Financial tips are necessary – especially when you are going through a major change in your life. For those of you in the military, these tips will come in handy when you decide to transition from a military to a civilian life.
Nobody stays in the military forever. Even the high-ranking officials are bound to retire at some point in their lives. Military service members are able to retire after 20 years and forced to do so after 30 years of service. However, not everyone last that long. According to a study published on Pew Research Center, officers stay on active duty for an average of 11 years. Enlisted military personnel stays for an average of 6.7 years.
If nobody stays in the military forever, you can assume that most of those in service will have to face civilian life sooner or later. That would require a couple of adjustments – and one of them involves your finances. After all, your stint in the military is considered a career. That means you earned from it. When you hang up your boots, you need to be sure that you and your family will still be left with secure finances.
Here are useful financial tips that can help you transition from a military to a civilian life.
Understand your military pay.
You should know what you lose when you leave the military. It is not just about your salary. You need to know how much you really take home and how much is being deducted from it. Not only that, you have to list the benefits that you get as a member of the military. Some have housing allowance, special pay, etc. All of these will be gone once you leave the service. Some servicemembers may be earning $50,000 a year but if you add all their benefits, it amounts to so much more.
Know your priority expenses.
After calculating your military pay, you need to sort out your expenses. To be more specific, you need to know which of your expenses should be considered a priority. Usually, your basic necessities are part of this list. Try to come up with two lists. One is your list of expenses for your bare basic necessities. These are the expenses that you need to survive. Then create another version of that list – something that still involves your basic necessities, but with more room for unnecessary yet vital expenses. For instance, a budget for a weekend getaway is not really part of your bare basic necessities but it is still necessary for the family to bond and have fun. This will help you set your financial targets later on.
Study the civilian’s outlook in life.
This does not seem like it is related to your finances but believe it or not, it can help you define what your priority expenses are. You have to remember that the life of a civilian and that of a military on active duty can be extremes. A civilian’s life can sometimes seem shallow to someone who just came from from a battlefield. While this may be true, you have to respect what the civilians hold valuable – because that will be your life from now on. Not only that, you need to change your expectations. People are not as disciplined or organized in the civilian world. Make sure you have your mind adapt to everything so you can make the right decisions when it comes to your finances.
Choose what home you will record.
There are a lot of benefits waiting for you as a veteran. However, you need to be careful about your records because that can affect your eligibility. There are benefits that are specific to certain states. For instance, Texas has a law called the Hazlewood Act that can exempt up to 150 hours of tuition fees for a higher education. This can be extended to veteran spouses and children. Make sure you look at the laws and benefits available for each state before you decide on where you will reside.
Attend a transition seminar.
The military provides seminars that will specifically help you transition well into a civilian life. It will help identify the issues that you need to address in order to adjust. These seminars will guide and educate you when it comes to the things that you need to accomplish in order to complete the transition process.
Identify the career that you will pursue.
Your service in the military is a career. If you will leave it, you have to find something else to do so you can earn an income to support your family. Choose a career that you would want to do for the next decade or so. Figure out what you are good at or the industry that suits your hobbies and passion in life. Having something to look forward to in your career will make the transition easier to handle.
Reduce debt as much as possible.
As you prepare to transition from a life of military service to a civilian life, you need to be aggressive in lowering your debt. The change you will go through is stressful enough. If you can remove debt from the picture, it will be better. Look at your debt accounts and identify which one is hurting your finances the most. It is not always the one with the biggest monthly payment because it is possible that your credit card debt has the highest interest rate eating into your budget.
Be mindful of how taxes affect your take home pay.
Tax payments will have a significant effect on your budget and they differ depending on where you reside. The way your state assess income tax and retirement military income should influence the way you negotiate your salary.
Put your TSP in the backseat while in transition.
Your Thrift Savings Plan or TSP has one of the lowest fees around. Obviously, if you have to transition into a civilian life, you have to change that into a 401(k) or IRA. But this is something that can wait. You do not have to do this while in transition. You can focus on other areas of your finances first like looking for a new job and setting up retirement savings with your new employer. Only after should you roll over your TSP and start saving again.
Have an emergency fund.
You cannot predict what will happen in the future. This is why an emergency fund is very important. This is one of your best financial resources which can help you address unexpected financial needs which could put a significant dent in your budget.
Consider a transition fund.
This should be treated separately from your emergency fund. This is strictly the fund that you will use during the transition phase only. If you feel like this phase will last for 3 to 6 months, then you need to save enough money to cover the expenses during that time. Having a separate transition fund helps keep the integrity of your emergency fund to enable it to address big concerns. You might not notice that you are already using up most of your reserve funds to cover transition needs. That can put your back against the wall if you suddenly encounter a big financial need in the middle of your transition.
Create a network around you.
You need to take advantage of the Transition Assistance Program or TAP offered by the military. For that to be effective, you need to put in the work. You have to find a way into your local community and start taking part like doing volunteer work or attending church. This way, you meet a lot of new people – some of whom can help you land a nice job.
Do not forget your insurance.
Do not overlook the importance of a life insurance. Although a civilian life may be less dangerous, life is still full of uncertainties. You want your family financially covered when something unexpected happens to you.
Refine your negotiation skills.
When you were in the military, it is the norm to use force to get someone to agree with you. Now that you are a civilian, you cannot use that anymore. You need to learn how to negotiate to get people to agree to what you want. From your salary to client meetings, negotiations will always play a crucial role in your success.
Develop a backup plan.
You need to be proactive in adjusting to whatever life throws your way. One way to accomplish this is to have a contingency plan. This will keep the unexpected from ruining your transition into a civilian life.
Head out to your local Veteran’s Organization.
There is a veteran’s organization in every local community and this group can help you deal with the various issues that transitioning can bring.
Plan your finances with your spouse.
Always remember to include your spouse as you are creating your financial plans. It will not only make things easier, it can also strengthen your relationship as you start a new phase in your life together.
Involve the kids in your financial plans.
Your children will have an important influence in your budget plans. This is why it is important to involve them in whatever decisions you will make with your spouse. Do not think that they are too young to understand. You may have to filter what you will tell them but make sure they understand the changes that you and your family will go through as you transition into a civilian life.