Content provided courtesy of USAA
By Joshua Andrews, CFP®
Do you lie awake each night wondering, “What do I do with my big, fat Reserve or Guard paycheck?”
Alright, “big” and “fat” are probably overstatements, but it’s still worth considering how to make an extra paycheck from Uncle Sam work best for you. As a citizen airman, I am often asked this question by my fellow Reserve and Guard members.
Consider these three scenarios, one of which may apply to your situation.
- My Reserve or Guard pay is less than my civilian pay when I’m on military leave. Careful budgeting is important for those who fall into this category. Planning can prevent you from draining your savings or relying on credit cards to maintain your lifestyle.
- My Reserve or Guard pay is equal to my civilian pay when I’m on military leave. Budgeting is simpler if you fall into this category. Your military pay fits nicely into your overall plan, helping you maintain your financial security while working toward your financial goals.
- My Reserve or Guard pay is more than my civilian pay when I’m on military leave. If you find yourself with a surplus, congratulations! This is a wonderful opportunity to get your finances squared away. USAA recommends treating this surplus like a work bonus. Not counting on it to enhance your lifestyle can go a long way toward securing your financial future. Consider the following ways you could put the money to work for your financial goals:
- Assess your insurance to make sure you’re adequately covered.
- Update your budget. Plan your spending wisely by paying yourself first. Otherwise, you will find that the money magically disappears by month’s end.
- Fill out your emergency savings.
- Reduce debt.
- Make progress toward a special goal.
- Add to your retirement savings.
- If you end up with a surplus, don’t get so focused on strengthening your finances that you forget to carve out 5-10% for “fun money.” You’ve definitely earned it, and spending a little on yourself can help you stay motivated toward achieving your other goals.
The key to managing your financial life as a Reserve or Guard member is to plan ahead and match your lifestyle to your income. Whether your military pay is money you need to live or just surplus salary, having a plan can help you achieve your financial goals while reducing stress.