Financial Matters: Five Steps to Take Before Deployment
There’s a lot to think about while preparing for deployment, but it’s important to make finances a top priority. Set aside time to review finances with your loved ones before deployment so that you can have peace of mind down the road. Here are five steps to help you prepare financially for deployment.
1. Understand your income and how it will change
It’s no secret that military pay is a bit more complicated than a typical nine-to-five day job, and when you deploy there are even more factors added to the mix. Taking the time to understand what you earn today and how your pay will change will put you and your loved ones on solid financial footing while you are deployed. For more information, read the article Military Pay 101: Basic Pay, Allowances and S&I Pay.
Revisit the basics of your pay today.
- Leave and Earnings Statement: This essential piece to understanding military finance shows your monthly income and leave totals. Use MyPay to access current and past Leave and Earnings Statements as well as allotments.
Revisit where your money is going.
- Pay distribution and allotments: Because your pay and allowances are delivered through direct deposit, it’s important to know where this money is going. Your allotments are automatic distributions of a portion of your pay that can be used to:
- Deposit money into bank accounts
- Make rent or mortgage payments
- Pay insurance premiums
- Contribute to investment products like EFTs or bonds
- Make charitable contributions to the Combined Federal Campaign, Army Emergency Relief, Navy and Marine Corps Relief Society, or affiliates of the Air Force Aid Society
Take the time understand your allotments and discuss them with your loved ones to avoid any confusion during your deployment.
Determine any additional pay you may be earning.
- Special and Incentive Pay: The biggest change that most service members see when deployed is the addition of special and incentive pay. S&I pay is used to compensate for dangerous or hazardous duty assignments or conditions. Currently, there are over 60 types of S&I pay authorized by law. Learn more about the most common types of S&I pay. Then find out which ones are applicable to your deployment to understand how much your income will change.
- Family Separation Allowance: If you are away from your dependents for more than 30 days, you may also be entitled to family separation allowance under certain conditions. The allowance is $250 per month, beginning on the day of departure and ending on the day prior to your return home.
Note: There can be a delay in receiving these extra pays. So you can plan for how you will use the pay once it starts, but don’t change your budget until then.
2. Put together a financial plan
A financial plan will help you and your loved ones manage household finances while you’re away, and set you up for success upon your return.
Understand how you spend your money.
- Document the predictable: The easiest way to start this process is to think about the expenses that you have every month – like rent, car payments, insurance or streaming services.
- Categorize the less predictable expenses: Take a look at a couple of months’ worth of bank and credit card statements. How much did you spend per month on items like food, transportation, entertainment and utilities?
- Review the results: After looking at your list of expenditures, determine where you might be able to tighten your belt. Are you splurging on entertainment or food? You can look for ways to save here and there, but don’t be too harsh on yourself. It’s important to make sure you understand not just your spending habits today, but how those spending habits will change while you are deployed.
Decide where you want to go financially.
Your deployment may come with a change in your income, so it’s important to set some goals for where you want to be financially during your deployment and when you return. Do you want to save up for a major purchase, put more towards your retirement or maybe pay off some debt? Use this savings goal calculator and My New Money Goal worksheet to help you plan.
Check your credit.
It’s important to review and monitor your credit while you’re deployed to help you stay on top of your finances, and watch out for any fraudulent activity. The following links can help:
- Monitor Your Credit infographic – provides helpful information and contacts for credit monitoring
- Operation Monitor Your Credit – short article with credit monitoring information
- Annual Credit Report website – offers free credit reports
Note: Service members can also freeze your credit during deployment. Learn more about how to freeze your credit and reduce identity theft.
Think about your taxes.
Your deployment will likely have some sort of impact on your taxes, so take the time to understand what this may mean when filing taxable income.
- If you are stationed abroad or are in a combat zone during the tax filing season, you may qualify for certain automatic extensions related to the filing and paying of your federal income taxes.
- If you are earning combat pay, it may be non-taxable.
- The Internal Revenue Service has a dedicated resource to help military members make accurate and informed tax decisions. Learn more about MilTax: Tax Services for the Military.
3. Plan to save some extra money
Whether it’s from family separation allowance, S&I or tax-exempt combat pay, you’re probably going to have a little extra money at your disposal during your deployment. While it might be tempting to use all that money on something splashy, it may be more helpful to put some of it away for the future. The good news is that there are a lot of tools at your disposal to make the most of those savings, including:
- Thrift Savings Plan: This is an official federal government-sponsored retirement savings and investment program, similar to a civilian 401K tax-deferred program. Service members can contribute money from their basic, special, incentive and bonus pay without paying federal or state taxes. Service members deploying to combat zone tax exclusion areas may also qualify to contribute additional funds into their TSP account, beyond yearly IRS contribution limits. However, service members under the Blended Retirement System need to plan out additional contributions to continue to maximize government matching contributions.
- Savings Deposit Program: This is available to service members during assignments and deployments to specified locations. It pays back a 10 percent annual return on investment (2.5 percent quarterly) on up to $10,000 contributed from un-allotted current pay and allowances. Upon withdrawal, a service member’s contributions to the Savings Deposit Program will not be taxed, but the interest earned will be. Remember that the interest stops accruing and the funds need to be withdrawn 90 days after deployment ends.
4. Understand your protections under the Servicemembers Civil Relief Act
The Servicemembers Civil Relief Act provides financial and legal protections for active-duty service members, including National Guard and reserve members, and their families. Taking the time to understand these protections can help you and your loved ones avoid some financial pressures during deployment. A few of the financial protections that may apply during your deployment include:
- Reduced interest rates: Creditors must reduce the interest rate on debts to six percent for liabilities incurred before you entered active duty. If the debt is a mortgage, the reduced rate extends for one year after active-military service. The reduced interest rate applies to credit card debts, car loans, business obligations, some student loans and other debts, as well as fees, service charges and renewal fees. Creditors can challenge this provision if they believe your ability to pay a rate higher than six percent is not materially affected by your military service.
- Postponement of foreclosures: No sale, foreclosure or seizure of property for nonpayment of a pre-service mortgage debt is valid if made during or within nine months after your service on active duty, unless carrying out a valid court order. This can provide tremendous protections from foreclosure. Be sure to contact your legal services office for help with missed mortgage payments.
- Deferred income taxes: The IRS and state and local taxing authorities must defer your income taxes due before or during your military service if your ability to pay the income tax is materially affected by military service. No interest or penalty can be added because of this type of deferral.
- Protection for small-business owners: If you own a small business, your non-business assets and military pay are protected from creditors while you are on active duty. This applies to business debts or obligations.
Learn more about the important sections of the Servicemembers Civil Relief Act.
5. Get financial help if you need it
Preparing financially before deployment is no small task. There are a variety of resources to help you and your loved ones with everything from organizing and planning your finances to emergency financial assistance, including:
- Financial assistance, counseling and resources – from Military OneSource.
- Road to Financial Readiness infographic – offers an easy-to-follow plan.
- Emergency financial assistance from the American Red Cross, including financial and disaster assistance, emergency communication support and community education. Learn more about American Red Cross support for military families.
- Financial information during emergencies from the United Service Organizations – a private, nonprofit organization supporting service members and their families by providing morale, welfare and recreation-type services.
- Emergency financial help through your branch of service. Before your deployment, you may want to preauthorize your loved ones to get financial help in case there’s an emergency while you’re away. Learn more about military relief organizations and emergency financial help.