One of the biggest unknowns about transitioning from military service to civilian life is about salary.
This comes from the fact that military benefits include an allowance for housing (untaxed) and a host of other allowances (also untaxed) that make the relatively low military salary seem much higher.
Here’s how to calculate the value of your military pay in civilian terms … and how to determine your salary requirements in a new location.
Account for all of the benefits you received in the military. G.I. Jobs has already catalogued the cost of your main military benefits. Basically, you’ll need to add up your housing allowance, value of health care premiums (which are free in the military), any contributions to the TSP for retirement and extra allowances like those for subsistence, sea pay, hazardous duty pay, family separation allowance or flight pay. That should be your civilian-equivalent salary. Visit our military-to-civilian pay calculator to quickly add up these calculations for you.
Additionally, figure out commute costs (especially if you used to live on base), schooling costs (if any), expected utilities and cost-of-living adjustment. Add that to your current civilian-equivalent salary and you should get an idea of your target salary. This calculation, of course, assumes one salary for your household, but if you have a spouse who also brings in salary, remember that there are additional expenses (see below), although you will have two salaries to cover them.
Don’t expect to dictate a salary. It comes as a rude shock to many veterans, but the civilian sector simply does not usually pay as well as the military. The current attitude toward service members is overwhelmingly positive, and Congress has responded predictably by allowing military salaries and benefits to increase. Your civilian-equivalent salary, even adjusted for the cost of living, is often thousands of dollars more than you can expect to receive from a civilian job (which is why you need to determine your salary requirements), especially if your previous duty station was in an expensive location that pulls down a high housing allowance.
Unsurprisingly, telling a potential employer that you expect $100,000 a year because that’s what your military salary in Hawaii was worth isn’t going to fly – he or she will just offer the job to someone else who is happy with the $60,000 the company is offering. So make sure you troll job postings to get an idea of which companies will likely pay you. And don’t despair — you can look at the money piece from a different perspective to see if your potential job pays enough.
Figure out what you actually need in terms of civilian expenses. This involves research. Your biggest expense will be a place to live, so look through real estate sites like Zillow or Realtor.com to get an idea of average house prices or apartment rents. This isn’t a time to dream big: it’s best to figure out your minimum requirements, and work up from there. From there determine a rent or mortgage payment. You can find a handy mortgage calculator here.
Next, figure in your required monthly expenses. These include car payments, health care premiums, utilities (including TV and Internet) and retirement contributions. The sum of these expenses plus what you expect to pay for mortgage/rent, multiplied by 12, equals the first portion of your required yearly salary.
Finally, calculate what you need for shopping – food and household items primarily, but other shopping costs like clothes and gifts, too. It’s easiest to calculate these expenses weekly, and to use your current weekly expenses multiplied by the cost-of-living adjustment you calculated before. Then multiply the weekly total by 52 and add it to your total from the previous paragraph.
You’ll have to account for increased taxes, too. A military salary is taxed artificially low, because the actual salary portion is only about two-thirds (on average) of your total compensation; the rest is made up of allowances, which aren’t taxed. A good rule of thumb is to expect to pay about 30 percent taxes, so multiply your total so far by 1.3 (100 percent plus 30 percent taxes) to get your overall required salary.
Figure out your own salary. Certainly the average for the jobs you’re looking for is a good place to start, and don’t forget to add spouse income (if available). A job paid by the hour requires additional calculation for the yearly payout. Count on working about 2,000 hours a year (50 weeks multiplied by 40 hours a week, which accounts for holidays). Overtime is paid typically at time-and-a-half.
If you’ve been honest, this will usually be a bit less than your civilian-equivalent salary, but it’s also your “low number,” meaning you should definitely shoot for something a little higher during your job search.
Remember the market determines salary. It would be nice if companies paid what employees required, but that’s not always the case. If you need to ask for more than companies usually offer for the jobs in which you’re interested, maybe see if you can make up the difference with overtime, bonuses or look a step higher on the salary scale. Other options are to see if additional income (from a spouse, perhaps) is available, or if you can do better in a different location. Just don’t accept a job that can’t support you or your family.