Joining the military

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When you enter the military, you will need to set a direct deposit. That is where your monthly paycheck is automatically deposited into your bank account. Without a plan for how you'll spend and save your money, it's easy to go into debt or fall short of your long-term goals. A budget helps you organize your spending.

Quick tip: If you're an officer, you'll need to budget for uniform purchases. If you're an enlisted member, you'll have a clothing allowance. But use it wisely, so that you can use your paycheck to meet other financial goals.

If an accident occurs, do you have enough cash on hand to replace all your possessions, including your military uniforms? Most of us don't. If you fall into that category, consider insurance like renters or a valuable personal property policy to help reduce the financial setbacks. If a loss occurs, a renters policy can help cover your valuables and military gear in the barracks or a rental property. A valuable property policy helps provide extra protection for special items, such as guns or smartwatches.

Your new budget should include money for emergencies. We never know when an emergency will happen, so it's nice to have money set aside to help during troubled times. Start with an initial goal of $1,000 and then work toward a fully funded emergency fund of three to six months of living expenses. Even setting aside $25 out of each paycheck will get you there over time.

Another key part of your budget will be funding your retirement savings. Set a goal of saving at least 10% of your income for retirement. If you have debt or other competing financial obligations, you may not be able to do the entire amount. But starting small is better than not starting at all.

With each raise or promotion, you can increase the amount you save. Military members have the Thrift Savings Plan available to them. If you are under the Blended Retirement System, remember that if you contribute 5% of your paycheck into the Thrift Savings Plan, once eligible, the DOD will match your 5% with 5%, which is free money.

While that fancy new sports car or decked-out truck looks appealing at the dealership, it might not fit within your budget. Your goal is to keep the total cost of ownership that includes your payment, insurance, gas, maintenance and repairs limited to 10% to 15% of your monthly income. A reliable used vehicle might be a better choice than a new car.

Predatory lenders are ready to step in when you need cash fast. But the terms are often unfavorable to you. The interest rate in particular can be much higher than it would be through other sources. If you need cash fast and don't have an emergency fund, military relief associations like the Air Force Aid Society or the Army Emergency Relief are there to help.

Also, once the situation is over, prioritize your emergency fund, so you are better prepared the next time an emergency arises. For more information and advice around steps to take when joining the military, please visit usaa.com/militaryjoining.

Description of visual information [: This material is for informational purposes. Consider your own financial circumstances carefully before making a decision and consult with your tax, legal or estate planning professional.

USAA means United Services Automobile Association and its affiliates.

No Department of Defense or government agency endorsement.

Information last reviewed as of January 2023 and its subject to change.] End of description.

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