The transition from the military to the civilian sector typically focuses on job opportunities. While this is important, it’s also vital to consider the financial aspects of transitioning into the civilian world and a new career. Preparation is key to success, and Veteran Saves has a treasure trove of tools and information to support you. With some planning and a willingness to learn, you can build a solid foundation to help you address your financial needs as a veteran.
Creating a Spending Plan
When managing your finances, it’s essential to understand all facets of your monthly income and expenses. Collect data from all sources of income, including paychecks and money you make from side jobs if applicable, and consider any disability or retirement income you may be qualified to receive.
Create a system for managing financial documents. Ideally, you will receive your statements electronically and use a password protection system to protect your login information. Design a secure filing system for any paper statements and get in the habit of filing papers immediately upon receipt. Set a schedule for reviewing and purging records annually by shredding anything you no longer need. This is a critical step in protecting your personal information.
Where does your money go each month? Understanding and managing your static expenses—those that are the same monthly—and your fluctuating expenses puts you in the driver’s seat of handling your finances. Track each and every dollar spent to get a clear picture of your expenditures. Note the splurges and consider your priorities to determine whether your spending aligns with your savings goals. Do you really need that $6 latte? Use the Veteran Saves Spending and Saving Tool at VeteranSaves.org to successfully budget.
Building Your Savings
Creating a consistent savings habit is one of the best gifts you can give yourself. Pay yourself first so you are prioritizing your short-, mid- and long-term savings goals. Short-term goals include building an emergency fund for unexpected expenses. A good short-term savings goal is $500. Mid-term goals can consist of things like purchasing a car. Long-term savings goals include retirement savings. Set up automatic savings for a convenient and effective way to build wealth. Take the America Saves pledge at VeteranSaves.org to set a goal, formulate a plan and stay committed to saving.
Understanding Civilian Compensation
Civilian compensation is comprised of several components, including your salary, health benefits and retirement plans. Work with your employer’s HR team to determine your tax withholding to ensure you are having adequate funds deducted for taxes without having too much withheld. Like your Leave and Earnings Statement (LES), your employer will provide pay stubs detailing relevant information, including your pay period, earnings and deductions, net pay, employer contributions and year-to-date totals. Review each pay stub for accuracy.
Retirement Planning
Does your company offer 401(k) matching? This is when your employer contributes money to your retirement account based on the amount you contribute. Employers can contribute a full or partial match. A full match is when the employer matches your contributions dollar-for-dollar up to a certain amount. A partial match is when they match your contributions up to a certain percentage of your salary, like 15%. Maximizing these matches can be a strategic savings tool.
Integrate your military and civilian retirement plans. It’s essential to roll over your Thrift Savings Plan (TSP) into your new employer’s plan or an IRA and don’t forget to select investments within your retirement account. Use free financial planning tools to help you determine the types of investments within your account, considering the length of time before you plan to retire and your risk tolerance. To do a rollover, you instruct TSP to send the funds directly to your civilian retirement account.
Debt Management
If you have any debt, creating a plan for debt repayment is critical. Consistency is vital to paying down debt efficiently while improving your credit score. Two popular techniques for debt repayment, the snowball method (tackling your smallest debt first) and the avalanche method (paying off the highest interest rate debt first) while paying minimum payments on other debt, are effective strategies.
The 30/40/30 Rule
A winning formula for fiscal fitness is the 30/40/30 Rule by Veteran Saves, which assigns a percentage of your take-home pay to past, present and future objectives.
- 30% to paying debt
- 40% to living expenses, emergency fund, needs and wants
- 30% to long-term savings (home purchase, retirement, education)
Veteran Saves Week
Mark your calendar for Veteran Saves Week, November 12-15. This week is dedicated to helping veterans, their families, caregivers and the military community build financial confidence and conduct a financial check-in.
- 11/12: Choosing the Right Financial Institution
- 11/13: Saving for Competing Priorities
- 11/14: All About Housing
- 11/15: Navigating Military to Civilian Employment Financial Transition
Join the movement by taking the Veteran Saves pledge at VeteranSaves.Org/pledge, which includes email and text reminders, resources and tips to stay on track toward financial goals. The site also contains an extensive library of financial tools and resources.
Read more articles for the Veteran Community here.
