Content provided courtesy of USAA Member Community.
By: Chad Storlie
Returning from a deployment, especially a long deployment is great. You are back with loved ones, you finally have some much-needed time off, and your savings account has never looked better. Returning from a deployment can be a time of potential financial missteps. Enjoy being back, enjoy being among your family, and follow some simple and direct guidelines to ensure that you do not make any financial missteps following deployment.
Avoiding Financial Mistakes Following Deployment #1 – Validate or Create a Strict Monthly Budget. When you return from deployment, creating a new personal budget should be your first rule. A new budget should use your new pay rates, BAH / BAQ Rates, BAS rates, and any special pay allowances. You should also validate and refresh all of your monthly expenses such as rent/mortgage, insurance, other debt payments, and the like. Importantly, do not include any of your pay saved from deployment in your monthly budget. All of your savings should be set aside – only your base monthly pay and allowances should cover your monthly expenses. Use USAA’s helpful budget tools here.
Avoiding Financial Mistakes Following Deployment #2 – Follow The Rule of 1/3 – SIT: Save, Invest, and Treat. There is a great desire to spend when you return from a deployment. To ensure that you spend wisely after revalidating your monthly budget. Follow the rule of 1/3’s with your deployment savings using the SIT acronym. One-Third of your deployment savings should go into Savings or your emergency savings account. One-Third of your deployment savings should be invested in a long term, growth retirement account with a very low (<0.5%) expense rate. One-Third should be available to spend for a new item, a family vacation, or another desired item. In my opinion, the Rule of 1/3 using the Save, Invest, & Treat framework ensures your deployment savings are not mindlessly spent away.
Avoiding Financial Mistakes Following Deployment #3 – Wait Three Months Before Starting a New Loan or A Major Purchase. New, major purchases immediately the following deployment are another potential mistake. On Army deployments, we all dream of a new pick-up truck regardless of rank! Instead, when you return let those dreams go on a little longer for a new auto purchase or the purchase of a house. You want to let life after deployment normalize without many new financial stress points. Waiting to make a major purchase for at least three months following deployment is a great way to ensure that you do not rush into a financial misstep.
Avoiding Financial Mistakes Following Deployment #4 – Do not Depend on Deployment Special Pays To Make Your Budget Work. During my time in the Army, the Combat Zone Tax Exclusion (CZTE) was the one deployment special allowance that got more Soldiers regardless of rank into financial trouble. On deployments, Soldiers built their budgets around special pay allowances of the CZTE, Hostile Fire/Imminent Danger Pay, and other additional allowances. These meant when they redeployed their monthly budgets were now based on getting hundreds of additional dollars each month. In addition, to make matters worse, there was no way to replace the lost income. The bottom line is that when deployed; keep your monthly budget based on your pre-deployment income. While deployed, this can seem crazy because you have hundreds of additional dollars coming in, but when you redeploy, this suddenly makes sense.
Avoid financial mistakes following deployment by maintaining a strict budget; save & invest 2/3rds of your extra pay on deployment; wait 3 months before a major purchase; do not factor deployment pay levels into your long-term budget. Planning, patience, and prudence in financial matters when you return from deployment will prevent and financial missteps following deployment.
How have you stayed on financial track after returning from a deployment? Share your advice below.