As a military member, you’ve already proven your capacity for self-control, as your role in serving your country demands a high level of accountability and maturity – not to mention intense physical maintenance.
You’ve probably noticed how this determination and attention to detail benefit other areas of your life. But have you considered using the same kind of grit when it comes to your money?
If you haven’t applied some tried-and-true military methods in your financial world, there’s no time like the present to start. We spoke with former Air Force fighter pilot Josh Andrews, who serves as an advice director for USAA, to uncover six ways to apply military discipline to your finances.
1. Give each dollar a mission. Creating and following a budget will ensure you won’t spend more than you earn. “As military members, anytime we have a decision to make, our first thought is, ‘What will have the biggest impact on the mission?’” Andrews says. “It’s our North Star, our guiding light. You can see the negative impact on your financial future if you don’t know the mission of each dollar.”
The most important mission for your dollar? You.
That means setting aside money for your savings and retirement accounts first, before purchasing anything on your “wants” list and after addressing your needs for day-to-day survival (like incoming bills and food).
“You are the most important bill you will ever pay,” Andrews says. “Pay yourself first.”
2. Protect your loved ones. You protect the nation, its people and those you serve alongside, but you also want to protect your loved ones and possessions. Andrews recommends having the following in place:
Life in the military can be dangerous, so having the right insurance is essential. If an incident should occur with a devastating effect and your home or family or car isn’t appropriately protected, it can take 10 to 20 years to fully recover the funds from damages and lost income.
An Emergency Fund
Have three to six months’ worth of living expenses set aside in an all-cash account. “In military life, we often don’t live next to our family. If there’s a death or emergency event, we need to be able to travel on short notice to see our family,” Andrews says.
In 2016, USAA’s Go Banking Rate Survey reported that 62% of those surveyed had less than $1,000 in savings. Would that be enough to cover sudden travel, an unexpected veterinarian visit or a necessary car repair if something happened tomorrow? If not, consider this your next financial mission.
Living Wills and Power of Attorney Documents
These ensure your desires will be carried out even when you’re unable to do so yourself. If you don’t have either of these legal documents in place when you die, not only does the state get to decide what happens to your possessions, but the process (known as “probate”) plays out under public scrutiny.
A living will allows you to state your wishes for end-of-life medical care – such as “Do I want to be kept alive indefinitely by life support or not?” – should you become unable to communicate your decisions.
Power of attorney allows a chosen family member, friend or loved one to make decisions on your behalf when you’re disabled or deployed. By making your wishes known upfront and set in a legally binding document, you decrease the amount of emotional stress your loved ones will face by freeing them from the burden of guessing what you would want to happen.
Levels of power of attorney range from special power of attorney, in which you authorize a person to perform a specific action, to a general power of attorney, which gives broad powers to act on your behalf. Choosing the level carefully is essential to protecting yourself.
A Retirement Fund
“Not only do we protect our nation, we protect our nation’s future,” Andrews says. “Every military member needs to provide for their future by saving now for retirement. Start early, start small, stay committed.”
Andrews adds that automating your retirement savings is one of the best methods for successfully saving. Set up an auto-pay mechanism to put a portion of every paycheck directly to your tax-advantaged retirement account so you never have a chance to see it as spendable in your regular bank account.
“You can get a loan for a house, you can get a loan for a car or for tires, but no one will give you a loan for retirement, so start saving now,” he says.
Stay the course and avoid taking money out of your retirement fund as much as possible. Not only will early withdrawals from certain retirement accounts trigger penalty fees and taxes, you also lose momentum from the compounding interest of your investments, shaving more than mere dollars from your nest egg.
3. Debrief and learn from your mistakes. “We learn from mistakes on the field,” Andrews says. “In our financial lives, we can look through our own mistakes and past mistakes of others. We all know people who have abused credit cards and got into debt for not living within their means.”
4. Be accountable. All military members — no matter the branch or rank — have one thing in common: accountability.
“The one thing we can do on a day-to-day basis is to hold ourselves and our family members accountable,” Andrews says. “It’s easy to swipe $5 for that cup of coffee once or twice a day, but over one month, that becomes a couple hundred dollars that you didn’t even realize you spent.”
If your spouse joins in on the same habit, that’s $400 a month poured right into your coffee shop instead of toward your financial security, stability or even long-term dreams of that vacation home.
Hold yourself accountable to the first item on this list: your mission. And if you’ve got a military background, you’ve already got what it takes to start exercising financial discipline now.
“You are the only one who can do that,” Andrews says.
At USAA, we’re experts when it comes to the crossroads between the military and personal finance. Want to learn more? Check out our podcast The Money Drill.
About the Professional: Josh Andrews is the advice director for Military Life Advice, Investments, and Education and a CERTIFIED FINANCIAL PLANNER™ practitioner. Prior to joining USAA in August of 2011, Josh served for 11 years on active duty in the U.S. Air Force (USAF). He currently is a lieutenant colonel in the USAF Reserves, where he serves as the director of USAF Academy admissions for South Texas.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER™ in the United States, which it awards to individuals who successfully complete the CFP Board’s initial and ongoing certification requirements.
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