Developing a plan to manage your finances after you exit active duty service is something that must be considered before you make the transition to civilian life. The plan should take into account your total take-home civilian pay after deductions; expenses such as a car loan, rent, mortgage, groceries and utilities; paying off credit cards and other debt; and saving money for the future.
As you reintegrate to civilian life, it’s important that you and your family follow the financial management plan that you developed based on your civilian income. Sticking to your plan will prevent overspending and incurring debt. If you have extra money, explore options for saving or investing it each month. Setting aside even a small amount allows you to put your money somewhere that you will not be tempted to spend it. It’s never too late to start saving for retirement.
If you are lucky, you will walk out of your Hail and Farewell party on Friday and into your new civilian job on Monday. But economic times being what they are, this probably won’t be the case. Your job hunt should start well before you exit active duty, and you should include at least nine months of pay for living expenses to bridge the gap as you transition into civilian life.
It is also important to remember that all paychecks are not created equal. In the military, stacked on top of your base salary are allowances, including a very generous tax-free housing benefit. So as you compare civilian employment offers to life in the military, don’t forget about those additions to your military base pay. As a retiree, you’ll have access to healthcare. But as a civilian you may now be paying for life, medical, dental and disability insurance. These expenses could put a significant dent in your pay, so be sure to consider them as you negotiate your salary. Pay in the civilian world is negotiable.
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If you have a Thrift Savings Plan, you can keep the funds in the account, roll them over into an individual retirement account or roll the money over into your new civilian employer plan. Be sure to explore whatever retirement or savings options your civilian employer offers.
If you find that you are experiencing stress due to financial concerns, there are many programs and resources available to help veterans find assistance. Every branch of the service has its own financial services and readiness program designed to help active duty, as well as transitioning veterans, manage their finances. Check your on base directory for the location of your financial services office. You can also contact: Military One Source, Personal Financial Management Program and Veterans Plus; they are all equipped to assist you with your financial planning needs.