10 Ways to Avoid Money Trouble in the Military

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Serving in the military will most likely not make you wealthy. But if you approach finances in a calculated and smart way, you can take advantage of some great benefits and save enough to take care of your needs in the future. Here are ten points to consider as you navigate managing your money while in the service.

#1 Don’t Count on Your Pension

You cannot assume that you will remain in the military until retirement. Just as in the civilian sector, there can be unforeseen layoffs. If you are able to retire, then your pension will be a great resource, but you need to plan for the alternative as well. Figure out how much you can save during your time and you will be much better off should something prevent you from finishing in the military according to your plans.

#2 Don’t Live Above Your Basic Allowance for Housing (BAH)

Your BAH is a predetermined amount that has been calculated by the military as an appropriate amount to provide good housing for your demographic. Whether you are single or married, if you find yourself spending more than your BAH on housing then it can be an indicator that you are overextending yourself. Staying at or below the BAH will help you reach your other financial goals, including saving for the future.

[External Resource: How BAH is Calculated]

#3 Use the Three-Year Rule When Buying a House

Purchasing a house can be a great investment if you do it under the right circumstances. However, if you are only going to be in the area for less than three years, then the closing costs and other fees can force you into a break-even or investment-loss situation. Consider the costs carefully, and see if renting is more cost-efficient for your shorter assignments.

#4 Take Advantage of the Benefits

There are many great benefits available to you as a member of the military. These benefits range from discounts on purchases, to scholarships, to fee-free credit cards that accumulate points or cashback, to unique educational opportunities. Look for and use these benefits.

#5 Use the GI Bill After You Get Out

The GI Bill is a great benefit to take care of higher education costs. It can be used by a service member, or be transferred to a spouse or child. If you are set with your education, the GI benefit can act as a great college savings plan for your child. If you are going to utilize the benefit for yourself, wait until you are out of the service. Waiting will allow the benefit to cover additional living expenses during your education.

[External Resource: U.S. Dept of Veteran Affairs, GI Bill Information]

#6 Stay Away From Credit Cards for Stupid Expenses

Credit cards are often viewed as an extension to one’s finances. This is not a healthy view. Credit cards can be useful when you use them for expenses that you already have budgeted, with the intention of paying off the balance monthly. The benefit is that there are cards that offer rewards such as mileage for flying or even cashback. But stay away from using credit cards until you are in a position where you know you will not be reliant on them to make ends meet.

#7 Make a Habit of Giving

Be dedicated to saving money for giving to your community or to causes around the world greater than yourself. There are local needs, and the military has programs for social aid as well. Giving back is a good way to impact those around you for good and to keep your own view of money in check.

#8 Increase Your Savings Before You Increase Your Luxury

It is extremely common to view additional money coming in as a way to increase your standard of living. However, events such as bonuses or promotions can provide an opportunity for adding to your savings. If you were living just fine on your previous earnings, there’s no reason to put your new earnings toward your lifestyle. Invest in your future before you increase current comforts.

#9 Max Out Your TSP and Roth

There are times when you will be able to have both a regular TSP and a Roth TSP. Whether you can only have one of the accounts, or if you qualify for both, do what you can to max out your contributions to the accounts. The more money you save now, the more it can work for you and earn for your future. One dollar now is worth ten dollars later.

[External Resource: Tradition vs. Roth TSP Contributions]

#10 Position Yourself for Life After the Military

As pointed out in the very first point, your time in the military can be unpredictable. It is always important to be prepared to enter the civilian workforce. Take time to figure out how your strengths in the service translate into civilian life. If there are certifications that you will need, acquire them and keep them up to date so you are ready to enter the workforce immediately upon finishing your military service.

Writer and speaker Natasha Munson has quipped that “Money, like emotions, is something you must control to keep your life on the right track.” There’s wisdom in knowing how money impacts you, and in knowing what your needs are and might be in the future. With money, living in the moment is not wise. Take control, plan, and prepare. The benefits will be worth it.