Whether you’re about to start terminal leave, or just finished boot camp, one thing is for sure: sooner or later you will be out of the military.
The military gives you a secret weapon for success as you transition to the civilian world: good habits.
Veterans are known for being punctual, polite and prepared — due to the habits of military life.
To financially prepare for your transition, here are some financial habits you should have as well. For better or worse, you won’t have a drill instructor there to instill these habits though.
You’re going to have to show some initiative to develop them yourself.
Track your spending
The first habit you need to have is tracking your spending. Without knowing where your money is going, you’ll never get ahead.
On the low-tech side, maybe all you need is a notebook to track your spending. There are plenty of hard-copy budget notebooks that are cheap and easy. If you’re a pencil and paper type of person, you should check out the Dome Home Budget Book. It’s only 6 or 7 dollars, available at Walmart, Office Depot and Amazon.
Tracking your spending every month, every week, or every day needs to be a habit. Knowing where your money is going is the only way to prioritize your spending, align your spending with your values, and save for your financial goals.
A great financial habit to have is to make yourself what I call “artificially poor.”
Use allotments from your military pay to pay yourself first. Save for retirement in the Thrift Savings Plan. Send a savings allotment to your savings account. Since you don’t see that money in your paycheck, you get used to not spending it. You’ll get in the habit of spending less while your savings grow automatically.
When you transition you’ll have a nice nest egg to keep you from having to take the first (crappy) job that comes your way. And you’ll know that can live on less than you earn.
Save your pay raises
New service members will probably get 6-8 pay raises during their initial commitment. There are pay raises for rank and longevity, as well as annual pay raises associated with inflation.
Get in the habit of saving a portion of each pay raise. If making rank means $200 more a month in base pay, increase your savings allotment by at least half, or $100. You’ll still have more money to spend, but you’ll also be accelerating your savings.
One of the great things about TSP contributions is that as your pay goes up, your contributions go up as well. That’s because TSP contributions are designated as a percentage of your pay. To grow your savings even faster, bump up your TSP rate a percentage point with each pay raise.
Saving regularly, even on a single enlistment, will put you way ahead of your peers in the civilian world. And you can keep your TSP account forever, reaping the rewards of the lowest investment fees in America.
Pay off credit cards every month
None of these savings strategies will do any good if you are in debt. Credit cards are great for protecting your purchases and tracking your spending. But if you’re carrying a credit card balance, that means you are spending more than you earn each month. You certainly don’t want to head into transition in debt.
Like any other good tool, credit cards should be used wisely. Get in the habit of paying them off each month. In other words, don’t buy things you can’t afford.
Military service requires and rewards physical fitness. Maintaining your fitness through your transition will undoubtedly save you money.
Being fit will result in lower life insurance premiums after you leave the service and you’re no longer eligible for SGLI, the Servicemember’s Group Life Insurance. You might get lower health insurance premiums too. And fewer trips to the doctor means fewer co-pays.
Stay fit so you can enjoy your time off, now and long after you’ve hung up the uniform. Hiking, biking, surfing and similar activities are cheap and fun ways to spend time with your family, or to clear your mind on your own. Maintain your habit of regular exercise through your military career and beyond for good physical and financial fitness.
“Habits are safer than rules; you don’t have to watch them. And you don’t have to keep them either. They keep you.” ― Frank Crane
Personal finance is not just about numbers. The most basic financial principle is as simple as can be: spend less than you earn. It’s the word “personal” that can make “personal finance” challenging, confounding, and frustrating.
Every person’s situation, priorities, values and resources are different. But what is more personal than your habits? Make these financial habits part of your personal routine to create a better financial life for you and your family, now and for the future.
Rob Aeschbach is a financial planner helping young service members and their families make sense of their finances. He is based in Norfolk, Virginia. Before becoming a financial advisor, Rob served in the U.S. Marine Corps, both on active duty and in the Reserves; he is also a Navy spouse. Rob is a candidate for CFP® certification, and a graduate of the U.S. Naval Academy in Annapolis, Maryland. He is the owner of The Military Financial Planner LLC, a Virginia registered investment advisor. Find him on Facebook, LinkedIn, Pinterest, and Facebook.