How to Create — and Stick to — a Budget in the Military

What is the main reason to use a personal budget? 

The main reason it’s beneficial to use a personal budget is so that you have a clear understanding of your income and expenses, and to ensure that you’re not spending more money than you’re earning. It’s also important that you’re setting aside expenses for future and personal goals. A budget can also help you reduce debt, save for emergencies, and plan for things like retirement. Many people confuse budgeting with a financial plan. A financial plan is a holistic picture of your entire finances which includes your budget within that, but also includes your life insurance policies, your retirement plan, your investment portfolio and more. Overall, a personal budget is an essential tool for managing your finances while pursuing financial stability.

How to Create a Budget in 5 Easy Steps

Creating a budget can be fun and easy. Here’s how military members can create a budget in five easy steps:

1. Calculate your net income: The first step to creating a budget is to calculate your net income. This is the amount of money you bring in each month after taxes and other deductions have been taken out. Make sure to include all sources of income, such as your salary, bonuses, basic housing allowances, per diem, and any side hustles or part-time work.
2. List Monthly Expenses: Next, list out all of your monthly expenses. It's important to be thorough and include everything, no matter how small or insignificant it may seem. Make sure to account for any unique expenses related to your military service, such as deployment costs or moving expenses. To help you with this essential step, we’ve created a downloadable budgeting template you can use to categorize your expenses.
3. Label Fixed and Variable Expenses: Once you've listed out all of your expenses, separate them into fixed and variable categories. Fixed expenses are those that don't change from month to month, such as rent or mortgage payments. Variable expenses, on the other hand, are expenses that vary from month to month, such as groceries and entertainment.
4. Determine Average Monthly Cost for Each Expense: After separating your expenses into fixed and variable, determine the average monthly cost for each expense. For fixed expenses, this is easy since the cost is the same each month. For variable expenses, look back over the past few months and calculate the average cost. This will give you a good idea of how much you should budget for these expenses each month.
5. Make Adjustments: Finally, it's time to make adjustments to your expenses as needed. If you find that your expenses are higher than your income, you'll need to make some cuts or find ways to increase your income. Look for areas where you can reduce spending, such as eating out less or canceling subscriptions you don't use. If you have debt, consider prioritizing paying it off to reduce interest charges and free up money for other expenses.

Monthly Budget Template

There are a lot of different budgeting methods you can try. The 50/30/20 method has 50 percent of your income going to needs, 30 to wants, and 20 to investments, savings or debt. The zero-based budget is where you have the goal of allocating every dollar to a different source in order to hit zero at the end of each month. There’s also priority-based, cash-only, and the 80/20 rule in addition to others, so talking to a financial advisor about which method makes the most sense for you could be helpful. To help you plan your monthly budget, we’ve created an easy-to-use template specifically for service members to categorize their expenses. You can download this template here.

Tips for Budgeting as a Military Family

Military members with families have some additional things to consider while building their budget. Here are a few tips to make the whole process easier.

1. Set financial goals: Decide on some financial goals that you'd like to achieve as a family. These goals might include paying off debt, saving for a down payment on a home, or building an emergency fund. Use your budget to help you allocate funds towards these goals each month.
2. Use resources available to you: Military families have access to a variety of resources that can help with budgeting. For example, many military bases offer financial education classes. There’s also the option of working with a financial advisor who has a comprehensive understanding of military benefits and can work with you one on one to plug those into your budget.
3. Take advantage of military-specific benefits: Military families are eligible for a variety of benefits that can help reduce expenses such as low-cost life insurance, basic housing allowances, and dependent pay. On-base benefits also include options like the commissary, which offers discounted groceries, and the Exchange, which offers discounted clothing, electronics, and household goods.
4. Plan for deployments and PCS moves: Deployments and Permanent Change of Station (PCS) moves can be expensive. Make sure to factor in these costs when creating your budget, and consider ways to reduce expenses during these times.
5. Involve the whole family: Budgeting is a family affair. Involve your spouse and children in the budgeting process, and make sure that everyone is aware of the family's financial goals. This can help create a sense of shared responsibility and accountability.

Tips to Sticking to a Budget While Serving

Sometimes the hardest part of budgeting is actually sticking to it once you’ve created it! To keep you on track, implement these tips.

1. Pay expenses before spending pay checks: Make sure all your bills are covered before you spend elsewhere. If you have a hard time keeping track of bills, set up automatic withdrawals with each company, but be sure to keep an eye on the bills as they come through to make sure your bills are within what you calculated for your budget. If not, it may be time to adjust those areas and the rest of your budget to compensate.
2. Use automatic withdrawals to invest money: Investments can also be set up with automatic withdrawal, just like your bills. Pay yourself first by making sure your future and your financial goals are all covered without having to go in and set the money aside each time. When you don’t have to think about it, you’re more likely to stick with your plan.
3. Set aside time to review spending on a bi-weekly or monthly basis: You’re more likely to stick to your budget when it’s working for you! Financial situations change all the time. That’s why it’s important to schedule time in advance to review your budget once or twice a month. Try picking the same day each time, like the 1^st and 15^th, or every first Friday of the month.

No matter where you are in your military career, starting a budget can help as you move forward on your financial journey. Learn more about building a budget or reach out to a financial advisor to enlist some professional help in planning your budget and managing your finances.