It’s the most basic rule of personal finance: spend less than you earn. Of course, it can seem like everyone’s out to separate you from your hard-earned money, from the luxury purse vendor outside the exchange to the Harley Davidson dealer’s tent packed with salesmen ready to give you a “great” finance rate. Making smart choices about how you manage your money while serving can set the stage for the long-term financial security of you and your family. Follow these four tips to get and keep your personal finances squared away.
1. Stop Overspending
The first step to stop overspending is to create a monthly budget that takes into account your income (your net pay and allowances) and your necessary expenditures (housing, bills, groceries, etc.). The crucial second step is learning to say no, both to yourself and to people trying to sell you things you may not really need. Saying no will feel awkward or unpleasant for a moment, but it can also protect you from perpetually struggling to make ends meet.
2. Pay Yourself First
At the top of that “necessary expenditures” list you should include a set amount that you invest into savings every month. No matter who you bank with, you can automatically kick a certain percent of your monthly check directly into savings. Experts suggest that 20% of your pay should go toward “financial priorities,” which can include paying toward student loan debt, credit card balances, maintaining an emergency fund, and, yes, savings. How that 20% is dispersed depends on your unique situation, and a qualified financial planner can help you determine the right amount for your needs.
3. Plan Realistically for Retirement
The military retirement system has recently undergone a major overhaul and how that affects you depends on how many years of service you’ve accumulated and, for many, personal choice. Figuring out how to save so you can retire comfortably depends on you becoming an active participant in saving toward retirement. Working with a financial advisor with knowledge and experience in planning for military retirement can help you plan for the retirement you want.
4. Don’t Buy More House than You Need
A big house, a big backyard, a big garage . . . it’s all part of the American dream, right? Unfortunately, that dream might be out of your budget, especially when you factor in additional costs like mortgages, taxes, utilities, insurance, and maintenance. In general, you shouldn’t commit more than 20% of your monthly budget to a mortgage payment, so keep that in mind when shopping for a home. Remember: It’s easier to enjoy a modest home you can afford than huge house that’s a constant source of financial stress.