A recent four-year analysis found that 65% of military households face some degree of financial strain.
The bright side? There are several military perks you might not be using yet.
We’ve assembled a guide to help ease your financial worries.
“In the 20th century, the United States endured two world wars and other traumatic and expensive military conflicts; the Depression; a dozen or so recessions and financial panics; oil shocks; a flu epidemic; and the resignation of a disgraced president. Yet the Dow rose from 66 to 11,497.” – Warren Buffett
Conflict is uncertain, but money can be predictable.
Service members shouldn’t have to lose sleep over finances. If you serve, you ought to be able to concentrate on your duties without fearing foreclosure or insolvency.
Unfortunately, that’s often not how it goes.
According to a four-year study, 65% of military families report experiencing financial stress. Yes — the majority are wrestling with money concerns.
You can be among the minority who are financially stable. The military gives you the tools to succeed — you just need to learn how to use them. Whether you’re currently serving or considering enlistment, let’s explore how to thrive financially.
The Monetary Advantages of Military Service
Having served on active duty for many years, I’ve noticed a pattern. Courageous young people often enter the military straight from high school with little understanding of money management. They frequently don’t know where to begin.
When someone is financially inexperienced, they either endure years of trial-and-error learning or find a money-wise mentor to point them in the right direction.
The first outcome is far more common — remember that 65% statistic.
The military offers numerous advantages to those who serve. Here are some of the top ones:
- Tuition Assistance – This is a major draw. Many enlist for education benefits alone. You receive the GI Bill, and you might not even need to use all of it yourself: the Military Tuition Assistance Program can pay 100% of tuition and most fees depending on your branch. There are yearly caps, but you generally have enough to earn a degree in a few years.
- No-Cost Facilities – Most bases include a gym that can save you hundreds each year. The base library offers financial resources and even interlibrary loan services, giving you access to a vast collection of personal finance materials.
- Complimentary Legal Help – The legal office (JAG) will prepare required documents like wills and living wills for free. They also provide legal counsel, contract reviews, powers of attorney, document preparation and tax guidance.
- Reduced and Free Entertainment – Programs like Waves of Honor offer free SeaWorld tickets for you and up to three dependents once per year. Installation travel offices list free or discounted events, and you can find deeply discounted tickets for Walt Disney World and Disneyland via their military offers.
- Space-Available Travel – Space-A travel lets you catch military flights between select installations either free or at very low cost. For vacations, AFVClub.com features Space-A getaways from about $349 per week. If Space-A isn’t an option, look into MilitaryFares.com.
- Health Coverage – One of the most valuable perks is Tricare, offering comprehensive health coverage for military families. This can save thousands annually and often requires minimal copays for health, vision and dental care.
And that’s not an exhaustive list.
How Military Compensation Works to Your Advantage
Many new service members don’t realize this, but the military’s pay structure is intentionally beneficial. Unlike civilian pay, much of your compensation is structured to reduce tax burdens.
Your base pay is taxable, but several allowances are tax-free and aren’t reported as taxable income. That translates to more cash in your wallet, especially if you’re in a lower tax bracket.
Here are some common non-taxable allowances you might receive:
- Basic Allowance for Housing (BAH): Intended to offset housing expenses. Rates change based on local costs. Learn your local BAH rate and aim to spend less than it to cover housing entirely. Overseas this is known as OHA.
- Basic Allowance for Subsistence (BAS): Designed to cover grocery costs. While primarily for the service member, with careful planning it can stretch to cover family food expenses.
- Overseas Cost of Living Allowance: Paid for higher-cost overseas locations, and it also applies to Alaska and Hawaii — so sometimes the military compensates you for being sent to pricier duty stations.
The military also covers moving costs and vehicle shipments when you’re ordered overseas.
It’s a solid deal.
Talk to your chain of command to learn about additional reimbursements, especially during a permanent change of station. The key is understanding the system and leveraging military benefits to your favor.
That covers what the military offers your finances. Now let’s examine what you can do for your money.
1. Curb Excess Spending
It’s tempting to feel flush with cash when your pay increases, and that’s one reason many service members end up stressed financially.
Your financial choices as a junior enlisted member will impact your circumstances as you move up the ranks. Adopting a long-term perspective is essential.
Too often a new recruit immediately purchases a flashy car, new wardrobes and other items they couldn’t afford while living with family.
Let’s examine a common trouble spot: vehicles.
Rob Aeschbach, a financial planner focused on service members, advises: “My simple rule on cars is don’t borrow more than five times base pay. For an E-3 that would probably get you a used hatchback instead of a new Mustang/Camaro/F-150. Nearly every service member I’ve seen in financial straits had unaffordable car payments.”
Don’t becomecar poor. If you must finance a vehicle, recognize you don’t truly own it until the loan is paid off.
If you decide to finance, use the military-related incentives available: expect lower interest rates, reduced down payments and often special discounts just for service members.
Frugal living can be enjoyable, and saving isn’t complicated — just not always effortless. You must learn to manage your money so you can afford the things that truly matter later on.
If you’re new to service, follow the fundamental steps to position yourself for financial success.
2. Steer Clear of Debt
A study from the National Foundation for Credit Counseling revealed that 32% of enlisted personnel have used at least one non-bank lending source, such as payday loans, pawnshops, refund advances or similar products.
Additionally, six in ten service members carry revolving credit card balances.
If you’re debt-free, congrats — you’re in a minority. If you’re carrying balances, you should aim to eliminate them as soon as possible.
Debt undermines your financial progress. Earning double-digit returns on investments is less meaningful if you’re servicing 14% credit card interest.
How should you tackle debt?
Two primary approaches work well:
- Debt Snowball: Best for those who need motivation. Pay off balances from smallest to largest. Early wins build momentum.
- Debt Avalanche: Best for analytically-minded people. Pay off debts by highest interest rate first to minimize interest costs overall.
3. Build an Emergency Fund
The NFCC survey also found that 55% of service members don’t feel financially ready for an unexpected expense.
Dave Ramsey advises keeping a $1,000 starter emergency fund before aggressively attacking debt. Once you’ve paid off non-mortgage debt, aim to save three to six months of living costs. You can’t predict emergencies.
Resist the urge to inflate your lifestyle with each promotion. Be the one who saves instead. When your pay rises, channel most of the increase into savings — you’ll barely notice the difference.
Spend as if you earned one pay grade less, andput the rest away.
You can also use deployments and TDYs to boost savings. On TDY, eat minimally and pocket the per diem. On deployments, assume you won’t have tax-free income later and stash what you can.
4. Generate a Secondary Income
Real estate is a common second-income path for military members.
You don’t need to buy a home at every station, but with planning you can purchase properties that become rental income sources down the road.
Rich from Rich on Money discusses military-friendly real estate investing in his guide. I own a rental property as do many service members I know.
Other ways to earn extra income while serving include:
- Starting a blog
- Selling items you no longer need
- Taking online surveys
- Doing research or freelance work
- Hosting on Airbnb
That list is just the beginning — many remote and flexible opportunities exist to supplement your military pay.
You could run a home-based side hustle or pick up a second job, but remember to check with your supervisor or First Sergeant if needed.
A supplemental income can accelerate your financial goals. Also investigate military discounts and other ways to reduce costs and stretch your earnings.
5. Start Retirement Planning Now
You can retire comfortably from the military — potentially wealthy — and it’s not impossible.
If you serve 20 years and retire, you’ll receive a reliable pension that provides passive income for life. When you compare how much you’d need in a personal portfolio to generate the same income, you’ll value the pension even more.
Sometimes you’ll leave the military before full retirement, so it’s wise to build additional retirement savings beyond your pension.
The Thrift Savings Plan (TSP) should be your primary retirement vehicle due to its very low fees — around 0.03% for many funds. For most service members, particularly younger ones, the Roth TSP can be especially advantageous. Contributions are made with after-tax dollars and qualified withdrawals are tax-free in retirement.
With consistent Roth TSP contributions, you could accumulate significant tax-free capital gains by retirement.
You can also open a Roth IRA, though contribution limits are smaller than for the TSP. The TSP’s contribution limit is much higher, making it easier to save at scale, though an IRA gives slightly more investment choices.
Aim to max out your Roth TSP each year, then contribute to a Roth IRA if possible. The order can vary, but aim to maximize retirement contributions.
Military Money Manual has charts showing the percentage you should contribute based on pay grade.
Your TSP and IRA are the tax-advantaged ways to save for retirement. Generally you can’t touch these funds until age 59½ — with limited exceptions — but the tax benefits when you reach retirement are substantial.
Understanding the Thrift Savings Plan Options
The TSP includes six core choices, all of which are index funds.
Index funds passively track an entire market index (S&P 500, NASDAQ, Dow, etc.) and tend to have much lower fees because they don’t require active stock picking.
Investing in index funds is essentially investing in the market itself.
Why choose that approach?
As The Balance notes, most actively-managed funds underperform their indexes over time.
Here are the TSP fund options:
- G Fund – Invests in government securities. Very safe; growth is modest.
- F Fund – A bond index fund including government, corporate and mortgage securities. Moderate risk and return.
- C Fund – Mirrors the S&P 500. Higher potential returns and higher volatility, invested in large U.S. companies.
- S Fund – Tracks a broad U.S. stock index outside the S&P 500. Similar risk/return profile to the C Fund.
- I Fund – International index exposure for diversification outside the U.S.
- L Funds – Lifecycle funds that blend the other funds according to your target retirement year, becoming more conservative as retirement approaches.
Your contributions default to the G Fund, so if you prefer other allocations, log in to TSP.gov and adjust your fund choices.
The military compensates well, and if you make smart choices, you can retire with substantial wealth.
However, many people squander the opportunity. Be among the small percentage who do it correctly. You’ve been given the resources — now act on them.
Kyle Donahue, a freelance personal finance writer and educator, breaks down complex money topics into practical steps and offers free resources. For more military-centric finance tips, visit Savinly and explore the guides for service members.
