Arguably, the hardest thing about many new life situations is the unknown. Transitioning out of military service is no different. It is hard to make a solid plan for a life you are not yet living. However, there are things you can do to be ready and prepared for in order to make your military transition smoother.
1) Beef up your liquid savings.
Ideally, about six to 12 months before transitioning, you should make saving a priority. Consider putting aside three-to-six months* worth of living expenses. Having this “transition money” saved will greatly help with any potential hardships in the first few months of transition.
*Review all your fixed monthly expenses (i.e. loans, mortgage, rent and childcare) and multiply them to get this number. A three-to-six month budget is dependent on what you are most comfortable with. Also, do not forget about other necessities, such as groceries and gas.
2) Review your Leave and Earnings Statement.
Your LES can be a helpful tool for military transition. You have three main sections on your LES. Going left to right, start with entitlements.
Entitlements
Basic Allowance for Subsistence and Basic Allowance for Housing will not be on a civilian pay stub. Not only will they not be there, but if you look at the bottom line (your entire entitlements pay), you need to keep in mind that these two amounts were not taxed. Therefore, you will need to consider the increase in the next block on your LES.
Deductions
Your federal taxes will likely be higher depending on your new pay, and you will likely have state taxes taken out, if you do not already. Your Federal Insurance Contributions Act taxes for Medicare and Social Security will likely increase, as well. You may also have other deductions in this column, such for a Thrift Savings Plan, Servicemembers’ Group Life Insurance and Family SGLI.
Insurance and retirement accounts are important considerations as you transition. You will need to replace these with civilian accounts, depending on your situation.
Allotments
This area of your LES is where you may have other payments that you set up, such as a transfer to a savings account, a TSP loan*, other payments and/or your dental and vision plans. Keep these in mind when reviewing your LES as you think about your new paycheck.
*If you do have a TSP loan, this will need to be paid in full while you are still in an active pay status. For more information please visit TSP.gov.
3) Research everything.
This may seem a little overwhelming, but there are so many factors for each individual or family that should be considered when transitioning that nothing should be overlooked. Knowing where you will live, or where you should consider moving, is one of the most important aspects to evaluate. Costs of living can differ greatly between areas of the country, even in suburban, rural or urban areas of the same region. Whether you are transitioning out after just one enlistment to go to school or retiring after a long career, the cost of living will be a huge factor in determining how far your dollar will go.
4) Seek professional help.
Go to your installation’s family readiness center and take advantage of all they have to offer from resume writing to financial counseling and classes. You can even use these services for up to one year after your military transition.
