An Army Second Lieutenant (2LT) Will Earn Over $100,000 in Salary in 2032 – Rule of 72

A brand new second lieutenant in the military earns a base salary of $2,550 per month.  Based on the average basic allowance for housing (BAH) is $1,429 a month.  So, the lieutenant earns approximately $50,170 in salary and allowances per year.  The military also earns a pay raise of approximately 3% per year or they have for at least the last several years.  If this trend continues, then military salaries will double every 24 years.  So, a second lieutenant will earn over $100,000 in 24 years.

 

The only reason I bring this fact up is that it shows an amazing perspective on how inflation and cost of living changes our lives over the long term.  I remember vividly asking my mom for $10 when I was a kid in order to go to the movies and get some popcorn.  My mom would always complain that she could remember only needed $1 when she was a little girl in the late 1950’s and early 1960’s for entry into the movie, popcorn, and a Coke.  Her dollar became our generation’s $10, and now $20 barely gets you into the show.  Heaven forbid you need to take a date to the movies.  Will the $100 bill become our children’s pocket change? 

 

On a side note – A real quick way to see how long it will take to double your money, either investments or inflation, is the Rule of 72.  Take the percentage that you are earning on your investments, 8% for example, and divide that 8 into 72.  At 8% interest, your investments will double in value every 9 years.  This is the power of compounding interest that everyone talks about.  If you could squeeze out a 12% return on your investments (not nearly as impossible as you think if you choose solid growth mutual funds), your money will double every 6 years.

 

Rate of Return	Rule of 72
2%	36.0 Years
3%	24.0
5%	14.4
7%	10.3
9%	8.0
12%	6.0

 

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