How To Grow Your Savings Account While in the Military

With these tips, you have the opportunity to be leaps and bounds ahead of your peers who went to a traditional 4 year college after your first enlistment is over. Continue reading to find out how to save money in the military. 

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Pay, Entitlements, and Allowances in the Military

Basic Pay – Every Military Member gets this. This is your paycheck. For your first 3-4 years of active duty, you will be floating around $1700-$2300 a month. Not bad considering the following entitlements. 

Basic Allowance for Subsistence (BAS) – Every military member gets this. This allowance is designed to supplement military members’ costs for food. As of 2022, BAS for enlisted members is $406.98 a month. If you are reliant on the chow hall, this may get deducted by around $350.00 a month to cover your meals from the chow hall.    

Basic Allowance for Housing (BAH) / Overseas Housing Allowance (OHA) – If you do not reside in government housing, you will receive BAH if you are stationed in the United States or OHA if you are stationed overseas. You can use the calculators through the links to see how much you may be entitled to. This is designed to cover your housing costs and possibly even utility bills. 

Cost of Living Allowance (COLA) – If you are stationed overseas, you will receive COLA. This is designed to help you adjust to the cost of living outside the continental United States. This varies per month and it is influenced by annual COLA surveys and currency rates. For example, while I was stationed in Japan, my COLA ranged from $110.00-$400.00. Use the calculator in the link to find out how much COLA you should get at your overseas location.  

Family Separation Allowance – If you have dependents, and you go on a TDY or deployment for more than 30 continuous days, you will be entitled to $250.00 a month. This is pretty common and you will file for this when you get back to your permanent station through the finance office. 

There are more allowances that you may qualify for, but these are the most common, and they can be extremely beneficial in saving money in the military. 

Leveraging Entitlements From the Military to Save Money

BAS – Use this for what it is for… Buying groceries. If you can eat at home as much as you can (or the chow hall), you will save significantly on eating out. 

BAH – If you are single, you should consider getting a roommate(s). This can save you a lot of money. For example, when I moved out of the dorms, I had a roommate with a two bedroom two bathroom apartment. We split the rent and the bills right down the middle, and we saved $600.00 extra a month by doing it. 

OHA – You cannot pocket extra money from OHA. However, you can work with your landlord to possibly cover all the bills with the OHA you are allotted. Talk with your local housing office and ask the questions accordingly. 

COLA – I can tell you that there is a higher cost of living in other countries versus the United States, but it is possible to save this money by living frugally. If you are in the dorms, you still receive this entitlement with no extra bills. You should be saving a big chunk of this. 

Family Separation Allowance – Being away from our families is hard. It is a big reason why I am stepping away from my military career. Use this $250.00 to plan something special for your family. Over a 6 month deployment, that is $1500.00. That could fund a family road trip or a romantic long weekend with your better half. 

Transportation Costs in the Military

Being in the military, we move around a lot. This can lead to a lot of financial stress if we are not careful. Luckily, our mandatory traveling expenses (airfare, DITY moves, lodging)  are covered, but when it comes to settling down and buying a car, we are on our own. 

Follow these do’s and don’ts of buying yourself a vehicle.    

Do – Consider buying your car from a private seller. However, if it passes your initial standards and you want to make an offer, take it to a mechanic to give it a look over before you pull the trigger. 

Do – Make sure you follow the correct process of registering your new vehicle, getting at least the minimum required insurance, and keeping your drivers license up to date. 

Don’t – Go into debt to buy a vehicle. Pay cash for your vehicle.This will save you in interest, and free up more money for expenses and saving every month.

If you need to get a car loan, you are looking at too much car. If you are in a pickle and need a car loan for less than $5,000, finance it through a local bank at a fixed interest rate. 

Don’t – Spend over 25% of your annual basic pay on a vehicle. Follow the link and find your pay on the chart. Multiply your basic pay by 12 and divide by 4. For example an E-3 with less than 2 years of service makes $2160.00. After multiplying by 12 and dividing by 4 you get $6480.00. That should be his maximum budget. 

Don’t – Buy a brand new car. Brand new cars will take you years to pay off. Not to mention that they depreciate in value so fast that you could sell the car after two years when you need to PCS and still owe money on it after you sell it. 

For my younger military members in the dorms, it is okay if you do not buy a vehicle right away. You are within walking distance to your work. If you want to get around a little faster, buy yourself a bicycle. You can save up quickly for a vehicle or another financial goal by doing this. 

I have had friends of mine go an entire assignment without owning a vehicle. This is especially common in overseas locations like Korea and Japan.  

Tips for Everyday: Saving Money in the Military  

  1. Spend below your means. This sounds simple, but if you spend significantly less than you make then you will be saving money in no time. 
  1. Avoid any and all debt. Debt can pile up quickly. It can really be a burden that can be difficult to climb out of if it gets out of control. In the military, our pay is sufficient to have a genuinely comfortable lifestyle without going into debt. The only debt we should consider is a mortgage for a home whenever we are ready to buy a home. 
  1. Automate your savings. In mypay, you can create allotments to other accounts rather than sending your entire paycheck to your checking account. As long as you know the account number and your bank’s routing number, you can make a specific dollar amount allotment to any account that you have every month. This could be a savings, money market, Roth IRA, brokerage account or anything else. 
  1. Avoid expensive habits. You will see that a large number of military members use tobacco products, vape, get daily coffee from a coffee stand, or drink energy drinks daily. These vices will be a drain on your checking account. According to the, if you smoked a pack a day, you would spend around $2200 a year on cigarettes.
  1. Avoid money pit hobbies. An example of this would be buying a boat, spending hundreds if not thousands on golf or scuba gear, or spending $40,000 on that Skyline GTR while you are in Japan. Any hobby with an extremely high barrier to entry will be a money pit. 
  2. Take advantage of military discounts. Saving 5-15%, or sometimes higher on transactions can really add up. It never hurts to ask at checkout if the business offers a military discount.
  3. Explore hobbies that are good for your mind, body, and wallet. Join a run club, try out lifting weights at the base gym, try out fishing, or find somewhere to volunteer that has a mission that you are passionate about. You do not need to spend a lot of money to have a fun hobby. 
  4. Consider a side hustle. There are many ways to make money today. If you have mechanical ability, instead of buying an expensive car to fix up for yourself, buy cheap cars that need work, fix them and flip them. Mow grass for people who are TDY. Do some research and consider finding a way to create some income on the side that you enjoy doing. 
  5. Take advantage of the base thrift store and Facebook yard sale pages. The base thrift store or “Airman’s Attic” will have great deals on used items, some even being completely free. Buying and selling used items from Facebook marketplace will also put extra money in your pocket.
  1. Save for emergencies. Try to create a savings account that can cover 3-6 months of your expenses. This will give you the flexibility to cover any big expenses that come up without the pressure of taking on debt to do so. If you have to dip into it, replenish it as soon as you can. 
  1. Create Financial Goals. Some examples of this would be getting out of debt, paying off your house, maxing out a Roth IRA, investing in a brokerage account to retire before you’re 60. Talk to a financial advisor and create a goal for yourself. It is easier to focus and save with an end goal in mind.
  1. Educate Yourself About All Things Finance. Listen to podcasts about tax benefits of certain retirement plans, investing, and real estate. Understand the process of your retirement system in the military whether it is BRS or High 3. Never stop learning about finance because it is always changing.  

Saving for Retirement in the Military

Being in the military gives you a retirement plan that is hard to beat in the civilian sector. The new Blended Retirement System that the military has opted into gives you a match into your TSP.

To max this out, you need to invest 5% yourself.  

After 20 years of service, you will receive a pension that is equal to 40% of your highest 36 months of basic pay. 

If you do not want to be dependent on working in the military for 20 years follow these key tips. 

  • After you have saved 3-6 months of expenses, and you are contributing 5% of your basic pay a month into your TSP, invest into a Roth IRA account. These accounts are tax advantaged because you pay taxes on the money you contribute, but it grows tax free. As of 2022, you can invest $6,000 into one of these annually, and you cannot withdraw them without penalty until you are 59.5 years old I would recommend diversifying it between a few different mutual funds or ETFs. 
  • After you have fully funded a Roth IRA for a year, invest what you are comfortable with into a brokerage account. I would encourage you to always think in the long term. I am not telling you to be a day trader. I would recommend an S&P 500 index fund for a majority of your investments. These investments could bridge the gap to possibly retire early. 
  • Invest into real estate with cash whenever you settle down. The first piece of real estate you should own free and clear is your own home, and when you can afford a rental in cash, consider buying it. It should generate passive income and appreciate in value over the long term.  

If you follow those tips, you will set yourself up for success in retirement.  

Common Money Questions From My Troops

Is it easy to save money while you are in the military?

In my opinion, yes it is. My wife and I would regularly save $1000-$2000 a month while living on base. Most of our expenses were covered through the entitlements so we saved like crazy. 

How can I make extra money in the military? 

Side hustles are a great way to have extra income, like those mentioned in this article.

Within your military work, consider volunteering for TDYs and deployments whenever they come up. 

On TDYs you may be entitled per diem pay to eat on every day. If you are lucky enough to stay off base, it will be relatively high. If you are staying on base or meals are provided then it will be lower. To pocket extra money on TDYs, make a trip to the grocery store to eat meals from your hotel room rather than going out to restaurants, and avoid spending excess money. 

On deployments, you will not have anything to spend money on. You will work, eat, go to the gym, sleep, and repeat. So naturally, you will save a lot of money. There is also a program called the Savings Deposit Program. You can fund an account up to $10,000 that will gain 10 percent annually and is paid out every quarter. That means over a 12 month deployment, a fully funded account will gain $1000!

Can I make extra money by going to college in the military? 

Yes, you can make extra money by starting your educational goals early. Make sure that you apply for FAFSA when you are early in your career. Since it goes off of your taxable income, you will receive a healthy amount of money from a Pell Grant for each class you take. With that, you get $4500 of tuition assistance to use each year.

The Enlisted Experience 

If you make good money decisions while in the military, you will be well on your way to being financially set. The military provides us with a lot of benefits where managing our money can be as easy or as hard as we want to make it on ourselves. 

If you choose the easy route, you will be on easy street heading to millionaire status in retirement. 

-The NCO You Never Had

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