Planning Your Finances as a Member of the Military

If you’re a member of the military, it’s likely you often take big risks in the service of your country. So it can be especially critical for you to have a financial plan. 

In fact, the nearly 1.3 million active members of the military have a special set of circumstances that they have to keep in mind when they’re mapping out their finances. If you’re in one of the military’s seven divisions, you may have to leave your family at a moment’s notice when you’re deployed, with the average tour of duty lasting up to 12 months. Being in the military also means potentially risking your life, which could possibly expose your family to financial risk.

To help you plan, you can take advantage of some key benefits available only to members of the armed forces, including loans, mortgages, retirement plans, insurance, and discounts. Here are some things to keep in mind if you’re in the military and starting to build a financial blueprint.

Create a budget

Whether you’re part of the military or not, the first place to start when planning your finances is with a budget. One budget you might consider is the 50-30-20 one, which requires you to split your monthly income into 50% for your fixed, essential expenses, 30% for your variable, nonessential expenses, and 20% for saving and investing. 

When you’re creating your budget, take note of your regular paycheck, as well as any other income you have, from an approved part-time job or from a military stipend. Remember that if you have a family, you’re eligible to receive a monthly stipend for housing, depending on how many dependents you have. You’ll also receive a separation allowance if you’re away from your family for more than 30 days.

Maybe you’re saving up for a house, an engagement, or to have kids. You may want to prioritize your savings in that case, and allocate more than 20% of your income to your savings, if you’re able to do so.

Protect yourself

As a member of the military, you can protect yourself, your family, and your things with insurance.¹ Having insurance can provide financial security for you and your family should something happen to you. There are military credit unions designed specifically for service members that can help you bank and may get you the protection you need, including Andrews Federal, Navy Federal, Pentagon Federal, Security Service Federal, and the United Services Automobile Association (USAA).  

USAA, for example, offers a variety of services from auto insurance, homeowners insurance, life insurance, loans, brokerage accounts, and more. Navy Federal offers different kinds of bank accounts, credit cards, loans, and more. Before being deployed, you’ll want to make sure your life insurance policy includes an “act of war” clause in case something happens to you, says Brandon Young, a financial planner and the founder of Fulgent Wealth Management, based in Tempe, Arizona. “Many credit unions and military banks offer life insurance during deployment with such clauses,” says Young. 

Before being deployed, you should also call your auto insurance provider and let them know you’ll be away from your car for a while. “Most automotive insurance groups will allow a deployed member to save money on their auto insurance by contacting them,” Young says. “Generally their rate will have been reduced while deployed and sometimes for a few months after. ” 

You should also consider having a power of attorney (POA) document before deploying. A POA  names a spouse or other family member to handle any financial emergencies that come up in your absence.  “One scenario we see often is when a person is deployed and their account has fraudulent activity or some other issue,” says financial counselor Jennifer Stogner from Huntsville, Alabama-based Redstone Federal Credit Union. In that case, having a POA can guarantee that someone will be able to work with the proper authorities to fix that situation. 

Save for the future and retirement

Perhaps one of the most important things you can do is put money away for the future, whether you stay in the military or not. Since you’re employed by the federal government, you’re entitled to a federal retirement arrangement known as a Thrift Savings Plan (TSP). Your TSP is similar to a 401(k), meaning that you’ll contribute pre-tax income to the account and pay taxes when you withdraw from it in retirement.

If you joined the military after January 1, 2018 or if you’re covered under the Blended Retirement System (BRS), which made military retirement plans more similar to civilian ones, the government will match up to the first 5% you contribute to your TSP every pay period. So try to contribute as much as you can to your TSP. Remember that in 2023, you can contribute up to $22,500 to your TSP.

The TSP also allows servicemembers to purchase an annuity, which is a long-term investment handled by an insurance company providing regular payments during retirement. People might choose to purchase an annuity to help protect against outliving their retirement money. It can also ensure that a beneficiary will continue to receive those payments after you pass away. You can find more information about annuities here.

It’s also important to save for emergencies and long-term goals. “Most servicemembers I worked with not only invested in their TSP, but they set aside additional funds within an IRA or a taxable brokerage account,” Young says. Investing some money in the market through a brokerage account can lead to higher returns than leaving your money in a savings account. However, all investing involves risk, and you can lose money. Stash urges customers to follow the Stash Way, our financial philosophy, which includes investing regularly in a diversified portfolio that includes stocks, bonds, and exchange-traded funds.

Capitalize on military discounts 

Your status as a member of the military can qualify you for certain discounts and financial benefits. As an active member of the military or as a veteran, you can have access to loans and mortgages backed by the Department of Veterans Affairs (VA), often with better terms than typical loans offer. Serving at least 90 consecutive days during wartime or 181 days during peacetime allows you to apply for those loans. “Over the course of a conventional 15-to-30-year mortgage, you will save thousands and thousands of dollars,” says Adem Selita, the founder of credit counseling service The Debt Relief Company based in New York. 

You should also always keep an eye out for any discounts for members of the military, Selita suggests. Certain schools, including St. Joseph’s University, Berklee School of Music, California Southern University, and more offer tuition discounts for active duty members of the military and the veterans. You can also get reduced rates from cell phone providers, retailers, amusement parks, and some travel. You can find out about military discounts here.

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