JANUARY 29, 2024 – Serving in the military comes with a unique set of challenges and opportunities. One crucial aspect that military families need a firm grasp of is their financial planning. Without adequate financial planning, you may struggle to make the most of your money, find issues when trying to secure your family’s financial future, and stumble while navigating the financial intricacies that come with a military lifestyle. Whether you are on active duty or are a seasoned veteran, this article will help you and your family maximize your money.
Defining clear and realistic goals is the first step you should take. Break down those goals into two categories: short-term and long-term. Short-term goals include setting up an emergency fund or paying off a credit card debt. Saving for a home, your children’s education and your eventual retirement are common long-term targets. It is essential to tailor your goals around your military career, making allowances for potential deployments and relocations.
Knowing how much money you have coming in and leaving your account each month is the cornerstone of effective financial planning. How can you plan for even the short term if you do not know how much disposable income you have? Listing your income is easy because there will usually only be one or two incoming transactions. Your outgoings are trickier because you will have one-off purchases for birthdays, may occasionally spend $10-$30 at the best sportsbooks in Georgia, or motoring costs that are difficult to predict.
Create two lists for your expenses. One is for essentials like housing, utilities, and insurance. The other is for non-essentials, things you could live without if you had to, such as Netflix subscriptions and similar. If you have one-off or infrequent expenses, total them for the year and divide the total cost by 12 to give you a monthly average. Such a budget helps you identify areas for potential savings while helping you keep track of your spending as you work towards your financial goals.
Military personnel usually have access to a wide range of financial benefits that can significantly impact your overall financial plan if you take advantage of them. From saving and retirement plans to comprehensive insurance, understanding and utilizing these benefits can save you a small fortune and help secure your financial future.
The Thrift Savings Plan (TSP) is a powerful tool for building wealth over time. Seek professional advice to understand your investment options, then contribute consistently throughout the term. Even a small investment is better than adding nothing at all.
Military members also often have access to low-cost life insurance through Servicemembers’ Group Insurance (SGLI). You do not need to be reminded that military life comes with far more risks than civilian life, so ensuring you have adequate coverage to protect your loved ones is essential.
Emergency funds, often called rainy day funds, are something everyone should have, but only some people do. Humans love to throw caution to the wind and live by the seat of their pants, so they say and don’t believe something will happen to them. However, military life can be unpredictable, with deployments, relocations, and other unexpected challenges, making an emergency fund essential.
Ask yourself the following questions: How would your family cope if you or your spouse experienced a sudden drop in income, and would you be able to afford an unexpected sizable expense without using loans or credit cards? If the answers to those questions are not “easy” and “yes,” you need a rainy day fund.
Aim to build a nest egg of at least three months’ worth of living expenses, but aim for six in the longer term. Your emergency fund should be readily accessible in case you need to get your hands on it in a bind. Think about putting it in an interest-yielding savings account because your money will work for you while waiting to be used.
Accumulating debt is sometimes unavoidable, especially when dealing with frequent relocations. That said, you should be cautious about accumulating unnecessary debt because it drains your disposable income, which can increase stress levels to breaking point.
If you have multiple debts, prioritize paying off those with the highest interest rate. Once the highest-rate debt is repaid, don’t bank the money you used to pay each month. Instead, add that money to what you are paying off the next highest-interest debt. Continue doing this, and you create a snowball effect that sees the sum of what you owe disappear before your eyes.
It is inevitable for some military personnel that they will be deployed somewhere at some stage of their careers. Planning for deployment is vital. Set up automatic bill payments, and designate a trusted family member or friend to manage your financial affairs while you are gone. At the same time, ensure those closest to you have easy access to essential documentation. You must communicate openly with your family members about your financial responsibilities during deployments; returning home to a financial quagmire is the last thing anyone needs.
Financial planning is a vital aspect of everyone’s lives, especially for those serving in the military. Military life creates unique challenges and situations that civilians do not experience. By setting clear, defined goals, creating a detailed budget highlighting your income and expenditure, and taking advantage of any military benefits that are available to you, you can make the most of your money and build solid foundations for the future.
Prioritize paying off debts with high-interest rates because such debt can hinder or scupper all your other plans. Once debt-free, start putting money away into an emergency fund to prepare you and your loved ones for the unexpected.
Overall, be open and honest about your finances with those nearest and dearest to you. Ask for help if you need it; your job is stressful enough without adding money worries.