Three financial tips for returning active duty military servicemembers.
As thousands of active duty military servicemembers return home from overseas deployment, many face financial pressures unique to their situation.
We talk numbers with Scott Halliwell, a Certified Financial Planner with USAA, a financial services company for 9.6 million military personnel and their families.
According to USAA’s surveys, nearly two-thirds of those surveyed are under at least some amount of personal financial stress. A little more than half don’t have money set aside for emergencies and a quarter have nothing set aside for retirement.
Halliwell has three basic tips that can help returning men and women with their financial fitness.
1. Reconnect with your finances: Pay down debt
Halliwell says: “If you think about what goes in a deployment, a lot of the normal, day-to-day finances change. It’s important for people to reconnect so that they can begin the process of paying down debt. There’s a lot of people out there with debt these days. Servicemen and women are really no different. The extra money they get from deployment [sometimes as much as $500 - $600 per month] can be a great way to pay debts down and get on better financial footing.”
2. Reacquaint with budget: Save 3 – 6 months of expenses for emergency fund
Halliwell says: “In many cases with a deployment, expenses back home might go down. Servicemembers might not have the same rent payments, cell phone payments, or auto insurance costs. At the same time, the income that they have over there – because it’s tax free and they get some extra incentives for being deployed – could be higher. So, it’s really important to reacquaint with your budget and get things back on track. The other big piece of that is making sure you have a solid emergency fund in place. We tell people you typically want to shoot for three to six months’ worth of your committed expenses in an emergency fund position so that you’re prepared. When life throws you those curve balls, you’ll have money to take care of it.”
3. Plan for future: Save 10% of salary for retirement
Halliwell says: “It’s really important that people save for retirement, especially the younger folks out there. Everybody should be saving at least 10% of their pay for their retirement, unless they’ve got it all locked down in good shape. The numbers and statistics out there indicate that for most people, that’s not the case. As far as savings opportunities, one of the great things deployed servicemen and women can do is they can use a Roth IRA because the money they earn in combat zones is tax free. If you take that tax-free income and put it in a Roth IRA, you have a really great potential to get tax-free income down the line.”
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