By Ayesha Haider, BA, MBA, AFC© Candidate, FINRA Military Spouse Fellow For most of us, receiving a tax refund is a...
Transitioning out of the military is a big step, both personally and financially. In order to ensure that you have the best possible success in your transition, it’s important to create a financial plan that will help you reach your goals and support your family while you settle into your new job and lifestyle. These strategies will make it easier to meet your overall goals, and ensure a successful move to civilian life.
When to Start Planning
Generally, you don’t abruptly transition out of the military. It’s a decision that you’ve carefully considered and made, often months or years in advance. The best thing to do is to begin preparing as soon as you’ve made the decision to leave the military.
What to Prepare
When you make the move to civilian life, you want to be sure you have everything you need for that critical transition period. There are several things you’ll want to make sure to have on hand before you move to your new job.
Prepare for 3-6 months of living expenses – In a perfect world, your savings account would include at least a year of living expenses. Unfortunately, that’s not always realistic. A minimum of 3-6 months of living expenses in savings will give you a buffer that will provide time to find a new job and get settled into your new lifestyle.
Provide for your loved ones – Make sure that you have life insurance that will help cover you and your spouse during this critical transition time, especially if you’re planning to spend time as a student before moving into a new career.
Set up a moving account – Will you be moving back to your hometown when you leave the military? What about settling in a city you loved during a previous post? If you’re planning to move after you separate from the military, you’ll need a moving savings account that will pave the way for your fresh start.
Create a budget – If you currently have a budget based on your military pay, then you may already know how much income you’ll need in order to maintain your current lifestyle. If you don’t already have one, then create it. This will give you a clear view of all of your expenses, and your overall financial condition.
Reduce your debt – Where possible, take steps to reduce your debt load before the time comes. This will make it easier to deal with in the event that you’re out of work during some part of the transition.
Other Things to Consider
Understand your “real” income – Military paychecks include both taxable and non-taxable income. You need to understand how that will translate to a civilian paycheck in order to better develop your understanding of the income you will need.
Check out the cost of living – Cost of living may be a determining factor when considering where to settle after you leave the military. Especially if you’re going to be moving, make sure that your job offers reflect the cost of living for that area.
Develop an understanding of career opportunities in your preferred field – You may discover that you need to make some modifications to either your budget, or your career plans, in order to reach your overall goals.
With careful financial preparation, you can make your transition out of the military a smoother move than anticipated. These strategies will enable you to prepare for a new civilian lifestyle without having to worry about finances in the early days of your transition.
Information appearing in this article is obtained from sources we believe are reliable. The information may not be a complete statement of all available data and is not guaranteed as such. Marine FCU is not responsible for the contents of this article and advises its membership to investigate claims before following the information provided.