For the more than 200,000 Service Members who leave the Military each year, the future brings new opportunities and new priorities. It also brings new financial challenges, like a higher cost of living. If you’re one of those Members nearing the end of their Service, the time to start preparing financially for your post-military life is right now.
So how do you begin? “Do an assessment of where you are financially and where you want to be, and make a plan to get there,” says Andy Cohen, Director of Financial Readiness in the Office of the Secretary of Defense for Personnel and Readiness. He acknowledges the process can be a source of anxiety but says the more you research, plan and understand, the better off you’ll be. “The knowledge will help reduce your stress level,” he says. Here are nine key recommendations.
1. Start Early
Financial planning for this shift should begin at least one year before leaving the Service, or two if you’re retiring, says Cohen. These time frames are when Service Members are supposed to join the Military’s Transition Goals, Plans, Success (GPS) program. “Six months is not early enough when you’re changing your life,” says Dan Caporale, founder and chairman of Hire Our Heroes, a nonprofit organization that helps position Veterans for success as they transition out of Service.
2. Commit To Your Future
Take advantage of the no-cost financial services offered by the Military. The Transition GPS program includes a financial management course that teaches how to build a 12-month post-separation budget; it also offers opportunities for one-on-one sessions with financial counselors and managers. Caporale adds that this is also a good time to update your will and beneficiaries.
3. Create A Budget
Start by analyzing your current cash flow, Caporale advises, and then build a budget for the first 12 months you’ll be out of the Service. One crucial consideration: the additional costs for everything that was untaxed, offered at lower cost or provided by the Military—such as housing, healthcare, childcare and commissary food. “It’s not that complex when you lay out the numbers side-by-side on a spreadsheet or budget worksheet,” which you do in GPS classes, says Cohen.
4. Build Your Transition Fund
Once your budget is in place, start building a transition fund. The amount will vary according to your particular needs, but it will need to cover your expenses until retirement pay begins or you start a new job—or while you’re job hunting, says Cohen.
5. Research Your Benefits
Compare your benefits from state to state; the money you’ll save in a particular state may influence your decision to move there. Some states, for example, don’t tax military retirement benefits, and others offer property tax exemptions for Veterans, says Caporale—whose organization offers a newsletter and blog, in addition to other resources, to help Veterans navigate these waters.
6. Negotiate Your Salary In Civilian Terms
Research the market rate for your skills in the area where you’re job hunting. “You’re being paid in the civilian economy based on a skill set and what you bring to the employer’s table—not your rank and time in the Service,” says Cohen.
7. Think Big Picture
Remember to compare the total value of a compensation package—not just salary. A lower salary might actually be part of a more beneficial compensation package if, for example, your future employer covers all healthcare costs. Keep in mind that, due to the federal tax advantage Military Members receive (since housing and subsistence allowances are not taxable), a transitioning Service Member may need a higher non-military salary to maintain a similar standard of living. Converting one’s basic pay and allowances to an equivalent fully taxable salary is referred to as Regular Military Compensation (RMC); Service Members can determine their current RMC by using the RMC Calculator.
8. Take Advantage Of Benefits You’ve Earned
If you want to go to school, Cohen says, use the GI bill. Buying a house? Do it with a VA home loan. If you’re eligible for medical benefits, take them. “You’ve earned these benefits,” says Cohen. “If you don’t use them, you’re leaving money on the table.”
9. Don’t Go It Alone
In addition to using the free resources (like Transition GPS) provided by the Department of Defense, and by federal agencies such as the VA and the Department of Labor, consider doing further research with private financial firms, Cohen suggests.
GEICO has been a proud supporter of Military Members and their families for more than 75 years. To find out more about military discounts and benefits you could receive, go to geico.com/military. Interested in joining the GEICO Military team? Head to geico.com/careers to learn more.
Read more: A Veteran’s Guide to Changing Careers
By Julie Anne Russell