“As more troops leave the military and return to civilian life, they face a financial transition that could be rough if they haven’t prepared for it.”
That was the opening sentence of an article by Pamela Yip, the excellent Personal Finance writer for the Dallas Morning News. If you are a recent vet, or have one in your family, you should read this article. Here are excerpts:
The Department of Veterans Affairs projects that more than 1 million military members will leave the service between 2011 and 2016.
“Transitioning to civilian life is a cultural transition which can be made much more difficult if the service member has not financially prepared,” said Tom Murphy, a certified financial planner at Murphy & Sylvest LLC in Dallas.
“Many items taken for granted, or available at little charge in the military, are either hard to get or expensive in civilian life.”
For example, once a family becomes accustomed to receiving many untaxed allowances such as housing and food, as well as untaxed pay for serving in a combat zone, “adjusting the budget to paying ordinary civilian taxes can be painful,” he said.
“The main thing is just having a plan,” said Scott Church, 27, a McKinney resident who left the Army in May as a captain after serving in Qatar.
Here’s what you need to know to make your plan:
This is a savings account that will tide you over while you’re searching for a civilian job.
“Plan early and know in advance that you’re going to be transitioning out of the military,” said Church, a graduate of the U.S. Military Academy at West Point who joined the military in 2007.
“Have an emergency fund of as much as you can so that when you do transition out, you can borrow from yourself and pay yourself back.”
Army pay ranges from $17,892 for a private with less than two years of service to more than $184,809 for a general with more than 20 years of service, said Murphy, an Army veteran.
“If we assume the average person transitioning from the military served four years and was a sergeant, then his/her pay was about $27,660,” he said. “It would be fair to say the majority of those transitioning had pay less than $30,000.”
But as Church notes, a lot of your expenses are covered while you’re in the service.
“You can make a lot of money while you’re deployed,” he said. “You get combat pay, and your overhead isn’t that much. Try to take full advantage of money you can save while you’re deployed.”
Benefits for Texas vets
“Those former uniformed members who entered the service from the state of Texas will find several unique state benefits,” Murphy said.
The Texas Veterans Land Board has programs to help Texas veterans finance the acquisition of land, homes and home improvements, he said.
“Texas veterans, their spouses and dependent children are also eligible under the Hazlewood Act to receive up to 150 hours of tuition exemption, including most fee charges at any Texas public college or university,” Murphy said. “These benefits are separate and distinct from any federal benefits.”
Although the Hazlewood Act doesn’t include living expenses, books and some fees, it can be a very valuable benefit when used in conjunction with the GI Bill, particularly to cover graduate degree tuition, he said.