Six Smart Budget Tips to Turn “Surprise!” Into “I Got This!”

By Catherine McCarthy, Operation Homefront Online Communications

When you are young and just starting out, the world can seem like your oyster. Opportunities stretch before you, and it’s easy to believe that nothing bad or unexpected will ever happen. But the universe has a way of ignoring even the best laid plans.

 A military career carries with it an inherent danger, and career-ending wounds and injuries (of varying degrees) can and do happen. Suddenly you’re facing a medical or physical evaluation board, and the future you imagined is a lot murkier. You may be facing an unexpected and early end to your military career. 

Transitioning from a military career, whether it be the end of one enlistment or a decades-long career, is something that requires careful planning. If you aren’t prepared, you can find yourself in financial trouble very quickly. But what does one do when the unexpected happens? Initial findings from medical boards can be delivered in as fast as three months.  Add additional time for processing and the time from submission to discharge can be as little as six months.  But most guidance recommends that you begin transition planning a year or more in advance!

It will be tough enough to face the challenges of life-altering illness or injuries, physically and emotionally.  Add financial strain, and those challenges can quickly become overwhelming for the entire family.  Act now to avoid that kind of situation.

Here are six smart steps you can take that can make a real difference:

  1. Understand exactly how much you earn and possible future income.
    Military compensation is much more than what is shown on your Leave and Earnings Statement (LES) or what is deposited in your bank account every payday. From tax exemptions to non-taxable income, many military families get surprised by how much one needs to earn on the outside to equal the standard of living they enjoyed while active duty.  

  2. Cut (and save).
    Hopefully you have a good read on what you are spending and where, but if not, it is not too late to start.  See where cuts can be made that can have immediate impacts. Discretionary spending and small impulse purchases are often one area where money gets lost, and you can be surprised at how those little purchases add up. Reduce or eliminate services that are nice to have, but not necessary.

    If you find yourself overwhelmed, consider taking advantage of free financial counseling services available on your local military installation or through Military OneSource. The Military Saves site also has a wealth of resources available.

  3. Talk with creditors.
    Learn about options that may be available for temporary relief as you transition, especially those granted to individuals with temporary or permanent disabilities. Keep in mind, though, that deferments can come at a higher cost later, so weigh the costs and benefits of utilizing them.

  4. Use severance packages as intended.
    Military separations can come with large severances. This money is intended to mitigate the financial impact of the gap between discharge and the commencement of benefits, such as VA disability compensation. However, finding a large chunk of money in your account can be a tempting invitation to spend now rather than save. Resist this temptation at all costs.

  5. Have the tough talk.
    There may be tough choices ahead. If you have had the income talk and have a feel for what you will be earning in the next few years, you may have to look at downsizing. What you can afford now may not be affordable in six months or a year. This can include vehicles and your home or apartment.  It is natural to not want to step backward, to lose the gains we have made, but this is preferable over increased debt, struggling to pay bills, and possibly facing repossession, eviction, foreclosure and destroyed credit.

  6. Be realistic.
    Full transition takes time. Think in years, not months. Many of our clients report two or more years for all of the dust to settle and real financial stability to be achieved. Stay positive. Half the battle of transition is outlook. Things will get better if you play it smart and be patient.

The bottom line is that delays in benefit processing do happen. Paperwork gets lost. New career paths take time to build. The better prepared you are today, the less rough the seas will be when the unexpected happens.

Operation Homefront has provided assistance to thousands of military families since its inception in 2002. So far this year, we have helped more than 2,700 families with financial assistance at their time of need and have offered free financial counseling to many clients. Find out more about how we help military families.

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    The Thrift Savings Plan (TSP) offers the same types of savings and tax benefits that many private corporations offer their employees under 401(k) plans. Sign up or get more info at tsp.gov

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