By Scott E. Halliwell, CFP®, ChFC®, CLU®, CWS®
Change brings stress; and leaving the military brings a truckload of it to your doorstep. Not only is the transition a major life event, it's also a major financial event. Picture this:
- You just decided to quit your job.
- You haven't interviewed in years, but now you have to get someone to hire you.
- You eventually land a new job, but it's halfway across the country.
- You uproot your family and move to a new town near your new job.
- You find a new place to live. But at first, it just doesn't feel like home.
- Oh, and while all of this is going on, the regular day-to-day challenges of life don't get put on hold. So, just for grins, add something more to the stress pile: your transmission locks up.
Now quickly, go back through that list. But this time, imagine the points as scenes in a movie starring you and your family — a movie titled, "Leaving the Military: Why a Cash Stash is So Important".
If you're planning to leave the military, the six bullet points listed above could very likely describe your short-term reality. To reduce the stress, do these two things: first, have an action plan; second, have a lot of money in the bank.
The general rule of thumb regarding emergency funds is to have three to six months' worth of your regular expenses set aside in a separate account. The idea is to have money available when life throws you a curve ball. Does transitioning to the civilian world have the potential to bring about a curve or two? You bet. Consequently, you should consider bumping up your cash cushion even higher; perhaps as high as nine to twelve months' worth of your expenses if you can swing it.
I know that's a lot of money to put aside but it's important to start building that cash cushion now. You want to start your new life on solid financial footing, not stressed out and buried in debt. Having money in the bank is one of the best ways to do that.
- Written by Super User
- Category: Blog
- Published: 16 May 2013