How to Plan Your Finances as a Non-Active Duty Military Family

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, RVC prioritizes and supports military families with benefits like our Military Spouse Employment Partnership.

Financial Challenges Faced by Military Families

Family members of people who serve in the U.S. Armed Forces face unique financial challenges, including:

• • Frequent relocations and housing cost changes
• • The need to budget properly for deployment or separation allowances
• • Finding ways to maximize military benefits for the entire family
• • Military spouse unemployment rate of 21%²
• • Lack of civilian-level support

By following the steps below, military families can chart a course for better financial management.

1. Set Financial Goals That Stick

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.

Pay down debt

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.

2. Set Up an Emergency Fund

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.

Set savings goals

Once you achieve these short-term goals, shift your savings focus to planning for major life events like:

• • A wedding
• • Saving for a down payment on a house
• • Having children
• • Retirement

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.

3. Learn How to Budget for Military Families

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:

• • Housing (rent or mortgage)
• • Groceries
• • Utilities
• • Subscriptions
• • Medication/healthcare
• • Entertainment
• • Transportation (gas, car payments, bus passes, etc.)
• • Savings/investments

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:

• • Fees for cleaning and moving out of a current rental home
• • First and last month's rent and possible pet deposits in new homes
• • Gas to drive personal vehicles to new duty stations
• • Hotels or other travel stops during long-haul moves
• • Electric/utility deposits
• • Continued mortgage payments or utilities, pool care and lawn care on a current property until it rents or sells

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.

4. Tap Into Government Benefits for Military Families

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:

• • A Basic Needs Allowance if your household income falls below 150% of the Federal Poverty Guidelines¹⁰
•  
• • Clothing Allowances for uniform purchases and maintenance¹¹
•  
• • Dislocation Allowances for partial expense reimbursement for required moves¹²
•  
• • Family Separation Allowances to support dependents of servicemembers who go on an unaccompanied tour of duty¹³
•  
• • Overseas Cost-of-Living Allowances¹⁴ or high-cost Continental United States (CONUS) Allowances¹⁵

TRICARE provides healthcare for servicemembers and their families. However, different bases may vary in terms of access to care and quality of care. RVC 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. RVC 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.

5. Get Your Affairs in Order

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.

Look into life insurance options

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.

6. Make an Estate Plan

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:

• • A will, which specifies who you want to serve as your estate executor/personal representative, who will receive your assets when you pass away, and any chosen guardians for your minor children.
•  
• • A power of attorney for finances, which names another person (your agent) who can manage your finances for you if you are unable to do so. A power of attorney can include general powers or specific actions, such as signing on your behalf at a real estate closing.
•  
• • Healthcare directives, which may go by different names in different states. In general, these involve explanations of your chosen medical care and/or the appointment of someone else to make health decisions for you if you're unable to do so.

7. Revisit Savings and Investing Strategies

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. RVC 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

• • Up to $22,500 per year in the TSP, plus up to $7,500 in annual catch-up contributions if age 50 or older
•  
• • Up to $22,500 per year in a 401(k), plus up to $7,500 in annual catch-up contributions if age 50 or older
•  
• • Up to $6,500 in Roth IRAs or traditional IRAs, plus up to $1,000 in annual catch-up contributions if age 50 or older

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.

8. Utilize Other Financial Resources and Support for Military Families

Seek out additional financial resources and support, which may include programs sponsored by employers or by nonprofits. Research these options:

• • Military financial counselors
•  
• • Military spouse employment or entrepreneurship organizations such as Blue Star Families, VirtForce, The Rosie Network, Association of Military Spouse Entrepreneurs and Hiring Our Heroes
•  
• • Educational and scholarship opportunities specific to military families, such as military tuition assistance, the Pat Tillman Foundation Scholarship and the Wings Over America Scholarship Foundation

Look into company-specific education programs as well. For example, at Riverstones Vista Capital , employees can use company-sponsored tuition benefits to further their education.

9. Prepare for Civilian Life

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. Riverstones Vista Capital is here to help you and your military family while you serve—and long after, too.

 

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.

 

READ MORE: The Ultimate Guide to Personal Finance