If you're a service member, receiving notice of a military deployment will most likely conjure up a range of emotions, the last of which is concern over your personal finances. But it shouldn't be. Being mobilized can present unique financial challenges, and you want your family to be prepared in case unexpected expenses arise, says certified financial planner Tara Falcone.
The founder of ReisUp, whose mission it is to level the financial playing field through education so everyone has a fair chance to become financially free and live their best life, knows that deployment and financial preparedness go hand in hand: She is married to a naval officer.
"Deployment can be very challenging, especially for military families," she says. "However, it can also present a great opportunity for you to get ahead on some of your financial goals."
Here are some key money moves she believes all deployed service members should consider well in advance of their deployment.
1. Create two financial goals — one short-term and one long-term. "The longer-term goal should be numbers-based and net-worth-driven." Examples of these include paying down debt, increasing your emergency fund, contributing more to retirement or investing in your child's college account, she says. Short-term goals are more fun — for example, a romantic weekend away or a family vacation to Disney World when the service member returns home.
2. Prepare for an income change. Falcone says you must understand how your income may or may not change during the deployment cycle. "Many families see a cash-flow boost, thanks to extra pay entitlements, lower taxes and fewer household expenses," she says, adding that planning ahead and being ready for this boost can prove to be advantageous for military families.
3. Add to a Roth Thrift Savings Plan (TSP). If you are employed to a combat zone, consider contributing to your Roth TSP, says Falcone. "A Roth account usually means you are going to pay taxes on those dollars today so you don't have to pay any taxes on the investment earnings when you withdraw them in retirement." However, she says, if you're deployed to a combat zone that has a tax-free benefit, you wont pay any taxes on those contributions ever." She says that this tax break can "add some serious fuel to your investing fire."
4. Utilize the military's Savings Deposit Program. The Department of Defense Savings Deposit Program was established to provide members of the uniformed services serving in designated combat zones the opportunity to build their financial savings. During each deployment a total of $10,000 can be deposited, earning up to 10% interest annually. Although the account can't be closed until the service member has left the combat zone, the funds will continue to draw interest for 90 days once he or she has returned home or to their permanent duty station.
More from Invest in You:
Here's how military veterans can invest in their financial future
For military families living on the financial edge, money matters are complicated
6 key financial strategies for life after military service
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