued to do these types of deals with the flipper over the next few years, using his profits from the previous deal to find a larger project to finance each time. Eventually, Stuart was lending out $100,000 with a 12% rate of return per deal.

Unfortunately, the flipper he was working with started to engage in some shady practices (he went to Jail) and Stuart lost $130,000 which was essentially all of his investment gains to date.

I can’t imagine what gut punch this must have been. It highlights the importance of finding a business partner you can trust. Especially if you are engaging in a business that you don’t have a lot of experience in.

At this point, most people would have thrown in the towel on real estate investing. But Stuart was committed to learning the ins-and-outs of the private lending business

After making a connection with a Real Estate attorney who had been in the private lending business for years, Stuart made the ultimate grand slam deal.

Stuart bought a private loan that the attorney had given to a local Real Estate Investor for $5,000. The loan had a $40,000 balance and paid 9% interest annually.

I just need to take a moment to comment on what an incredible deal this is. He bought an asset worth $40,000 for $5,000. Upon closing the deal, he had immediately created $35,000 in equity which equates to a 700% return on investment. On top of that, he collected 9% interest on the $40,000.

As unlucky as he was with his previous, fraudulent business partner he was even luckier finding this attorney who gifted him such an amazing deal. This would fall under “too good to be true” except it was true. I have no idea why the real estate attorney would have agreed to this deal, but he did.

Stuart rolled his profits from that deal and invested in more mortgage notes over the next few years, all of which were providing a yield in the high teens. The only downside was these notes did not provide any tax advantage like owning a physical income property does so Stuart started paying an incredible amount of tax.

While I would file this under one of the better ‘problems’ to have in life, good on Stuart for identifying that he could find a more tax efficient way to invest his money. Physical real estate provides loads more tax advantages than investing in mortgages.

To avoid massive tax bills, Stuart transitioned into Physical real estate. He and his wife bought four rental properties in Alabama. They Put 20% down on each property and uses a property manager to keep these investments on the passive side.

Stuart accomplished all this while actively serving in the military. Today he is in his 16th year in the Navy. He says he Plans on retiring after 20 years to receive full lifetime pension from the military. He thinks he’ll receive around $35,000 in annual income for the rest of his life when he receives the pension.

Their Real Estate income more than replaced Stuarts wife’s income and this allowed her to pull the trigger on FIRE and quit her job and become a full time, stay at home mom.

And they were able to ditch the roommates.

This article is for informational and entertainment purposes only. It should not be considered Financial or Legal Advice. Not all information will be accurate. Consult a financial professional before making any major financial decisions.