Written by Laura Briggs
Published Oct 31 | 7 minute read
Military families, whether those with a servicemember on active duty or in the reserves, face unique financial challenges—making additional support and planning essential. In fact, nearly 81% of military families say their finances have caused stress in the previous 12 months.1
Someone may be placed on non-active duty for the short term due to a transition period, or long term as a member of the reserves. For servicemembers leaving the military but staying in the reserves or going on non-active duty for a short period, proper financial support includes things like setting financial goals, paying down debt, maximizing government and employer resources and saving for the future.
As a leading employer of military veterans and spouses, Synchrony prioritizes and supports military families with benefits like our Military Spouse Employment Partnership.
Family members of people who serve in the U.S. Armed Forces face unique financial challenges, including:
By following the steps below, military families can chart a course for better financial management.
To prioritize for the short and long term, start building awareness of your financial situation right now, including debts and existing savings. Consider it like looking at your GPS before heading out on the road.
As many as 91% of military families have at least one credit card, compared with only 69% of the civilian population.3 Military families are also more likely to carry higher balances than their civilian counterparts.3
List out all one-time and revolving debts, noting the interest rates for each one. Pay off high-interest debts like credit cards first.
Once you eliminate debt, set up an emergency fund to cover unforeseen expenses like car damage, pet health needs or appliance repairs. Studies show that just over half of military servicemembers have an emergency fund.4 Start with a small goal of saving $1,000 for emergencies, but work to build up to several months of household expenses.
Once you achieve these short-term goals, shift your savings focus to planning for major life events like:
Use the bucketing strategy to split up your savings. You can use different bank accounts or sub-accounts within your main checking or savings account to distribute savings toward particular goals. These can include short-term savings goals like a vacation, or long-term goals like retirement.
Using automated savings transfers can also make it easy to stay on top of your goals.
A basic budget for military families includes knowledge of all money coming in and going out, with caps set for each area of life. You can try using a zero-based budget, which entails assigning every cent you earn to a specific task in your budget. For instance, you can break down your expenses into categories such as:
Active duty families, including U.S. Armed Forces Reserves members called up to service, may need flex spending budget categories. For example, most military families relocate to new duty stations during "permanent change-of-station (PCS) season" from mid-May through mid-September.5
These relocations bring up many new expenses, such as:
Find software or apps that help make budgeting easy, such as Mint or YNAB (You Need a Budget). Once you have a good handle on monthly spending, consider more advanced financial tools like Kubera, which provides a dashboard of your net worth.
Every family should know about all potential government benefits and maximize them to the best of their ability. This includes military pay, bonuses, Basic Allowances for Housing, healthcare through TRICARE and education/tuition assistance.
Full-time military servicemembers receive pay based on their years of service and rank.6 The total monthly pay is split in half, for a total of two monthly pay installments. Reserves members receive drill pay based on their years of service, rank and location.7
Active duty servicemembers who do not use government-provided housing (such as those not living on base) are eligible to receive a Basic Housing Allowance.8 This amount varies from one person to another. Servicemembers also receive a Basic Allowance for Subsistence (BAS) in line with the annual food cost index. Different BAS pay rates apply for enlisted members vs. officers.9
Your situation may also qualify you for additional benefits, such as:
TRICARE provides healthcare for servicemembers and their families. However, different bases may vary in terms of access to care and quality of care. Synchrony employees with experience as military spouses share that they sought out supplemental healthcare through their own careers to help bridge the gap.
Military spouses should also prepare to self-advocate by setting their own career goals and getting to know their human resources professionals at work. Synchrony team members share that this can help you plan for your future and help others see you as more than just a servicemember's dependent.
Talk with financial professionals about insurance protection and estate plans. At a minimum, you need life insurance, a will, a power of attorney and healthcare directives.
Life insurance can help cover expenses—such as income replacement, mortgage payoff or college education costs—if something happens to you.
Many government or military-sponsored benefits provide great coverage for less expense compared with civilian options. For example, with Servicemembers' Group Life Insurance, you can purchase a maximum of $500,000 in coverage for your family in increments of $50,000.16 You might also want to purchase supplemental private life insurance for greater financial need or to ensure you're locked into the lowest rates should you ever leave the military.
An estate planning lawyer can help you make a comprehensive estate plan. Your estate plan incorporates intentions for the future distribution of your assets and appoints key people to carry out financial management or make healthcare decisions for you. This plan should include:
With firm financial footing under you, check back in on your budget. If you're able, consider allocating more to savings and investing. Maximize your Thrift Savings Plan (TSP) and other retirement accounts. Note that TSP enrollees who use the Federal Employees Retirement System may lose out on agency matching contributions if they hit the maximum contribution limit before the year is over. Synchrony employees who are married to servicemembers can attest that leveraging additional retirement savings options allows more robust options for future planning.
In 2023, you can contribute:17
If you have overage, consider putting it aside in a high yield savings account or money market account, or consider opening a certificate of deposit to grow your wealth.
Seek out additional financial resources and support, which may include programs sponsored by employers or by nonprofits. Research these options:
Look into company-specific education programs as well. For example, at Synchrony, employees can use company-sponsored tuition benefits to further their education.
Your spouse or partner may eventually leave the military, either from full-time active duty to civilian life or from the reserves to civilian life.
The transition to the civilian side may present a range of emotions and new resource needs. While some benefits such as access to educational assistance may continue, it can feel like a drastic adjustment to lose healthcare benefits, affordable government-sponsored life insurance and allowances.
Take time to review your family's finances as you adjust. Draft a new budget and prepare to tap into savings during the transition period, if needed. Synchrony Bank is here to help you and your military family while you serve—and long after, too.
READ MORE: The Ultimate Guide to Personal Finance
Laura Briggs is a three-time TEDx speaker and the author of five books, including the award-winning "Remote Work for Military Spouses." Laura built her remote freelance writing career while moving 11 times for her husband's 14-year U.S. Navy career. She's also a doctoral candidate in business administration and enjoys helping other freelancers build freedom-based businesses.