just getting my head around this..
How do ensigns save money ( when making ~$3200 per month plus BAH, BAS)? I mean can that really happen if proper with money??
@Hurricane12 hit many key points - she knows the drill.
There is base pay. There is also sea pay, flight pay, other special pays, bonuses at certain career decision points.
When they are deployed in a combat zone, there are extra pays and untaxed monies. Too much to go into here, but if you’re forward deployed in certain situations, you can sock away the cash.
There are “allowances,” which are untaxed. BAH is location-linked, higher in high-cost areas.
All medical, dental, vision and pharmacy are free - no premiums, no co-pays, whether at a military facility or an emergency/urgent care while driving XC to next duty station. Just show that military ID.
The exchange and commissary offer tax-free shopping, often competitive or better than WalMart, Target, etc. It’s a good option to have.
Roommates are a great strategy.
Some keep personal goods at a minimum, stow it in a storage facility or at a friend’s, and give up the apartment and associated costs while deployed.
There is the Fed version of a 401K, see
www.tsp.gov with targeted retirement funds, Roth/non-Roth, variety of options.
They can start this upon commissioning and active duty. Easy deductions from pay straight to their fund. Long-term savings, follows 401k rules for portability.
If they are smart, they already have their IRA, probably Roth, going, as they have earned income that started as SA midshipmen/cadets.
There is the new blended retirement system. That is easily searched to learn more.
There are time-in-service pay bumps every two years. There will be a pay raise at O-2 in about 2 years, and 2 years after that, O-3, when they will be making roughly twice what they make as O-1, if I recall the pay tables correctly.
Www.dfas.gov has the pay tables.
BAH allowance also goes up with rank.
When possible, establishing residence in a state without income tax allows the AD military member to be a transient resident at duty stations, not subject to state income tax. My home state was GA; they wanted full state income tax no matter where I was. The minute I got stationed in FL, I registered to vote and did other things, went to the base JAG to get the letter to tell GA I was no longer a resident, and claimed FL for the remainder of my AD career. DH’s home state was PA, which did not assess state income tax for AD military serving out of state. He never paid state income tax during his career.
Using basic personal financial management principles, having a budget, spending less than what comes in, managing credit smartly, investing diversely and for short/medium/long-term goals, knowing the difference between needs and wants, exercising discipline in money matters, it is possible to build a strong foundation for wealth-building. I was well-advised by my parents and senior officers, and made mostly the right choices starting in my late teens.
