Saving

Building better money management skills

Good money management works the same for military service members as it does for everyone else. You may have special laws and considerations when it comes to things like deployment, but the basics of being financially successful are the same.

Reckless spending, not tracking your money on a daily basis and simply not having a plan for the future can lead to disaster or at the very least, a lifetime of work with no rewarding retirement. Follow these steps to become a better money manager.

1. Build a budget and adjust it if a spouse is deployed. With a budget you can properly track your spending and fully understand where all your money is going. Also, take into account the bump in pay if your spouse is deployed in a combat zone and the cut in pay when they return home.
2. Control credit card spending. You’ll never be able to save for anything if a huge chunk of your money goes to credit card debt every month.
3. Adjust your attitude. If you don’t take money seriously then you need to change your habits and your perspective. If you find that you’re spending too much money on soft drinks or are going out to lunch at work two or three days a week, stop it. Save more money.
4. Pay bills on time. Late payments and penalty fees cost you money and they end up on your credit report as a negative entry. Pay on time each month.
5. Make a plan. Set goals and write them down. Maybe you want to retire in a sunny paradise or in the mountains, or you want to visit Europe for your 25th wedding anniversary make a plan and make it come true.

Saving for emergency situations

Some people call it a nest egg, some an emergency fund, whatever you choose to call it doesn’t matter, just start saving. Particularly for anyone who gets deployed to an active war zone, you need to know your family will be okay if something happens.

Follow these tips:

1. Save your tax refund: When tax season is upon you take your refund and save it – don’t blow it at the local mall.
2. Save extra funds: If you qualify for bonuses, hazard pay and increased pay because you’re deployed in a combat zone, take that money and save it.
3. New account: This leads to the perfect segue; open a new account that automatically deducts money from your paycheck. If you are deployed in a combat zone take advantage of the Savings Deposit Program.
4. Save your change: This is simple enough; start saving your change in a bottle or if you want to be more daring, save all your one dollar bills too.
5. Keep paying a bill: Let’s say you’ve finished paying off your car or credit card bill, don’t stop; keep paying that bill but put it into the emergency fund. If you can’t afford the whole payment, pay half; just keep the money flowing.
6. Over-budget: As you prepare your budget (and you should have one) pad some categories with extra money, just in case. When the money is spent, take the difference and bank it.
7. Wants and Needs: Before you spend, differentiate between your wants and needs. If you don’t really need something you want to buy, don’t buy it. Save the money.

Planning ahead for retirement

Saving for retirement is not difficult, but it does take commitment and a willingness to remove a portion of the money you earn to store it away even if you plan on making a career out of the military and qualify for a pension. The pension probably won’t be enough to retire comfortably. Use these options to boost your retirement funds.

• Thrift Savings Plan (TSP): A TSP offers a tax-deferred method to save money for retirement similar to a 401(k). The limit is $17,500 per year and $23,000 if 50 or older. The money you contribute is not taxable income, which immediately saves you money. Any growth, dividends and interest earned are also sheltered from taxes. You will be taxed when you withdraw the money during retirement.
• Roth TSP: With a Roth TSP, contributions are initially taxed but when you eventually withdraw the money during retirement, the money and earnings accrued are tax-free as long as all rules are met. Contribution limits are currently at $17,500 per year total, for a regular TSP and a Roth. If you are receiving Combat Zone Tax Exclusion benefits, the limit is $51,000. Learn more here.
• Individual Retirement Account (IRA): With an IRA you can invest any type of funds such as stocks, bonds, mutual funds and cash. Like the TSP the IRA comes in two forms, the regular and the Roth IRA. You initially pay taxes on the Roth but withdrawals may possibly be tax free. The regular IRA may be tax deductible depending on your income.
• Life Insurance Replacement: Once you retire from the military your Servicemembers’ Group Life Insurance (SGLI) expires in 120 days. You can switch your policy to Veterans’ Group Life Insurance (VGLI) with no medical examination. That may be your best bet but the VGLI is more expensive and goes up approximately every five years until you’re 75. For more information about VGLI and SGLI, visit the U.S. Department of Veterans Affairs life insurance section.
• Health Insurance Replacement: If you retire after 20 years you will be eligible for health care after retirement. If you retire before 20 years you can sign up for the Continued Health Care Benefit Program for up to 18 months. After retiring you have 60 days after to enroll. Check out this TRICARE site to learn more about the program.