There’s definitely 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.
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
- Meet financial responsibilities like a car or mortgage payment
- Pay insurance premiums
- Invest in securities like mutual funds
- Donate to charity
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. Special and incentive 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. Find out what S&I pay is 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.
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 will come with a change in your income, so it’s important to set some goals for where you want to be financially when your return. Do you want to save up for a major purchase, put more towards your retirement or maybe pay off some debt?
Check your credit.
You’re not going to get far without credit. If you’re planning on making a major purchase on your return, it’s a good idea to make sure your credit can support that. You’ll want to make sure that the agencies’ credit reports match your records. If there are discrepancies, you will need to dispute them with the agency that is reporting them. You can find instructions on how to dispute errors on credit agencies’ websites.
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. If you are an enlisted member, warrant officer or commissioned warrant officer, none of your combat pay is included in your taxable income. If you are a commissioned officer (other than a commissioned warrant officer), there is a limit to the amount of combat pay you can exclude.
- The Internal Revenue Service has a dedicated resource to help military members make accurate and informed tax decisions. Visit Tax Information for Members of the Military for more information.
3. Plan to Save Some Extra Money
Whether it’s from family separation allowance, special and incentive or tax-exempt combat pay, you’re probably going to have a little extra money at your disposal during your deployment. While it’s tempting to use all that money on something splashy, it may be 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.
- 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.
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 take off 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 assistance office for help with missed mortgage payments.
- Deferred income taxes: The Internal Revenue Service 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 leading up to a 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:
- Free, confidential financial counseling or referrals from a Military and Family Support Center or through Military OneSource. Local community resources are available through the Joint Forces Headquarters for service members who aren’t located near military installations. You can find more information about available resources through the State Resource pages on MilitaryINSTALLATIONS.
- Emergency financial assistance from the American Red Cross Financial Assistance, which works under partnership agreements with the Army Emergency Relief, Navy-Marine Corps Relief Society, Air Force Aid Society and Coast Guard Mutual Assistance to provide financial help with emergency travel, burial of a loved one and assistance to avoid privation.
- 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.