If you’re new to the military, chances are you have a lot to learn about a lot of things. It’s a new way of life that comes with significant changes, including financially. You want to be sure to start your financial life in the military off right in order to set yourself up for success in your continuing career. And you certainly want to avoid any big rookie mistakes that might come back to haunt your wallet.
So what should new military members know about managing money in the military? “If we could offer one piece of advice to military members — new and old alike — it would be to focus on frugal living,” said Mark Leach, Vice President of Media Relations at First Command Financial Services.
“Financial discipline is becoming even more important as service members and their families deal with the added uncertainty of defense downsizing and the ways it may affect their military careers and benefits,” Leach said.
So what are some more important snippets of advice?
Learn about benefits available to you
“These include financial education and services provided by personal finance managers (available on many bases), participation in the Thrift Savings Plan (TSP) and mandatory interest rate reductions to 6% for active duty military under Service Member’s Civil Relief Act,” said Karen Carlson, Director of Education and Creative Programs at InCharge Debt Solutions.
Create a solid foundation and stay debt free
Laying a sound foundation for your finances will make later issues easier to deal with. “This means taking advantage of housing allowances and signing bonuses to reduce your expenses and pay off debt, if you have any,” Carlson said. “Make a goal to become debt free and stay debt free. Use the discipline techniques you acquire in basic training toward other areas of your life, like budgeting and saving. Remember that retailers, car dealerships, payday lenders and other businesses near military bases have a long history of preying on service members. Be cautious.”
Don’t waste a signing bonus
According to The Military Wallet, it’s a good idea to use your bonus wisely. This doesn’t mean you can’t use some of it for fun; it means you should plan out what you will spend and what you will save before you even receive your bonus. That way, you won’t be as tempted to spend it on the first thing that catches your eye.
“New service members are going to be way too busy at learning their jobs,” said Doug Nordman of TheMilitaryGuide.com. “There’s not much time to spend on managing their finances. They should try to automate things as much as possible, including account deductions for bills and savings.”
This goes for investments as well: “Set up automatic deductions for your investments,” Nordman said. “Try to maximize your TSP (or your Roth TSP) contributions and your Roth IRA contributions.
Track your spending
Nordman suggests doing this on a smartphone, online, spreadsheet or paper. He also suggests making a spending plan or budget for the goals that are most important to you. If you don’t, you may end up throwing away your money on things that you don’t truly care about and have none left for the big things.
Use credit cards wisely
If you cannot pay off your credit cards every month, stop using them and stick with cash. As a new military member, you don’t want to run your credit score into the ground straight out of the gate.
Save, save, save
“Try to save 80 percent of every pay raise (promotions, annual raises, longevity raises),” Nordman said. “The sooner you start and the more you save, the quicker you’ll reach financial independence. Along with this comes avoiding a consumer lifestyle. “Live frugally and match your budget to your values. Cook for yourself. Shop from thrift stores and Craigslist, and learn how to maintain and repair your stuff.”
According to The Military Wallet, the two most important things to save for are retirement and your transition back to civilian life.
If you follow good advice and purpose to keep your finances in check, you should be well on your way to having a successful and fulfilling military career.
Photo courtesy of Alan Cleaver