In the Military? Tips For Saving Money at Every Stage

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.

Recruits

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.

Mid-career soldiers

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.

“Deployments can also create a time-warp effect, making it easy to lose track of when bills are due,” Nager says.

“(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.

Re-enlistment?

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.