- Spend Your Money Right: How to Manage Your Finances While Serving in the Military
Spend Your Money Right: How to Manage Your Finances While Serving in the Military
Military members face hurdles every day, and financial management is one of them. Due to the frequent deployments and moving costs, active military personnel have to deal with cost-of-living adjustments, which makes it hard for them to manage their household finances. That is why you must learn to spend your money right and avoid unnecessary expenses.
With utility bills, loan payments, and credit card bills due at the end of the month, men and women in uniform sometimes struggle to make ends meet. However, managing your money and making sure you’ll have an emergency fund isn’t impossible.
With that in mind, here are some ways you can make sure your finances are in order whether you’re serving a domestic base or deployed overseas.
Create a Budget and Stick To It
The first and most essential part of managing your finances is creating and sticking to a budget. It may seem challenging to follow at first, but it will be worth it in the end.
On top of that, budgeting is the first step to make sure you can pay off your debt and start saving for your future expenses. Moreover, it will balance your financial situation and give you peace of mind while doing your duties in the military.
Thus, to develop a realistic budget, you should live within your means. While the military may cover your other deployment expenses, you should plan out how much you should allocate for transportation, utilities, lifestyle, food, education, savings, retirement, insurances, and debt reduction.
Set Aside For Emergency Expenses
In creating a detailed list of what comes in and a plan for what goes out on your finances, the allocation for emergency funds should be included in your what-goes-out list. Set aside a part of your salary for unexpected situations, such as home repairs, injuries, or car repair costs. Concerning this, you can start with your available money until you can cover up to six months worth of your expenses.
An emergency fund is a great help for the military folks to ensure their families won’t be out of budget when resolving emergencies, especially if they’re deployed overseas. Instead of pulling a significant amount of cash intended for monthly expenses, you can use your savings to finance unexpected circumstances.
Monitor Your Credit
Just like civilians, a good credit score is also essential for military personnel.
A credit score is a number derived from your credit report to depict your creditworthiness. The higher your credit score is, the better the deal you have when applying for a loan. A poor credit score indicates that you might be troublesome as a borrower and make lenders (or other institutions that require it) reject your application.
Credit scores that are 670 and above are generally considered good, but a credit score that is over 800 are exceptional and usually reap the better deals. Moreover, credit scores considered to be poor are under 579. Any score in between these ranges is an average credit score.
Thus, to prevent bad credit history, you should pay off your debts on time and avoid late payments. If you are deployed overseas, you should make sure you still get to pay your bills on or before the due date.
You can set up an automatic payment system or designate your spouse, parent, or siblings to make the payments on your behalf. It is essential to take proactive steps to get your bills paid even if you’re deployed in a distant place. By doing so, you won’t have to worry about late fees and additional charges while on your duty.
Invest Your Money
While you are in the military, investing is an excellent way to manage your finances. You can use your money to start a small business, purchase a franchise, buy land, or invest in rental properties. Trusting a professional with your money can be smart if you don’t know much about the stock market.
Make Use of Military Discounts and Benefits
When you are in the military, you will always put your life on the line to protect your country and make sure everyone else is safe. As such, many businesses offer discounts on their products and services to military members as a way of showing gratitude for their services to the country.
Aside from that, your spouse is also eligible for a scholarship through the Army Emergency Relief Spouse Education Assistance Program. They may receive assistance to obtain their first undergraduate degree for up to four academic years when they pass the eligibility criteria. With that, you will save a significant amount of money from tuition fees if your spouse will pursue a career to help you with the finances.
Learn More About Tax Breaks
Aside from military discounts and scholarships, a tax break is also one of the perks of being a military member. You can take advantage of this benefit to save more money for the future.
One of the available tax breaks for men and women in uniform is a Combat Pay Exclusion. It means the income you earn during your deployment is tax-free. With this, you will have a great opportunity to grow your savings account or reduce your debt.
Moreover, you can also use your tax-free combat pay to contribute to an Individual Retirement Account (IRA). Since your IRA can grow tax-deferred until you get the money, having more contributions today can boost your savings over the years.
Tax-free combat pay is just one of the government perks you can get for serving your country. Thus, if you want to make sure you can get all the benefits you are eligible for and these are in full effect for you and your family, getting the help of a tax expert will be a smart step.
Keep Track of Your Expenses
Monitoring your expenses is one of the necessary things to do to manage your finances. By simply keeping track of your spendings, you’ll know where your finances stand every month. On top of that, when you stick to your budget, you can save yourself and your family from huge piles of debt.
Spend Your Money Right: Takeaway
Being financially stable is one of the challenges faced by most military personnel. However, if you spend your money the right way, save more, and take advantage of the perks offered by the government, you will thrive while serving in the military. The tips mentioned above are just some of the ways you can manage your finances. If you learn to spend your money right you can ensure that you and your family will have financial stability during your time in the military.
For more information on military pay, and how to spend your money right, here is the updated pay chart.