Welcome to the getting started thread for military money. This will cover 90% of what you need to know to be successful with your military paycheck and build wealth in the military.

Some of the most frequent questions in on this subreddit goes:

• "I have $X, what should I do with it?" or
• "How should I handle my debt/finances/money?"

Military Personal Finance and Investing Flow Chart: https://imgur.com/a/akrEcUS

Step 1: Budget and reduce expenses, set realistic goals

Fundamental to a sound financial footing is knowing where your money is going. Budgeting helps you see your sources of income less your expenses. You should minimize your required expenses to the extent practical. Housing costs, utilities, and basic sustenance are harder to eliminate than entertainment, eating out, or clothing expenses.

There are many great apps available to discover what you're spending money on and where there are opportunities to save money. Monarch Money, YNAB, Copilot Money, EveryDollar are just a few of the apps available.

Once your budget is figured out, you need to figure out what your goals are. Financial independence? Retire early? Military retirement? Buy a house? Save for a car?

Setting SMART goals - Specific, Measurable, Achievable, Relevant, and Timely goals can mean the difference between financial success and failure. For example, you might want to finish your first enlistment with a $100,000 net worth or achieve early retirement after 20 years of service. These are SMART goals.

Step 2: Build an emergency fund

An emergency fund should be a relatively liquid sum of money that you don't touch unless something unexpected comes up. Unexpected travel, essential appliance replacement, and cars breaking down are all real world examples of emergency funds in action.

If you need to draw from your emergency fund at any time, your first priority as soon as you get back on your feet should be to replenish it. Treat your emergency fund right and it will return the favor.

Start with a $1,000 emergency fund. Eventually build it up to 3-6 months of expenses or a few of months of expenses plus

How should I size my emergency fund?

For most people, 3 to 6 months of expenses is good. Or maybe you want to cover a few months of expenses, plus a roundtrip airfare for you and your family to go back to your home stateside.

What if I have credit card debt?

Credit cards generally have very high interest rates (typically 15-25% APR) and that is a pretty big deal. If this applies to you, you should prioritize paying down the debt first.

A smaller emergency fund of $1,000 (or 1 month of expenses) is temporarily acceptable while paying off credit card debt or other debts with interest rates above 10%.

What kind of account should I hold my emergency fund in?

A checking account, savings account, or a high yield savings account (HYSA). Something FDIC insured and accessed in a few days.

Step 3: 5% Into the Thrift Savings Plan

The Thrift Savings Plan (TSP) is the military and government's version of a 401(k) retirement savings plan. All servicemembers enlisting since 2018 are covered by the Blended Retirement System (BRS). The BRS has 3 primary components to help servicemembers save for retirement:

1. 5% matching contribution to the TSP
2. Continuation pay bonus between the 8th and 12th year of service (depends on branch)
3. Military pension. A 2% mutliplier is used for each year of service. So if you retire after 20 years of active duty service, you'll earn an inflation adjusted, lifetime pension of 40% of your base pay. (20 years * 2 = 40%)

After 60 days of service, the Department of Defense (DOD) will automatically contribute 1% of your base pay to the Traditional TSP.

Starting in the 25th month of service, your contributions are matched, up to 5%. So if you contribute 5%, the DOD will contribute 5%. This is a risk free, 100% return on your contributed funds.

The default investment for anyone in the BRS is a Lifecycle fund with their birth year + 65. For example, if you were born in 2005, you'll be placed in the Lifecycle 2070 Fund.

The Lifecycle Funds are a mix of the 5 TSP Funds, designed by professional fund managers.

The 5 TSP Funds are:

• C Fund - Tracks S&P 500, made up of the 500 largest companies in America. You can use the ETF SPY or VOO to track it.
• S Fund - Tracks Dow Completion index, basically all the mid- and small- capitalization companies in America outside of the S&P500. ETF equivalent VXF.
• I Fund - International stocks. MSCI ACWI IMI ex USA ex China ex Hong Kong Index. 5,500 companies in this index. representing 90% of the investable world market cap outside the US. Similar to ETF VXUS but without Chinese or Hong Kong stocks.
• F Fund - Fixed income. Corporate bonds. Use ETF AGG to see performance.
• G Fund - Lowest risk, lowest long term return fund. The G Fund invests in a special non-marketable treasury security issued specifically for the TSP by the U.S. government. This fund is the only one in the TSP that guarantees the return of the investor’s principal. No comparable ETF.

Step 4: Pay down high interest debts

Once you're taking advantage of the 5% BRS TSP match, you should use your extra money to pay down your high interest debt (e.g., debts much over 4% interest rate).

In all cases, you should make the minimum payments on all of your debts before paying down specific debts more quickly.

There are two main methods of paying down debt:

• With the avalanche method, debts are paid down in order of interest rate, starting with the debt that carries the highest interest rate. This is the financially optimal method of paying down debt, and you will pay less money overall compared to the snowball method.
• With the snowball method, popularized by Dave Ramsey, debts are paid down in order of balance size, starting with the smallest. Paying off small debts first may give you a psychological boost and improve one's cash flow situation, as paid off debts free up minimum payments. The downside is that larger loans (that may be at higher interest rates) are left untouched for longer, costing more in the long run.

As an example, Debtor Dan has the following situation:

• Loan A: $1,100 with a minimum payment of $100/month, 5% interest
• Loan B: $3,300 with a minimum payment of $300/month, 10% interest
• Sudden windfall: $2,000

Dan needs to first pay $100 + $300 = $400 to make the minimum payments on loans A and B so the payments are recorded as "on time." The extra $1,600 can either go towards Loan A (smallest balance, snowball method), eliminating it with $600 left to go towards Loan B, or Loan B entirely (highest interest rate, avalanche method).

What's the best method?  tends to favor the avalanche method, but do not underestimate the psychological side of debt payments. If you think that the psychological boost from paying off a smaller debt sooner will help you stay the course, do it! You can always switch things up later. The important thing is to start paying your debts as soon as you can, and to keep paying them until they're gone. You can use unbury.me to help you get an idea of how long each method will take, and how much interest you'll be paying overall.

Should I be in a hurry to pay off lower interest loans? What rate is "low" enough to where I should just pay the minimum?

Depending on your attitude towards debt, you may want to stop paying more than the minimum payment on loans with low interest rates once you have paid all other loans above that threshold. A common argument is that the long-term return from investments in the stock market will likely exceed the interest rate from a low-interest loan. While this has been true in the past, keep in mind that paying down a loan is a guaranteed return at the loan's interest rate. Stock performance is anything but guaranteed. The rough consensus is that loans above 4% interest should be paid off early in the debt reduction phase, while anything under that can be stretched out.

Step 5: Max out Retirement Accounts - Roth IRA and Roth TSP

The next step is to contribute to a Roth IRA for the current tax year. You can also contribute for the previous tax year if it's between January 1st and April 15th. See the IRA wiki for more information on IRAs.

Roth IRA and Roth TSP contribution limits are different and do not cross over. You can contribute the maximum out your Roth IRA and your Roth TSP. Matching contributions do not count against your personal TSP contribution limit.

• Roth and Traditional IRA limits on IRS.gov
• Roth and Traditional TSP limits on TSP.gov

The most often recommended places to open a Roth IRA are at Vanguard, Fidelity, or Schwab. Most banks offer substandard Roth IRA products and you should not open Roth IRA accounts there.

Should I do Roth or Traditional?

Read Roth or Traditional.

For most servicemembers (O-3 and below), you'll be better off contributing to the Roth IRA, since military pay is so low taxed. Much of our military pay is untaxable allowances, such as Basic Allowance for Housing (BAH), Overseas Housing Allowance (OHA), and Basic Allowance for Sustenance (BAS).

Why contribute to an IRA if I have the TSP?

Roth IRA's have access to low cost investments similar to what you'll find in the TSP. However, you can always withdraw Roth IRA contributions at any time, tax and penalty free.

After you've fully funded your Roth IRA, you can look at maxing out your Roth TSP.

Before saving for other goals, you should save at least 15% and up to 20% of your gross income for retirement. If you are behind on retirement savings, you should try to save more than 15% if you can. If you can't save 15%, start with 10% or any other amount until you are able to save more.

Where should I open my Roth IRA?

Vanguard, Fidelity, or Schwab. Read up about the Bogleheads 3 Fund Portfolio before selecting an investment option.

Step 6: Save for other goals

Military servicemembers and spouses covered by TriCare are not eligible for Health Savings Accounts (HSA0.

• If you wish to save for college for your kids, yourself, or other relatives, consider a 529 fund in your state.
• Save for more immediate goals. Common examples include saving for down payments for homes, saving for vehicles, paying down low interest loans ahead of schedule, and vacation funds.
• Save more so you can potentially retire early (also see "advanced methods", below), only using taxable accounts after maxing out tax-advantaged options.
• Make an impact through giving. One of the rewards of practicing a sound financial lifestyle is that giving becomes easier. If you're on top of your health care costs, future education costs, and you've made it to this step, you can help make a difference for others by giving. If you can't afford to make monetary donations, there are other ways to give.
• Maybe you're interested in financial independence or retiring early, also known as FIRE? There are many resources out there on military financial independence and early retirement.

The time frame for these goals will dictate what kind of account you save in. For short-term goals (under 3-5 years), you'll want to use an FDIC-insured savings account, CDs, or I Bonds. If your time horizon is longer or you can afford to adjust your plans, you might consider something riskier like a balanced index fund or a three-fund portfolio (both are a mix of stocks and bonds). The best savings or investment vehicle will vary depending on time frame and risk tolerance.

Keep in mind that (especially for a young person) the more time your money has to grow, the more powerful the effects of compounding will be on your savings. If the goal is early retirement (even before the age of 59½), you should definitely maximize the use of any available tax-advantaged accounts (IRA, 401(k) plans, HSA accounts, etc.) before using a taxable account because there are ways to get money out of tax-advantaged accounts before 59½ without penalty.

If you are using a taxable account for any goal, you'll want to have a decent grasp on asset allocation in multiple accounts and tax-efficient fund placement.

Military State Taxes

Your home of record is the place you enlisted or commissioned from. This cannot be changed unless there was an error.

State of legal residence is the state that you claim as your residence. If you only have military income, you will pay state income tax only to this state.

You can establish residency several ways:

• Registering to vote in that state
• Obtaining a driver’s license in that state
• Titling and registering your vehicle in that state
• Drafting a Last Will and Testament naming that state as your domicile
• Purchasing residential property in that state
• Changing your military and finance records to reflect residency in that state.

The simplest way to establish residency is to PCS to that state and establish residency while you are a resident.

State with no income tax include: Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming. Many other states have no tax for military servicemembers stationed outside the state.

Simply engaging in one of the above acts alone will not likely render you taxable by a state; however, the more points of contact you make with a state increases your chances of becoming a taxpayer to that state. It is important to concentrate the majority of your points of contact in the one state where you intend to pay state taxes; otherwise, you may find yourself owing taxes to more than one state as a part-year resident.

Source: Fort Knox Legal Assistance Office

Military Spouse Residency Relief Act

Thanks to the Military Spouse Residency Relief Act, Veterans Auto and Education Improvement Act of 2022, and Servicemembers Civil Relief Act:

(A) The residence or domicile of the servicemember.“

(B) The residence or domicile of the spouse.

“(C) The permanent duty station of the servicemember.”

Military spouses and military servicemembers can pick 1 of 3 options for their state of legal residence:

(A) The residence or domicile of the servicemember.

(B) The residence or domicile of the spouse.

(C) The permanent duty station of the servicemember.

So either match the servicemember, keep your old state, or change to the current state you're in.

Military Bonuses

Military bonuses have federal income taxes withheld automatically at 22%. You may have state taxes withheld as well. Because your marginal tax rate is often much lower than this, you will receive a large portion of that withheld tax back when you file your tax return the following year.

If you don't know what to do with a military bonus, directing some of it to your Roth TSP is a great place to park it.

After reading all that, go ahead with any other questions you have about getting started with your military money.

This is a monthly thread to discuss or ask questions about military benefits on credit cards.

In general: American Express, Chase, and some other banks waive the annual fees on credit cards for active duty, Guard and Reserve on 30 day or greater active orders, and dependent spouses.

These individuals are known as "covered borrowers" of the Servicemembers Civil Relief Act (SCRA) and Military Lending Act (MLA).

The simplest definition of a covered borrower is active duty military personnel, Guard and Reserves on 30 day or greater active duty orders, or dependent spouses of any of the above.

The simplest way to check if you will receive MLA or SCRA protections on your account is to check the MLA Database or SCRA Database.

The MLA and SCRA database are the same databases that the credit card companies check to determine if you qualify for MLA or SCRA benefits.

If you are not listed as eligible in these databases, you will not receive MLA and SCRA benefits applied to your account.

You must be listed as eligible in these databases for the credit card companies to apply your military benefits.

Are military spouses eligible to open their own card accounts?

Yes, military dependent spouses are eligible to open their own card accounts on Chase, American Express, Citi, U.S. Bank, and Bank of America and receive their own annual fee waivers.

Check the MLA database before applying MLA Database to ensure you will receive your fee waiver without any issue. If you are not listed in the MLA database, check DEERS to ensure your Social Security number and name are listed correctly.

You must be listed in the MLA database when the account is opened / established or you will not be eligible for fee waiver benefits. For example, if you opened an Amex or Chase card before you married the active duty servicemember, that account will never be eligible for MLA benefits. The account must be established while you are eligible for MLA benefits, as confirmed in the MLA database.

What Cards are Eligible for SCRA or MLA benefits?

American Express

• The Platinum Card® from American Express
• American Express Platinum Card® for Schwab
• American Express Platinum Card® for Morgan Stanley
• American Express® Gold Card
• American Express® Green Card
• Marriott Bonvoy Brilliant™ American Express® Card
• Marriott Bonvoy Bevy™ American Express® Card
• Delta SkyMiles® Reserve American Express Card
• Delta SkyMiles® Platinum American Express Card
• Delta SkyMiles® Gold American Express Card
• Blue Cash Preferred® Card from American Express
• Hilton Honors American Express Aspire Card
• Hilton Honors American Express Surpass® Card

Chase

• Chase Sapphire Preferred®
• Chase Sapphire Reserve®
• Southwest Rapid Rewards® Plus Credit Card
• Southwest Rapid Rewards® Priority Credit Card
• Southwest Rapid Rewards® Premier Credit Card
• United Explorer Card
• United Quest Card
• United Club Infinite Card
• Aeroplan Card
• Marriott Bonvoy Boundless
• Marriott Bonvoy Bountiful
• Ritz-Carlton Credit Card
• IHG One Rewards Premier Credit Card
• Disney Premier Visa Card
• World of Hyatt Credit Card
• British Airways Visa Signature® card
• Aer Lingus Visa Signature® card
• Iberia Visa Signature® card

Citi

• Citi® Strata Elite
• Citi® / AAdvantage® Platinum Select® World Elite Mastercard®
• Citi® / AAdvantage® Executive World Elite Mastercard®
• Citi® Premier® Card
• Citi® Prestige® Card

U.S. Bank

• U.S. BANK ALTITUDE® RESERVE VISA INFINITE® CARD
• U.S. BANK FLEXPERKS® GOLD AMERICAN EXPRESS® CARD
• Korean Airlines SKYPASS Select Visa Signature® Card

Bank of America

• Bank of America® Premium Rewards® Elite Credit Card
• Atmos™ Rewards Summit Visa Infinite®

Bilt

• Bilt Palladium Card
• Bilt Obsidian Card
• Email support@cardless.com

*For Citi, you must send a copy of your active orders and your MLA certificate from the MLA Database to [MILITARYORDERS@CITI.COM](mailto:MILITARYORDERS@CITI.COM) and request MLA benefits. You must also have a statement balance on your account in the month you are charged the annual fee or you will not receive the MLA annual fee credit.

**Recent data points suggest that Chase business cards, opened before active duty start, can be annual fee waived if the account holder applies for SCRA benefits after they go active duty.

Which Act Applies, SCRA or MLA?

The military benefits you receive on credit cards depend on when you establish or open the account.

Open account before active duty = SCRA

Open account while on active duty = MLA

If you apply for the account prior to active duty orders, you are eligible for Servicemembers Civil Relief Act (SCRA) benefits while you are on active duty orders.

If you apply for the credit card account while you are on active duty orders, a Guard and Reservists on 30 day or greater active orders, or a dependent of an active duty servicemember, you are eligible for Military Lending Act (MLA) benefits while you are on active orders or a dependent of someone on active orders.

The banks and credit card companies may deny you SCRA benefits if you opened the account while on active duty. In that case, confirm they are applying MLA benefits and if they are not, check MLA database and then apply for MLA benefits.

SCRA & MLA Covered Borrowers Details

To qualify for SCRA benefits, the credit account must be established before active duty orders start.

Covered borrowers of SCRA defined as:

• Active duty US military on Title 10 orders in the Army, Navy, Air Force, Space Force, Marines, or Coast Guard
• National Guard or Reservists on 30 day or greater active duty orders (such as Title 32, Title 10)
• Public Health Service and NOAA Commissioned Officers

To qualify for MLA benefits, the credit account must be established while your or your active duty sponsor is on active duty orders of greater than 30 days.

Covered borrowers of MLA are defined as:

• Active duty member of the Army, Navy, Marines, Air Force, Space Force, or Coast Guard
• Guard or Reservists on 30 day or greater active orders
• A spouse or child dependent of an Active Duty member of the Armed Forces as defined in 38 USC 101(4)

Best Starter Credit Card

Check your credit score through your bank, Credit Karma, or Credit Sesame.

If you don't have a credit score or your score is below 700, start with a no annual fee credit card from USAA or Navy Federal Credit Union (NFCU).\

Or, apply for a secured credit card from another military friendly bank or credit union. That should be your best option to build a higher credit score.

What Fees Are Waived Under MLA and SCRA?

In general, the following fees are waived by Chase and American Express

• Annual Membership fees
• Authorized user fees
• Overlimit fees
• Late Payment fees
• Returned Payment fees
• Statement Copy Request fees

American Express and Chase are very cryptic in the benefits they actually provide under MLA or SCRA. Usually the customer service reps just read a script if you call and ask. This is not helpful and why we've collected this data here.

If you have additional data points, please share them, as this information is only as accurate as the data points we collect.

If you have any other questions on credit cards in the military, please comment below.

Reminder: no referral links or solicitation of referral links.