Managing That First Paycheck: Tips for New Service Members
When your new service member gets their first paycheck in the military, it’s a big moment for them. In most cases where the service member in question is still a young adult, this may be their first real paycheck and their first step toward financial independence. In a case like this, they’d need some financial guidance. As their parent, you’re perfectly positioned to provide much of the advice they need. In this article, we will share with you some basic information you will need to know to help your service member manage their first paycheck. So with all that said, let’s get right to it!
Understanding the Military Paycheck
A military paycheck has several deductions that may look confusing at first. But here is a simple breakdown:
Gross Earnings: This is their total pay before anything is taken out.
Net Pay: The actual amount they’ll take home after taxes and deductions.
Taxes: These include federal, state, and possibly local taxes.
Social Security and Medicare: Deductions that help fund retirement and healthcare programs.
Other Deductions: This could include health insurance, retirement savings, or life insurance.
Encourage your new service member to review their pay stub regularly and ask questions if something doesn’t look right.
Create a Budget
Now that you understand how the military paycheck works, it’s time to help your new service member set up a simple budget. You can start with these steps:
List Income and Expenses: Write down their net pay and all monthly expenses, including rent (if applicable), phone bills, and groceries.
Set Spending Limits: Break their expenses into categories like “needs” (food, transportation) and “wants” (entertainment, shopping).
Track Spending: Encourage them to use a budgeting app or keep a notebook to monitor where their money goes.
Build an Emergency Fund
Life can be unpredictable, and having an emergency fund is a smart move. Teach them to save a portion of each paycheck, aiming for three to six months of living expenses. Even starting with $20-$50 a month can make a difference over time.
Pay Off Debt
If your new service member has credit card debt or loans, encourage them to pay off the debt with the highest interest first. This saves money in the long run and keeps them financially healthy.
Start Saving for the Future
The military often offers great retirement savings plans, like the Thrift Savings Plan (TSP). After they receive their first paycheck, make sure to encourage your new service member to contribute, especially if their contributions are matched. The earlier they start saving, the more their money will grow over time.
Make Smart Choices
Military dining facilities and housing can save a lot of money. Remind them to avoid unnecessary expenses like takeout or impulsive purchases. Also, encourage your new service member to use military discounts, which can save money on everything from entertainment to car insurance.
Celebrate Financial Wins
Finally, remind your new service member to enjoy their earnings responsibly. It’s okay to treat themselves now and then as long as they stick to their budget and savings goals. This also serves as a reward system that’ll further motivate them to make better and smarter choices.
Conclusion
Watching your son/daughter make smart money moves is a joy to you as much as it is to them. So follow these tips and watch them climb the ladder to financial success. By following these steps, your new service member can start their military career with good financial habits, setting them up for success both now and in the future.
Useful Resources
Thrift Savings Plan (TSP) – A government-sponsored retirement savings plan for service members. www.tsp.gov
Military OneSource Financial Counseling – Free financial guidance for service members and their families. www.militaryonesource.mil
MyPay (DFAS) – Official military pay portal to review pay stubs and manage direct deposits. www.dfas.mil/mypayinfo
