Military benefits are confusing! I’m so glad Elizabeth Colegrove from The Reluctant Landlord is willing to share her knowledge of military benefits with us and helping us decode the military pay stub!
For military families, getting on your feet financially can be overwhelming. For me the hardest part about becoming a military spouse was learning to become financially stable.
While I had a basic understanding of personal finance, so I could find hidden ways to save money on base, learning the ins and outs of military benefits felt like a foreign language.
I learned so many things the hard way. The great news is that many people have walked your path, and there are tons of financial resources at your fingertips.
On This Page…
As we get started, lets talk about the military’s paystub or as it’s formally known–your LES (Leave and Earnings Statement).
Your LES is the same thing as pay stubs in the civilians world. It is full of useful information and the key to understanding your income.
The key is to read your LES each month since it covers the service member’s pay, taxes, allotments and more. Military.com provides a great description of each LES category.
Here are 6 financial benefits found on the Military LES.
1. Base Pay
This is your base salary, and your retirement contributions are based on this amount of money. It is also taxable. It changes based on years in service and pay rate. It does not change based on your location.
Basic Allowance for Subsistence is the amount of food benefits a service member receives. It is non-taxable and varies for both enlisted and officers. It is also deducted if you live on base and eat at the mess hall. It is based on feeding the service member not the family.
Basic Allowance for Housing is your amount of housing money that is provided to you depending on what base the service member is assigned within the US. It is important to note that it is based on the base and not where you live. It is non taxable and changes based on if you single or married.
4. Base Housing
Most duty stations offer on and off base housing options, while many places have gone to privatized housing. If you live on base your entire BAH is absorbed.
Many bases now have utility limits, so you make money if you are below the limit and you owe money if you are above the limit. Also, the BAH allotment changes depending on the cost to live at a specific duty station.
* Things To Note– Always inquire about base housing. In some places the housing is much nicer and sometimes even gives you money back. When we were first married, we heard that base housing didn’t make sense. So we failed to look at on-base options in Corpus Christi. At that time base housing would have made much more sense than living off base. Of course we figured this out months later. Always look at all options with each new duty station.
This is the life insurance. It also has other benefits such as traumatic insurance. The military service member receives $400,000 in life insurance for $29 / month and the spouse receives $100,000 in life insurance for $5 / month.
We signed up for it the minute we got married, as everyone should. We have additional insurance from USAA, but it costs almost 3x the SGLI monthly amount for only $500,000 in life insurance. So definitely start with SGLI, and explore additional coverage if you would like.
6. TSP (Roth/Regular)
This is your retirement account. It is exactly like the civilian program currently except there is no matching and the program has some of the lowest fees. The current 2015 maximum annual contribution limit is $18,000.
The military offers two types of retirement account: The Roth where you pay taxes now and the investment earnings grow tax free and the regular TSP program. The TSP allows you to contribute money to the account before taxes, giving you the tax break now, and you pay tax when you withdraw money from the account at retirement.
While there is a new military retirement plan going into effect Jan. 1st 2018. Here is a great article on military wallets.
The key is not to get overwhelmed like I did when I tried to save 30% of our income, pay for grad school in cash, and still have money for emergencies, living and a vacation fund.
Oh my gosh, I got overwhelmed, depressed, and honestly was so miserable I felt like I failed. Keep it simple and save as much as you can without pushing yourself beyond reasonable financial limits.
A few more tips about the military pay stub.
On the LES, you will also see special pays, aviation, sea pay etc. When you go into a deployed zone or over seas there are even more pays. Base pay, BAH and BAS are the basics and usually the ones you learn when you first get started.
All military personal are considered salaried so they do not receive overtime or holiday pay. While service members typically receive federal holidays off, you receive no extra pay if you work the holiday. Service members receive their full base salary no matter how little or how often they work, including BAS and BAH.
Taxable vs Non-Taxable.
For most civilian all pay is taxable, there is no differentiation. For the military your Base Pay and special bonus are taxable. BAS and BAH is not taxable.
3 Financial Habits to Start Today
In the beginning your key is just to start the good habits. You want to start reliable habits so as your income grow you have a great basis to grow them on.
1. Put 5% in TSP
When you are first starting out aim to put 5% of your income into the TSP. If you can afford more than 5%, go ahead and aim for a higher number. The key is to start a good habit. Every time my husband or I got a pay raise, I increased our contributions. After slow increases over the past 5 years, we now max it out annually.
2. Sign Up For SGLI
Sign up for SGLI now! This way you don’t forget to do it later AND you have life insurance, which is so important! It is also one of the cheapest insurances out there and easiest to get.
3. Start a Small Savings Account
Think of this as your beginning emergency fund. When we first got started we opened up the NAVY Fed $3,000 CD at 3%. We saved $250 a month into our emergency fund account.
If you are like I was in the beginning you will think that these small amounts don’t matter and you shouldn’t even try. The truth is you have to start someplace. By having a good building block in place and slowly work your way up over time.
Elizabeth Colegrove is a wife, military spouse and author of the rapidly-growing blog The Reluctant Landlord. She spends her days working as a passionate investor and real estate landlord. She loves educating military families about their military benefits in her spare time. Connect with her via Facebook or Twitter.
Want more on military life?
- How Military Families Can Prepare for Civilian Transition
- Military Life and Money: How to Keep Your Financial House in Order
- How to Find a Budget that Works for Military Families
- Military Base Gate Etiquette: 10 Small Ways to Avoid a Giant SNAFU