Your experience in the military gave you many valuable skills you can apply to the civilian workforce once you're ready to make the transition. But there's a big part of life after the military you may feel less prepared for: dealing with your finances.
Here are five steps that could help you lay the foundation for a solid financial plan once you're ready to move back into civilian life.
1. Consider How Your Expenses Might Change
A shift back to civilian life will require additional considerations due to the change in lifestyle. When you were in the military, you may have had access to a variety of things you will now need to pay for as a civilian. These benefits may have included housing, child care, gym access and more. Make a list of the benefits you had while on duty that you would like to have in your civilian life.
Also, think about lifestyle changes. Will you travel more for vacation? Do you want to set new financial goals, such as saving to buy a home or for your retirement? These questions could help you better understand your needs and wants.
2. Build a Realistic Budget
From here, you may want to track your spending in civilian life, and a realistic budget could help. The key to a better budget? Consider what kind of income you might make as a civilian, either from a job or pension (if you're retiring). Then, divide your expenses into categories and total them up.
Do your expenses exceed your income? If so, it might be time to look at areas you could cut back — or cut out entirely. Your savings are another important consideration. Note how much you want to save or invest each month and think about treating it as an expense you pay yourself.
3. Use Your Benefits & Take Advantage of Discounts
As a military veteran, you can still enjoy many of the benefits and discounts available to active and retired service members. Many retailers and businesses offer discounts on the cost of products and services. So, ask businesses if they offer a military discount! This could help you save a little extra on purchases.
Also, there are many military benefits to consider:
- Transition Assistance Program (TAP) resources
- Post-9/11 GI Bill for education and training
- Veterans Health Administration
- VA home loans from the Department of Veteran Affairs
As a service member, you may also expect to receive specific benefits for your retirement, like a pension. Know what you're entitled to and how much income you'll likely get from these benefits. Then, you can think about how much you might need once you fully retire.
Will your benefits and income cover your costs? If not, you could always consider bumping up your savings and investments with an eye toward growing your wealth on your own for the future.
4. Prepare for the Expected & Unexpected
No financial plan is complete without a contingency plan for the unexpected. An emergency fund is one way to plan for financial emergencies — or for the period just after your transition (if you don't want to immediately start a job in the civilian workforce).
An emergency fund is a cash reserve that could be used to cover surprises that crop up in life after the military. You could also use this resource in the event of a job loss, or if you find yourself between jobs longer than you expected.
These unexpected costs could include:
- Emergency home repairs
- Unexpected car issues
- Medical bills not entirely covered by your veteran's health benefits
Setting aside a small amount of money each month in an easily accessible savings account is one way to start an emergency fund. It might take some time to build a sizeable financial cushion, but that's okay — you can grow your savings steadily over time.
5. Protect Yourself & Your Family
You may also want to guard against emergencies and the unexpected in another way: with the right insurance policies. From life insurance and critical illness insurance to accident insurance, it might be worth evaluating your options for coverage. You may have access to policies as a veteran, but you may also want to check out other insurance options to compare costs, coverage and benefits. Consider speaking with a financial representative who could help you choose the right policies for your needs.
There are many things to consider before every major life change, but your finances don't have to add to your list of concerns. Think about planning, preparing and getting your financial plan on solid ground — so you can hit the ground running in civilian life.