Military Deployment and Its Impact on Your Financial Health
Being deployed is the ultimate commitment that members of the armed services offer. Such deployments can occur many times over the course of a career and while it may bring anxiety to the service member and their family, there are some real financial benefits to a deployment.
This is a period of time where you have the ability to maximize your pay and minimize expenses.
Reducing Expenses During Deployment
Individuals can reduce discretionary income by up to 90% while being deployed. Those with families back in the states will not enjoy such a dramatic reduction in costs but can still strive for a significant reduction in living expenses.
During a deployment all meals are provided, and depending on the location of your deployment, there is usually free entertainment provided on base for service members while away from home and family. It is possible to go for weeks without ever spending money, if you pay attention and look for opportunities to be more frugal. There are local clubs, restaurants and bars that you can spend money at, but with the amenities provided, many time these costs are not necessary.
Other places to save include dropping the insurance on the car you drive, suspending services like your cell phone and maybe even cable or internet, depending on your family’s needs. If needed, you are able to end a rental lease and put things in storage.
The SCRA (Servicemembers Civil Relief Act) also grants you the ability to reduce interest rates to 6% on everything from credit cards to personal loans. If your current rates are higher, communicate with your creditors with a phone call and submission of corresponding documentation of deployment. This will reduce the rates, thus reducing monthly costs.
Income During Military Deployment
Combat pay results in several benefits for you and your family. These include stipends for:
- Family Separation
- Hardship Duty
- Hostile Fire
- Daily Per Diem
These additional stipends can add up to hundreds of extra dollars a month. Add with the added benefit of tax free income if you are serving in designated combat zones, this could add another 15% to 20% increase in your income.
Best Uses for The Extra Income and Lower Expenses
1) Pay down debt. Use this opportunity to reduce debt balances through extra payments.
2) Start or add to a retirement fund. Whether you open or contribute to a Roth IRA or a Roth TSP, set aside money for retirement that will grow tax free. Career military members also have the benefit of a pension, which when added to IRA balances can provide a lifetime of financial security.
3) Save for emergencies in a rainy day fund. Financial advisors recommend having 6 months set aside in short term investments that you can gain access to in the event of an emergency.
4) Save to purchase a home. While military benefits can offer VA loans with no money down, closing costs can still be several thousand dollars. Having a down payment may also provide a loan approval for a higher loan amount, if you choose.
5) Start a College Fund for your kids. College funds for children is another good use of additional funds once the first three items have been established.
Deployment provides the opportunity to take additional funds and using them to contribute towards building your financial security.