Creating a Spending Plan When You’re in the Military

Having a solid spending plan can guide you toward your financial goals. The following 10 steps can help you create a budget that works with your military life.

10 steps toward better finances

1. Identify income

Write down all the money you earn each month:

• Basic pay
• Allowances, such as Basic Allowance for Housing, Basic Allowance for Subsistence or Overseas Housing Allowance
• Special pay (combat, hazardous duty, etc.)

If your income varies, use a safe estimate. Don’t count overtime or special pay unless you’re sure you’ll get it.

2. Review past spending

Add up what you spent in the last three months.

• Check bank and credit card statements.
• Include bills and receipts.
• Calculate monthly payments for big costs like property taxes that come due once or twice a year.

3. Separate debts and expenses

Debts are loans you can pay off, like a car loan or mortgage. Expenses are ongoing, like rent, gas, electricity, phone, car insurance and groceries.

4. Track cash and credit

List all cash payments, such as ATM withdrawals, commissary and cash back. Track your credit card spending, too.

5. Create your spending plan

Now that you’ve figured out where your money has gone, you need to determine where you want it to go in the future. Your spending plan should include your savings goals as well as your expenses.

Start by subtracting your total monthly expenses from your total monthly income. If your expenses are higher than your income, you may consider a part-time job to pay off smaller revolving debt, such as credit card debt, or reduce monthly spending.

6. Balance your budget

There are several routes toward balancing your budget:

• Reduce discretionary expenses like expensive dining, luxury goods or routine entertainment.
• Lower fixed costs. You might sell a second car or refinance your mortgage.
• Increase your income with a second job if allowed or explore opportunities like special duty assignments or reenlistment bonuses.
• Adjust your tax withholding if you receive a tax refund or owe taxes each year. Use the IRS Withholding Estimator.
• Review your Thrift Savings Plan contribution. Temporarily reduce your contributions to pay down costly debt, but try to contribute at least the minimum to receive your full employer match.

If you have extra money at the end of the month, think about increasing your savings.

7. Pay yourself first

Set aside a portion of your income for savings each month.

• Save 5-10% of your income.
• Build an emergency fund for unexpected expenses.
• Explore savings options, such as a traditional savings account, your TSP, or a Roth or traditional IRA. Your financial counselor can help you determine the best savings vehicle for you.

8. Track ongoing spending

Now that you’ve created a spending plan, you need to create a system that tracks your expenses as they occur and tells you how much you have left to spend in each category.

• Use software or a spreadsheet.
• Record spending regularly.
• Check category balances so you don’t overspend.

9. Update your plan as needed

You may need to revise your plan over time and as you become more aware of your spending habits. Let your financial goals be your guide as you adjust your spending plan.

10. Celebrate wins

Build in small rewards to keep yourself motivated as you make progress toward your financial goals. When you’ve paid off your credit card, use part of the money that would have gone toward the next payment to do something special for yourself. The next month, apply that same payment amount to the next goal on your list.

Success in budgeting is not in perfection; it is in persistence. If you stay focused on the vision of your ideal financial future, you will get there.

Reach out to Military OneSource for free financial counseling. Call 800-342-9647 or log in to start a secure live chat. OCONUS/international? View calling options.