An ROTC member recently contacted me and asked for some financial tips on how to get the most out of his time in the service. There are literally hundreds of financial benefits to joining the military. But this topic is so broad that it could take a book to cover everything, especially for a new recruit who isn’t familiar with many of the military benefits which will be available once he joins active duty. While I can’t I can’t cover everything in this article, I can boil it down to the most essential topics:
Avoid debt – including student loans. New military members should avoid debt like the plague. In some circumstances, it can even ruin your career. Going into ROTC is a great way to avoid student loans. Graduating without debt will be a huge financial benefit that you won’t appreciate until you are out on your own and paying for everything out of pocket. One less bill means you have more money for fun now, and more money to save for later. Bonus tip: the military will forgive some student loans. This is only on a select basis, so be sure to research this before joining the service.
Don’t buy yourself an expensive graduation gift – including a new car. Large monthly payments add up more quickly than most people realize. $400 car payment, $1200 in rent, cell phone, cable, internet, utilities, fuel, insurance, food… not to mention furnishing your house or apartment. The next thing you know, you are living paycheck to paycheck. Start off small and grow into your salary. A good way to do this is to continue living like you are still a college student for as long as you can. Then upgrade your lifestyle as necessary, and as you can afford to.
Don’t squander a signing bonus. Not all military jobs come with a signing bonus, so consider yourself lucky if you receive one when you join the military. It’s OK to have fun with your military bonus, but it’s also a good idea to use some, or all of it responsibly. Make plans for the money before you receive it, otherwise the temptation will be strong to spend it on frivolous things, or just lump it in with the rest of your savings, only to see it slowly dwindle away. Here are more tips on how to use a military bonus.
Save for two things: (1) retirement, and (2) your transition out of the service.
- The military has one of the best retirement systems in the world. You can earn roughly 50% of your base pay after serving only 20 years in the military. But only around 15% of people stay in for the entire 20 years. That means roughly 85% of veterans transition back into the civilian sector. More on this in a moment. Even if you stay in long enough to earn a military retirement pension, it may not be enough to live on. It will be a good idea to supplement that with contributions to the Thrift Savings Plan, which is the government version of a 401k plan, or with an IRA.
- Transitioning back into the civilian work force can be a difficult and expensive time for many people, as it often involves relocating, some time off work, and other related expenses happening at a time when your income may be lower than you are used to. Have a cash cushion to help you through this time.
Save some more. Want to buy a nice car? How about a house? Marriage and kids? Most incoming college students don’t think of these things, but they are among the largest expenses you will have and some or all of these will probably be on your agenda at some point in the future.
Seek personal and professional advancement. The military offers a variety of personal and educational benefits, including training, leadership opportunities, travel, and more. Put yourself out there and learn, see, and do. Your life and future career will be much richer, whether you serve four years, or 20.
Take advantage of your military benefits. Military members and veterans have access to a multitude of valuable benefits. It’s not possible to cover all of them in an article (it takes a book to cover everything), but there are some benefits which are very valuable, and widely available. The biggest are the VA Loan, and the GI Bill. The VA Loan can be used to help you buy a home with a guaranteed loan, a low interest rate, and no money down, should you choose.
The GI Bill can be used for college education. Having a degree already is nice, but you may decide to use military education benefits for more advanced schooling, or, if you decide to stay in the service long enough, you may be able to transfer your GI Bill benefits to your dependents. Other valuable benefits exist, and it’s a good idea to to buy a book to help you understand some of them (The Military Advantage by Terry Howell is a great place to start – it covers dozens up benefits and is updated each year).
Buy The Military Guide to Financial Independence & Retirement by Doug Nordman. This is by far the best book I’ve read about how to use your military service to position yourself for a financially independent retirement. This book is valuable, even if you don’t stay in for the full 20 years required to receive full military retirement benefits. Doug runs the military blog, The Military Guide, is financially independent and “walks the walk.” He also donates the proceeds from the sale of his book to military charities, so he isn’t out just to make a quick buck. Buy the book.
Bonus tip: Have fun. Serving in the military is a great experience, but there is more to just dollars and cents. In my time with the military, I had the opportunity to travel to five continents and over 30 countries. Some of these trips were on official duty, but many of them were made on my own time and with my own dime. Spend money on adventures and experiences, and you will remember your time in the military for the rest of your life.