The day has finally arrived. You sprint out of the company office, bounding across the grass as SNCOs and boot-tenants holler to “stay off the daggum grass.” But it doesn’t matter. You’ve made it. You’re untouchable. You’re free. You have your DD-214, and your last paycheck burning a hole in your pocket. Time to hop in that Ford F-150 that you financed at 20% and roar past the base gates for a road trip back to your hometown.
Two weeks later, you’re flat broke, credit card debt is eating away at your Post-9/11 G.I. Bill housing allowance, and you’re sharing a one-bedroom apartment with three other people and sleeping on a yoga mat.
Don’t be this guy. Leaving the military can be tough enough without adding money troubles to the mix. Task & Purpose spoke with a couple of financial experts and veterans to glean some helpful tips for avoiding post-service poverty.
Seriously, set up a rainy day fund.
“There’s no such thing as job security in the civilian world, not like there is in the military,” Curtis Sheldon, the lead financial planner and president of C.L. Sheldon & Company and a former Air Force fighter pilot told Task & Purpose. “On any given day you can be shown the door, not because you did anything wrong, but because the company is doing something different.”
Which makes a “rainy day fund,” “war chest” or a “oh shit, thank God I have some cash squirreled away” account a really good idea.
Okay, so now that your heart rate is up, let’s bring it back down. Here’s what you need to do:
Before you get out, start saving. Yes, every month.
Try to save about 10% of your monthly income; here’s a pro tip: Set up automatic payments or deposits so that money goes into savings before you can spend it all on liquor and cases of beer at the base exchange.
Continue squirrelling away cash until you have about six months to a year’s worth of living expenses stashed away. Keep in mind, this money is in that unpleasant-to-think-about, but important-to-plan-for event that your job suddenly disappears once you’re a civilian, or you have some other unexpected expense. It is not for last-minute tickets to Vegas for a reunion with the boys from 3rd Platoon.
“At this point, you’re not going out to eat dinner and going to movies, you’re paying the rent and keeping the lights on while you look for a job,” Sheldon told T&P. “You don’t want to take any risk with that money or any chance of it going down in value, so you’re probably looking for a savings account, or you could potentially look for shorter term certificates of deposit at a bank to get a little bit better interest.”
Civilian life comes with a lot of freedom and a lot of costs.
Leaving the service and moving out of the barracks doesn’t just mean you can grow out those long beautiful locks or that bushy face rug; it also means rent, utilities, food, and insurance — auto, health, dental, life — are all on you.
“Understanding your cash flow needs is one of the most important steps you can take toward financial independence,” explained Ryan Guina, an Air Force veteran, guardsman and the founder of The Military Wallet, a financial news site geared toward service members. “Knowing your cash flow needs after leaving the military can be difficult because there will be some expenses you can’t predict, such as the cost of healthcare, which is covered while on active duty. So in some cases you will need to make an estimate until you have hard numbers to work with.”
Which means balancing a budget, like a boring adult.
One way to help you plan for the new expenses is to start tracking how you spend. To get a feel for just how much cash you leave on the (disturbingly sticky) dance stage at the local strip club, try out an expense tracker. The tracker sorts your monthly payments and purchases into categories like: groceries; entertainment; utilities; and travel. Many banks offer this as part of their online checking services, but there are some other options, like Mint, which will track your spending for you.
“So as you’re getting out, or even while you’re still on active duty, look at what you’re spending going out, what you’re spending on groceries, if you’re living out in town,” Sheldon told T&P. “That would at least give you an idea on what your discretionary spending money is. That might help.”
Pay off that credit card debt before you get out.
The more expenses you have chipping away at your income month-over-month, the less cash you have in your wallet. Obvious, right? That’s why it’s a good idea to start cutting down your debt while things like rent, health insurance, and even food are covered by Uncle Sam.
Or, if you can’t control yourself, just don’t use a credit card.
“The most important aspect of credit card use is to know yourself,” Guina told T&P. “I know many people who swear off credit cards, because they know they can’t control your spending. I know just as many people who only use credit cards because of convenience, security, and rewards. But they always pay the balance in full. If you are in the first camp, then lay off the credit cards, and pay cash or use a debit card. If you are in the latter camp, then keep up the good work.”
As your departure from the military draws near, take a quick inventory of your room. If your wall locker or closet looks like a storage shed from Hoarders, then you might want to take a trip to the nearest pawn shop to start hocking some of that crap. Sure, the military will cover your first move as you leave, but that’s it. If you pull up stakes again, paying for it is on you.
“As a rough rule of thumb, if you pay someone to move your stuff it’s somewhere around $1 a pound to move it, and you could do it cheaper with a U-Haul,” Sheldon explained. But even if you rent a truck and drive the stuff yourself, “you’re probably looking at $0.25 or $0.50 a pound to move it with a U-Haul and that starts making a lot of that stuff really expensive.”
If you’re going to college, you may be eligible for other bennies beyond just the G.I. Bill.
While the Post-9/11 GI Bill is an incredible benefit, it may not cover 100% of tuition for every university, especially those high-priced private colleges. Consider looking into the Yellow Ribbon Program as a way to earn your degree without breaking the bank or taking loans.
Additionally, many states offer education grants to vets attending local schools. “Most colleges and universities have a veterans resource center or an office that specifically works with veterans using the GI Bill or other scholarships and grants,” Guina told T&P. “They can help you learn which programs or benefits you may qualify for, and many will even help you complete the paperwork and apply for the benefits.”
In the Military? Tips For Saving Money at Every Stage
- Young soldiers may face many financial pitfalls, including low starting pay
- Throughout their enlistment, soldiers typically experience trouble with debt and family obligations
- Toward the end of their military careers, servicemen and women are often faced with forking paths, and re-enlisting can have financial benefits
The average U.S. soldier spends between seven and 10 years in uniform. While that might not seem long to civilians, it could be a lifetime to a fresh recruit in his or her late teens or early twenties.
Not only is the prospect of a seven-year stint in the armed forces daunting enough, but wrangling the rest of your life into order–your finances, in particular–can add an extra degree of difficulty.
And by the time you’re ready to hang up your boots and retire, or otherwise move on to civilian life, soldiers have other things to consider. Should you stick it out and earn a pension? Or go back to school and earn a degree?
There are many viable paths after serving in the military, but if you want to leave the service with a sense of financial security, you’ll probably want to consider what you’re facing during each phase of your enlistment.
Here are some of the major money challenges that soldiers experience during those phases, from conscripts to commanders, and some tips to help you work through the financial bottlenecks at every stage of your service. Keep in mind that these are only tips, however, as every soldier’s experience is going to be different.
As a recruit, you should expect money to be tight–you’ll be earning less than $20,000 per year in base pay as a private at the E1 rank, according to the Department of Defense. For that reason, probably the most important thing you can do is to make a budget, stick to it, and establish healthy money habits.
Also, if you’re packing debt, keep up with your bills. Debt doesn’t disappear just because you’ve joined the military, and ignoring it is only going to hurt you in the long run.
“The number of people joining the military with student loan debt is increasing. The number of [military members] with large student loan debt and no degree to show for it is also increasing,” Lacey Langford, a financial advisor, veteran, and founder of North Carolina-based advisory Sage Services, tells Stash.
Young recruits should also be wary of predatory financial products targeting military members. You’re likely to be offered all sorts of high-interest loans and be tempted to make big purchases, like a car or a house. Stick to your budget, make sure you understand the terms of any loans you take out.
Also, you’ll want to check out the military’s available retirement programs, including the pension system and the Thrift Savings Plan (TSP), which is similar to a 401(k) program.
After a few years in the military, the pay scale ramps up. So, the good news is that your paychecks will be a bit bigger and you’ll have more resources to work with. The bad news, though, is that a military career could start to take a toll, with frequent relocations and deployments.
If you’re deployed, unforeseen issues can arise with family members. “When one spouse is away, all the burdens of running a household, (including) child care, fall on the other,” investment advisor and U.S. Army veteran Eric Nager, of Alabama-based Southern Capital Services, tells Stash.
“(Deployment) can be tricky when banking systems, time zones, languages, and postal services are different from home,” Nager says. “If families fall behind, they can be assessed late fees or other unnecessary charges.”
Leaving the service
If you worked for the service for 20 years or more, you’ll qualify for a pension. But most soldiers leave long before that.
So, for most soldiers, getting all of your financial ducks in a row in preparation for a career in the private sector is a good first step. However, many soldiers struggle with two aspects of their new life: Losing a steady, reliable paycheck, and finding a job.
That can make it tough on family members, who rely on soldiers’ earnings. And not just immediate family members; Many soldiers help out extended family, too.
“For many service members, they are the highest earning person in their family,” said Langford. “Because of this, many of them are overextending themselves to help family members out.”
Once out of the service, many veterans have trouble finding jobs. There are a number of reasons why including skill mismatches and stereotyping of service members–many employers don’t understand how military service translates to their needs.
What about re-enlisting? Bonuses typically abound for those willing to extend their time in the armed forces, and the armed services often use them to keep trained soldiers in the ranks. But the military’s retirement system (pensions and the TSP) is generally the primary motivator for keeping soldiers enlisted. The Defense Finance and Accounting Service says that accruing 20 years of honorable service–no less–is the only way to qualify.
The net value of a military pension is roughly $200,000 for an enlisted soldier, and $700,000 for an officer, making it a powerful incentive.
No matter what stage you’re at, the best day to start saving is likely today.