How to whip your butt into financial shape

Wanna know how you can set yourself up for financial freedom early on in your military career? From tracking your spending habits, building a budget, side hustles, and investments. In this article, we’ll give the beginner’s guide to make your LES work for you in the long run.

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One of the main reasons that prompted me to write this article is how some Army Mamas feel stuck in the service. They want to leave, but the financial stability and benefits attached to being in the Army seem hard to beat.

 

It sucks feeling like you put so much time and dedication into a career that does not bring you true happiness, but you have over a decade left to reap retirement benefits.

 

I’m here to tell you that it doesn’t have to be that way. You can create a financial plan that can help you seamlessly transition back to the civilian world without worrying about carrying any debt with you.

 

If you love your position in the military, but you still want to create a better financial situation for yourself, don’t worry–this article is still for you.

 

The goal is to relieve the burden of debt and create a secondary source of income to ensure you have something to tap into when it comes time for retirement.

 

A few years ago, we discovered a leak in one of our restrooms. The initial job turned into an over $10,000 repair as the plumbers dug deeper.

 

Both my boyfriend and I did not have that much money to cover those costs. Between childcare and our regular bills, we just hadn’t saved up an emergency fund.

 

We decided to apply for an emergency fund for Guardsmen through our family assistance program.

 

In order to receive the assistance, you have to set up an appointment with a financial advisor through military one source, submit copies of your LES, bank account statements, and other documents.

 

During my financial counseling sessions, we established a budget, talked about how I could get rid of debt, and everything else on building healthy financial habits.

 

Long story short, we were not granted the assistance, but I learned that my spending habits and how I viewed money had a lot to do with the financial hole I had dug myself.

 

We’re going to talk about how to avoid digging a financial hole for yourself and reshaping the way you view your income.

 

Track your spending habits

The first thing you need to do is track your spending habits.

 

When I was forced to go through my bank account to categorize my spending, it was pretty painful.

 

There are different categories of spending and you can get as specific or general as you like when doing your tracking:

• Income- anything that puts money into your bank account (salary/wage, gifts, child support, disability, etc)
• Groceries
• Savings- Investments, retirement, emergency fund, etc
• Utilities- water, gas, electric, trash, phone, etc (these bills fluctuate, but they are constant)
• Transportation- fuel, oil change, car maintenance, parking fees, car registration, public transportation, etc
• Home- home warranty, HOA fees, rent/mortgage, homeowner’s insurance, lawn care, etc
• Childcare- regular daycare, weekend babysitter, school tuition, etc
• Luxury- takeout, nail/hair salon, retail shopping (these items are often wants, not needs)

You can track your spending by looking at your bank account and writing the spending out on a piece of paper in each category. Doing this really puts things into perspective of exactly where your money is going.

 

Or you can print out a copy of my free spending tracker and write down each time you pull out your wallet to hand over cash, swipe your card, or even when an automatic payment takes place.

 

At the beginning of each pay period, you’ll list the amount in your paycheck at the top. Each time you make a transaction, you’ll subtract that from your initial paycheck amount. By the end of the month, you’ll have a good idea where you are spending your money.

 

Keeping a spending tracker handy each time a transaction occurs will force you to acknowledge each time you make an unnecessary purchase.

 

I also like this method because referring back to your bank account to categorize your spending can be challenging when you use your debit card for virtually everything. Sometimes your account doesn’t detail where the spending took place. And other times, we get swiper’s amnesia by the end of the month!

 

Once you have tracked your spending, it’ll be easier to establish a budget.

 

Develop a budget

When developing a budget, you’ll have to identify all of your bills. Reoccurring ones that will never go away or change (e.g. rent/mortgage, phone bill, internet, cable, childcare, etc) and fluctuating bills (e.g. electric, water, gas, groceries, credit cards, etc).

 

Then you’ll need to look at your expendable income. This is usually money that you spend during special occasions and holidays (e.g. birthdays, Christmas, etc).

 

An easy way to calculate your fluctuating bills and expendable income is to look at your bank statements or spending tracker to determine how much you spend on average.

 

You’ll then add up all your bills to see what the grand total is. Once you’ve done that, you need to subtract your income after taxes to determine just how much money you have left over after everything is said and done.

 

Did you cringe after seeing that leftover amount or let out a surprised, “Hmm, not bad.”?

 

When I first did this, I cringed. I couldn’t believe just how much money I was spending frivolously. 

 

A simple budget rule to help in getting your finances in shape is the 50-30-20 budget.

 

What is the 50-30-20 budget?

 

The 50-30-20 budget in simple terms suggests that:

• 50% of income goes to Needs
  • housing, utilities, daycare tuition, groceries, etc
  • essentially anything that you truly need to live a functional, healthy, and content life
• 30% of income goes to Wants
  • takeout, gifts, travel, retail items, cable, streaming services, etc
  • this category requires a lot of integrity on determining the difference between actual wants and needs
• 20% of income goes to Savings
  • retirement savings, investments, short term savings goals (e.g. saving for a vacation), etc

Once you have identified your spending habits and categorized wants, needs, and savings, you can adjust where you can adjust your spending and saving.

 

For your reoccurring bills, identify any that you really don’t need. For example, there really is no point in having cable if you have multiple streaming services. And there really is no point in having multiple streaming services if one of those offers basically the same thing as the other ones that you have.

 

This can be hard to whittle down, because of the “what if” factor. What if you want to watch a movie that is offered on one streaming service for free, but you have to pay to rent it on a different one?

 

I’m not sure how that justifies paying 14.99 each month for a movie that you might watch in the future. Be real with yourself and start nixing some of these unnecessary streaming services.

 

Another thing to consider when building your budget, are you saving enough?

 

No really, are you? For me, I set up an automatic transfer of $25 a month and thought that was alright. Ha!

 

You should be saving at lease 15% of your paycheck.

 

Let’s look at the base pay of an E4 with less than 2 years: 2,262.60

 

Multiply your base pay times 0.15 and that will give you the minimum amount you should be saving from each pay period.

 

For this example: 2,262.60 x .15 = 339.39

 

Most of the time, we spend our money and then whatever is left over at the end of the month is what we save.

 

We need to shift our mindset from spending first and saving last to saving first and spending last.

 

One phrase that helps change this thought process is getting into the habit of paying yourself first.

 

Honestly, why are we okay with setting up automatic payments for a huge car payment, but we struggle with building our savings? That money in your savings is for you to have cushion and live a comfortable life in retirement.

 

So try it out. Treat it like a reoccurring automatic payment and pay yourself first.

 

If you’re interested in learning more about better savings habits, check out The Money Guy Show on YouTube. The hosts give crazy good advice on developing better financial habits with saving as the center focus.

 

Slash Debt

When you have identified your bills, are there any that you can reduce the financial impact on?

 

For example, if you have a credit card that has a high interest rate and a high balance you might be able to transfer your balance to another credit card. By doing this, you’ll be able to actually pay off most (if not all) of your balance within the allotted time before that credit card company applies interest.

 

Most companies have an 18 month time frame before they begin to add interest. For me, I simply transferred my balance from Capital One to Chase and then I was able to pay off just the balance without any added interest.

 

You’ll need to do a little research to see which credit card company best befits your needs and time constraints depending on how much debt you’re carrying over. But this is a feasible way to pay off any lingering debt due to credit card usage.

 

Other ways to slash debt are:

• Consolidated Loans
  • If you have multiple loans, you may choose to consolidate them into one with a company that either has a lower interest rate or has a period with no interest rate at all (similar to a balance transfer)
• Debt Snowball/Avalanche
  • This method focuses on paying off any high interest rate credit cards, loans, etc first. To do this, you continue to pay the minimum balance on all other cards and funnel any extra money into paying the highest interest rate debt off first. Once that debt is gone, you move onto the next one with that same method.

Now, I understand that some of us really may be living paycheck to paycheck and it can be very challenging getting out of debt when you’re just plain broke after everything is said and done.

 

That is why my next suggestion to help slash debt is looking into federal/state assistance programs.

 

Some financial assistance programs include:

• WIC (Special Supplemental Nutrition Program for Women, Infants, and Children)
• SNAP (supplemental nutrition assistance program–check your local sign-up)
• Army Emergency Relief
• TANF (Temporary Assistance for Needy Families)
• LIHEAP (Low Income Home Energy Assistance Program)

I grew up on welfare and the time when food stamps were actually in a food stamp booklet.

 

Those programs are in place for a reason–to help people to get out of hard times and become self sufficient.

 

Getting a little extra assistance can help you allocate your regular income to paying off your debt.

 

Once you’ve got your debt out of the picture, you can make the decision to terminate the financial assistance.

 

Should you get a side hustle?

 

Recently, I’ve been thinking of ways to generate extra income that doesn’t require me getting an actual second job.

 

Let’s be honest, us Army Mamas do not have the time to be taking on part-time job on top of our full time job.

More specifically: passive income.

 

I used to do things like MyPoints and Swagbucks to earn giftcards to pay for Christmas gifts during the Holiday season. Well, I still do use MyPoints to get reward points on purchases through big companies like Walmart. But it can be time consuming trying to qualify for surveys, which most of those types of sites offer.

 

Now, I’ve been researching other ways to earn passive income that doesn’t require as much time and dedication.

 

A quick Pinterest search or even YouTube yields so many results for passive income!

 

Some examples of passive income are:

• creating digital products (stickers, planners, invitations, business cards, social media templates, etc)
• affiliate marketing (if you have a large social media following, you could earn a commission from products you suggest)
• Wrapify or other similar companies (get paid for placing an ad on your car. I just started doing this and it’s legit!)
• create a blog (like to help people solve problems or have something you’re passionate about? blogging might be for you)
• create a course/ebook (do you have something of value to share that could really help others out? create a course or an ebook one time and people can purchase it without you having to do anything else with it)
• rental property income (this is more feasible for active duty personnel when they move from base to base)
• Dividend investments (we’ll talk more about this in the next block)

 

Investments

Raise your hand if you’re contributing to TSP.

 

Keep it up and face palm yourself if that’s the only type of investment you’re making in the stock market.

 

TSP is a great starter on stock market investments, especially if you’re like most people that aren’t well-versed in Wall Street lingo.

 

For TSP, you can allocate funds to Traditional TSP and Roth TSP.

 

With Traditional TSP, you’ll pay taxes when you withdraw your retirement. With Roth TSP, you pay taxes up front so that when you withdraw your retirement, it is tax free.

 

For TSP investments, and really any type of investment, you can choose riskier behavior early in your career. Once you near retirement, it is best to switch allocations over to more conservative accounts in case there is a shift in the market.

 

Now, let’s talk about dividend funds. A great way to make passive income off of compounding interest.

 

The beauty of investing in dividend funds is that when you put money into it, the company shares a portion of their earnings with you based on your investment. 

 

So your return on investment is dependent on how much money you put into the fund.

 

Keep in mind that companies can increase, decrease, or stop paying out your dividend return–therefore it is important to keep an eye on these potential changes.

 

Even if you only start with a little money, you can just reinvest your dividend return each time the stocks pay out. By doing this, it not only builds the amount of money that you’re investing, but it has the potential to increase your return if you decide to use your dividend return as passive income.

 

Do a little research into the stock market and find out which stocks offer dividend funds. You can find a lot of great information on the stock market and more specifically great dividend funds to get started on nerdwallet.com.

 

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I wish I would’ve learned more about healthy finance habits growing up, because then I would’ve prioritized saving over spending.

 

Coming from a low income upbringing, joining the military was the first time I had ever seen that much money hit my account at once. And I’m sure it is similar for a lot of other people who join the military.

 

Which is why some of us continue to perpetuate this vicious cycle of living paycheck to paycheck and consequently feel chained to our contract.

 

If you’re interested in breaking this cycle within your household, then check out my free spending tracker. I’ve also included here a budget builder as an added bonus.

 

Ways to hold yourself accountable are to express your goals with the household and get your spouse’s and/or children’s buy in.

 

Make it a challenge amongst coworkers. Share this information with your Soldiers and see who can slash more debt, accrue more savings, and cut their “wants” spending to 30%. This could be a great learning opportunity to set yourself and others up for success during their military career.

 

Let me know if you decide to opt-in to this finance challenge. Tag me on Instagram or give a shout out down in the comments.

 

Get your free budget guide here.

Get your free spending tracker here.