As you embark on this next phase of your life, it is important that you plan for your financial future just as you would plan for any other mission. We know that you are asked during the military Transition Assistance Program to do this planning, but we have found that most of you pay little attention to it and only give it minimum effort.
For many of you, your spouse has been handling the financial duties for the family while you have been deployed or otherwise engaged. Now, as many things change in your life, it is time for this to be a joint effort.
It all starts with a budget. The attached sheet is a place to start in preparing yours. Unless you have a firm grip on what your current expenses are, how will you know if a job offer is acceptable? What is the minimum that you can accept and still properly support your family?
As you prepare your budget, take into consideration future expenses. How much will the government pay towards your children’s college education and how much will have to come from scholarships and student loans? When will you have to replace a car and when will you need one for your kids?
You are now paying about 10% in income tax. When you start to draw your pension which will probably be a 50% reduction in pay, your income tax rate will double to about 20%. Take a look at the current schedule attached. Any disability pay that you get will be tax-exempt.
If you find that cash flow is tight with your military pension and new job salary, you should do a complete financial analysis. Many of the STAR mentors are capable of assisting you with this. You might consider remortgaging your home. If you have been paying off a 30-year mortgage for the past 10 years, consider remortgaging for 15 years. At today’s interest rates, your payments should be lower and will improve your cash flow.
Look at a bi-monthly payment plan if your bank or mortgage lender offers one. By making half of the normal payment twice a month (no increase in cost to you), you will reduce the term on the mortgage by 2 to 3 years. The lender will give you the analysis.
Please take the time to plan and prepare for your financial future.
Anthony Weiss
Co-Founder STAR Network
