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Your tour of duty may be finished, but a whole new world of opportunity is opening up―including financial changes.
When you're leaving the military, it's a good idea to think of all the financial steps that will make your transition to civilian life simpler. Here are eight financial moves to make to help you navigate big purchases like health care and housing as well as changes to the way you make money.
1. Secure Health Care
Purchasing health insurance is a big, but necessary, expense that can save you money in the long run when you need to access medical care. Luckily, you have some options that can help make the transition and purchase affordable:
- When you separate from active duty, you have 90 days to change your coverage with TRICARE to a new provider.
- You can temporarily sign up for the Continued Health Care Benefit Program for a period of 18 to 36 months.
- You may qualify for a veteran's health care program.
- You can use a health plan from your new job, or your spouse's job.
- You can shop your state's marketplace for an affordable plan by going to HealthCare.gov.
You may have a grace period after separation, but don't leave this big financial move to the last second.
2. Build an Emergency Fund
During this time of change, it is important to build up a good emergency fund for any unexpected expenses. An emergency fund is cash savings that you can access immediately in the case of an urgent expense, such as a needed car repair or medical procedure not fully covered by insurance. The money should not be used for anything besides an emergency.
If you don't have an emergency fund yet, you can start one by doing the following:
- Open a separate savings account to help you avoid using your emergency savings for anything other than urgent expenses.
- Start by contributing what you can afford after other necessary expenses are met or setting a certain amount each month to pay into the fund.
- Initially, try to save up an extra $1,000.
- Once you meet this goal, strive to save three to six months' worth of expenses so that you could live without income for that period of time in a pinch.
An emergency fund can save you big time, especially during times of transition when unexpected costs may crop up, by preventing reliance on credit or loans that come with interest.
3. Make a Resume and Job Hunt
The most financially stable option when leaving the military is to move directly to a new job, so looking for work is an important part of the financial steps to take when leaving the military.
As you begin to look for work post-military, start off on the right foot with a revamped resume. It's OK to include military-specific duties and responsibilities, but highlight your strengths by concentrating on skills that may translate to civilian work.
4. Sign Up for Unemployment
If you don't find a job right away, you can qualify for unemployment through the Unemployment Compensation for Ex-Servicemembers (UCX) program. To qualify you'll need:
- An honorable discharge
- For your active duty to satisfy the employment period dictated by your state
- To have satisfied the term of employment requirements, such as completing a full term of service, a qualified early discharge or 180 days of continuous active-duty reservist service
- To meet state qualifications
You can apply through your state unemployment office as UCX is administered by your local state office.
5. Manage Your GI Bill
Now is a good time to look at your Montgomery GI Bill/Post-9/11 GI Bill benefits and see what you've amassed. You may have enough to pay for job training or college education while getting paid a living allowance alongside it.
Using your GI Bill benefits may just be one of the most financially savvy moves you can make. Users of the Montgomery GI Bill get a monthly payment (for up to 36 months) based on the number of classes they take. Recipients of the Post-9/11 GI Bill get up to 36 months of benefits to use for education that include:
- Tuition: Full tuition for in-state students at public schools or a set maximum amount contributed to private school tuition.
- Housing allowance: Housing funds equal to an E-5 with dependents' basic allowance for housing (BAH) adjusted for your school's ZIP code, or half the national average BAH for online students.
- Books and supplies: Up to $1,000 per year for supplies and book fees.
Using your GI Bill for education can be a smart financial move for now and later. Not only may you be able to stretch your housing allowance to cover your general expenses while you study, but you'll also put yourself in a great position to eventually earn more in civilian work when you have your degree.
6. Factor in Taxes
You may be used to part of your compensation being tax-exempt, like your BAH and basic allowance for subsistence (BAS). But as you move to civilian jobs, your entire income will be taxed equally under federal income tax laws and any local income tax laws.
When setting a target salary, keep this in mind: You will likely need to make a little bit more in a civilian job to see the same net income as you did while serving.
7. Check Your Housing Options
If you are thinking about purchasing a home soon, you likely have the unique opportunity to take a Department of Veterans Affairs loan. These offer the advantage of no down payment and competitive rates. But it's important to compare them to other potential mortgages, as VA loans may not automatically have the best terms for your situation.
You may also benefit from foreclosure avoidance assistance when you work with the VA, even if you take a mortgage from another lender.
8. Make Sure Your Credit Is in Good Shape
When you have a big life transition coming up, make sure your credit is in good shape. You may want to get a mortgage, apply for a car loan, rent an apartment, interview for a job or just apply for a new credit card as you adjust your finances to post-military life. Each of these situations can be impacted by your credit score.
Prior to separation, make some moves to improve your credit and prepare for any borrowing you may need to rely on soon:
- Pay your outstanding debts. If you have any outstanding debts that have gone to collections, now is the time to take care of them. You may be able to make a payment plan or, as a last resort, offer a settlement amount. While unpaid collection accounts can stay on your credit report for seven years, paying them off could help improve your credit quickly.
- Get your accounts current. If you're behind on any accounts, getting caught up on payments can help limit damage to your credit score. Late payments can stay on your credit report for up to seven years and hurt credit scores, though their effect will lessen over time.
- Sign up for Experian Boost®ø. You could boost your credit score in minutes by signing up for Experian Boost, a feature designed to give you credit for the bills you pay on time, such as utility or cellphone payments.
- Increase your mix of accounts. Having a mix of different types of credit can help to build your credit file. For example, if you only have a car loan in your credit history, opening a credit card may be a good idea. This may be a great time to sign up for a credit card with benefits for service members.
If you placed an active-duty alert with the credit bureaus to protect your credit against fraud, you can remove this at the time of your separation by visiting Experian's Fraud Center and choosing "Remove a fraud alert." At that time, if you would like to add a more general fraud alert, you may do so by choosing "Add a fraud alert."
From Protecting Our Country to Protecting Your Finances
During the transition period from military to civilian life, you can protect your finances with tools such as free credit monitoring from Experian. Take it a step further to protect your identity with Experian IdentityWorksTM, which is a great follow-up to IDnotifyTM for active-duty military.
As service members and veterans, you have resources from both your military service and other resources, including Experian, to protect your finances and build up your credit. Take advantage of them for financial security during this important time.