Considering all the challenges military families may face together, financial matters might not always be top-of-mind. But the burden of debts and late payments can have a negative impact on mission readiness, relationships, future opportunities and decision-making processes.
Personal finance is undoubtedly an important part of life. With the federal tax deadline extended to July 15, 2020, this summer is a good time for families to check in on their financial progress and revisit goals.
These tips for boosting financial literacy, growing savings and reducing debt can help military personnel and their families achieve financial stability.
1. Explore and utilize resources from MilitaryConsumer.gov
Jointly created by the Federal Trade Commission and the Department of Defense, MilitaryConsumer.gov is a resource center for all matters related to personal finance for military servicemembers and families. Topics range from buying and financing a vehicle, using allotments, improving your credit rating and recovering from identity theft. Since each toolkit and guide is specifically designed with military life in mind, this site can be a great starting point when you're looking for helpful, actionable information.
2. Make military-specific deductions when you file your taxes
As you prepare your taxes, ensure that you're making all the deductions you're eligible for as a member of the military. Possible deductions include the cost of uniforms, moving expenses and civilian job search costs, to name a few.
There are other ways to get strategic with your tax liabilities. For instance, while you're serving, you and your spouse can establish your residency in a tax-free state so that, regardless of where you're stationed, you will benefit from substantial income tax breaks.
3. Contribute regularly to your retirement savings as soon as possible
The sooner you start making significant contributions to your retirement fund, the larger your savings will grow by the time you reach retirement age. Because many military service members don't stay in the armed forces long enough to become eligible for a pension, it's advisable to make your own contributions early and all throughout your career.
One military-specific option to explore is the Thrift Savings Plan (TSP), a defined contribution plan for retirement savings. Through this plan, members of the uniformed services can make traditional pre-tax or Roth after-tax contributions — or both. The Roth TSP option is similar to a Roth 401(k) in that there are no income limits.
4. Plan out how you'll use or transfer your education benefits
Student debt is one of the biggest financial burdens many families in the U.S. experience. Military members who are eligible for the substantial college tuition benefits available through the Post-9/11 GI Bill should carefully consider how this benefit can be used to further their own career or that of a family member. Servicemembers and veterans who don't plan to go back to school should find out how to transfer these tuition benefits to a spouse or child.
5. Familiarize yourself with the financial programs available to you
There are a number of advantageous savings and investment options available to members of the armed forces. It's a good idea to familiarize yourself with all of these programs so that you can start saving and seeing growth early on. For example, you may be eligible to receive 10% annual interest on savings up to $10,000 through the DOD's Savings Deposit Program (SDP). This growth rate is unlike any traditional savings plan you'll find in the civilian world.
Another example is a new program launched in October 2019 through which you may be able to receive free electronic credit reporting services from one of the major credit reporting agencies while serving on active duty. This is a helpful resource to help you monitor for fraud and improve your credit score.
Remember that these types of programs may evolve or be expanded over the years. Make it a habit to check back in and ensure that you're getting the most out of the opportunities available to you.