Helping Your Service Member Use Deployment Pay Wisely

financial planning

Mar 25

Aside from base pay, service members on deployment are eligible for a variety of special pay and benefits. These may include Imminent Danger Pay, Hardship Duty Pay, Family Separation Allowance, and tax-free earnings, all of which are designed to serve as compensation for the challenges, risks, and sacrifices associated with deployment. Making use of this additional deployment pay wisely can help greatly improve your service member’s financial situation. Unfortunately, many new service members fail to properly make use of the opportunities presented by deployment pay and end up missing out on the chance to improve their financial situation.

In this article, we will share with you three mistakes new service members make with their development pay and how to help your service member avoid them and, in so doing, use their development pay wisely.

Not Budgeting
In the U.S. military, deployment typically comes with a noticeable bump in a paycheck. This increased purchasing power has often been found to lead new service members to overspend. Advise them to always have a budget before they begin spending their paycheck. The budget should set aside a portion of their pay for savings, daily consumption, investment, emergency funds, and so on. It doesn’t help to just have a budget, though; they need to stick to said budget to see the best effects.
Not Taking Full Advantage of Deployment Benefits
“One of the biggest financial errors new service members make is not taking full advantage of the many financial benefits the U.S. military offers.” This statement made by a seasoned service member is true for both service members on deployment and those serving in non-deployed roles.
As a service member on deployment, your son/daughter is eligible for not only special pay like the Family Separation Allowance but also several additional financial benefits, including tax-free earnings, spouse tax filing flexibility, and military discounts. These additional benefits might not reflect directly on your service member’s paycheck, but they can still be very helpful. All your service member needs to do is take advantage of these benefits.
Not Investing
Another very common mistake is seeing development pay as “extra” cash to spend rather than a tool for financial growth. While there is nothing wrong with the occasional treat, blowing through the money without a plan is an irresponsible financial move that would end up ruining your service member’s finances. Encouraging your service member to invest can help avoid this financial pitfall. Things like the military’s Thrift Savings Plan, Roth IRA, and Stocks & Index Funds are great options for your service member to check out.

Conclusion

Deployment pay provides a unique opportunity for service members to improve their financial condition, but this is only the case when this additional pay is used wisely. By encouraging your service member to budget and stick to said budget, take full advantage of the other deployment benefits available to service members, and invest, you can help them turn their deployment pay into a stepping stone for long-term financial stability.