Take advantage of military benefits and other investments to make sure that your family’s finances are secure
As a military family, managing finances is a big responsibility. No matter if you stay at home to care for your family or you work too, managing the income received from the military can pose its own unique challenges.
While the military does offer quite a few benefits and services to make it easier to manage your family’s finances, it can be hard to know how to get started if you aren’t familiar with what’s available to you. From relocation assistance to tax breaks, it can be hard to keep up with everything, so let’s take a look at how you can better manage your family finances and make smart investments as a military family.
Budgeting For Military Families
Military families face their own unique challenges when creating and updating budgets
Being in the military means that you and your family probably don’t have the most traditional lifestyle. From moving around frequently to inconsistencies in income, coming up with a budget and sticking to it is a challenge all on its own. Thankfully, there are plenty of resources available to you and your family—you just need to know where to find them.
Budgeting during relocation
Military families are seemingly always on the move. Relocation can be a big adjustment for families and is sure to cause some challenges to budgeting. Luckily, there are some programs and benefits you can use to make it a bit easier.
The military has a Relocation Assistance Program to help support families through any moves and help them establish a life when moving to a new area. This can help families find housing, find sources to schedule the move, help spouses find employment opportunities, and help families make transitions to new school districts—among many other things. There are so many factors to think about when moving, and the Relocation Assistance Program makes moving a bit easier for families.
While relocation is typically reimbursed through the military, there is still a possibility that you may be left with unreimbursed moving expenses. If that’s the case, make sure you know your options. When it comes time to do your taxes, you can use any unreimbursed moving expenses as a deduction on your taxes. To save the most money possible, do your best to research all of your options before relocating.
Adjusting to irregular income
Income from the military tends to be irregular as positions and ranks change. You may lose or gain certain benefits, which poses its own unique challenges to budgeting. A common tactic is to make your budget with your spouse’s base pay rather than including these added benefits. This way, if you do receive extra money, you know that you’ve prepared your budget for the possibility that you stop receiving the money. The military also has a compensation page that you and your spouse can use to better understand how much your spouse will earn, which makes it that much easier.
While preparing your budget is a good first step, it’s always easier said than done to adjust to irregular income. Again, the military does have additional benefits you can use to ensure that your family is financially secure in the face of uncertainty.
You should definitely take advantage of the commissary. By shopping through the commissary, you and your family can save a lot of money on groceries and other household necessities in comparison to buying from the store.
Investing In Life Insurance
Provide your family with financial security with a life insurance policy
It’s scary to think about a time when you or your spouse may not be around. With a spouse in the military, your family must be realistic about your options. In most cases, military families definitely see the value in life insurance coverage for the spouse who is enlisted. But, many families don’t think about coverage for non-military spouses.
No matter if a non-military spouse is employed or is a stay-at-home parent, you need to consider what life would look like if they weren’t around. How would your family afford to take care of your children? How would your surviving spouse be able to balance being the sole supporter of the family while also taking care of the household chores?
It’s because of these scenarios that it’s so important for not only active military members to get a life insurance plan but also their spouses!
Military member life insurance options
The military offers exclusive life insurance options for veterans through the VA. Active duty military members are often automatically enrolled in these programs, but they can always opt-out or lower their coverage. The type of life insurance options the military offers include:
- Servicemembers Group Life Insurance (SGLI) – Active duty military members are automatically signed up for this type of life insurance and are signed up for the highest coverage amount, which is $400,000.
- SGLI Traumatic Injury Protection (TSGLI) – If an active duty military member is enrolled in SGLI, they are also automatically enrolled in TSGLI. This provides coverage ranging from $25,000-$100,000 for any traumatic injuries that happen on or off duty.
These insurance options are great, but sometimes the coverage amount is not enough—especially for families who rely on the policyholder as their primary provider. Because of this, military members can get private life insurance on top of what the military offers, or they can get a separate policy entirely.
Life insurance options for military spouses
If an active duty military member is enrolled in SGLI, their families can also get life insurance protection through the military too. Children are protected for free, but it does cost extra to ensure spouses.
The military offers what’s called Family Servicemember’s Group Life Insurance policies. This policy protects dependent minor children, disabled children, and full-time students up to $10,000 per child. Military spouses, on the other hand, can get covered for up to $100,000, which can be decreased if needed.
As a military spouse, this may not be enough coverage. This is why many military spouses choose to explore private insurance options on top of what they can get through the military.
Private life insurance options for military families
Private life insurance typically comes in either a term policy or a permanent policy, though both are very different.
Term life insurance is a type of policy that lasts for a pre-determined amount of time, which normally can go up to 30 years. If the policyholder were to pass away, their beneficiaries would receive a death benefit of the coverage amount. This tends to be a pretty popular option because of how simple the policies are and because they tend to be very affordable.
Permanent life insurance is quite a bit more expensive than term life insurance. That’s because the coverage of permanent life insurance has a few more benefits in comparison to term life insurance. Permanent life insurance policies cover the policyholder for their entire life, so they don’t have to worry about a policy expiring.
These policies also carry a cash value savings component. As the policy ages, the policyholder can take a loan out on the policy if needed. While these benefits are great, many military families find that the benefits of the policy don’t really outweigh the cost.
Now that it’s pretty easy to find a life insurance policy online, more companies have started offering accelerated term life insurance policies. In a traditional term policy, a policyholder is almost always required to take a medical exam. Let’s face it, being in a military family can keep you busy and you may not realistically have the time to go through a medical exam to get life insurance.
Accelerated term life insurance is an alternative with no medical exam required Instead, applicants detail their medical history and their lifestyle in-depth on their application. Then, the insurance company can use those questions to determine how much coverage they can get approved for and what their premium will be. The process is much more simple and you can get a private life insurance policy much faster.
Understanding Tax Benefits
Utilize military tax breaks to make sure you are taking advantage of all the opportunities available to your family
Military families need to do all they can to understand their tax benefits so they can maximize their savings. Serving in the military brings quite a few tax breaks, and when your family files your taxes in a way that utilizes all benefits possible, you can save a lot of money.
Some of the most common tax breaks for military families include:
- Combat pay – If your spouse is in active combat, the combat pay they receive does not count as income and you do not have to pay taxes on it. You can use this income when looking at your family’s Earned Income Tax Credit. You can use it as income to help you reduce the amount of tax you owe.
- Penalty-free retirement withdrawals – Under certain circumstances, your spouse may be able to take money out of retirement funds, like an IRA or a 401(k), earlier than retirement age without paying penalties. They must be on active duty, have been on active duty for more than 179 days, and called to active duty after September 11, 2001.
- Extended tax deadlines – Military members that are serving in combat zones get an automatic 180–day extension on their taxes for filing tax returns, paying taxes owed, and filing refunds.
- Maximum interest rates – Active military members cannot be charged more than a 6% interest rate per year on any money that is owed to the IRS before they joined the military.
- Travel expenses – If a military member travels over 100 miles away from home for duty, any unreimbursed expenses can be written off on taxes.
- Moving expenses – As mentioned earlier, any unreimbursed moving expenses from relocation can be deducted from taxes.
The more you know about your tax benefits, the more you will save in the long run!
The military offers amazing opportunities for families, but it can also pose some challenges when it comes to managing finances. With an untraditional lifestyle, your finances may need to be approached in a different way than you’re used to. The more you know about the resources around you, though, the easier it will be to get a handle on your finances.
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