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Image of a man in uniform and a woman sitting and discussing a budget on a couch.

How to Build Your First Budget as a Military Family

Jul 11, 2022 | 5 min. read

There’s more to building a budget and saving for financial goals than just cutting back on spending.

The idea of living on a budget may sound restrictive, but it can actually provide you with opportunities for financial freedom in the future. By knowing where your money is going each month and setting specific savings and investing goals, you can increase your chances of living the life you imagine. Being prepared is key.

When building your first budget, consider these ideas:

Track your spending. One of the best ways to track your spending is by looking at your bank statement and writing down your expenses for the previous month. Then sort your expenses by category and use highlighters to color-code them. For example, you may choose to highlight necessary expenses like rent or mortgage and utility bills and insurance in yellow. Discretionary expenses like clothes, dining out and event tickets might be highlighted in orange. Investments or savings can be highlighted in blue. Adopting this approach and then tallying your spending in each category will give you a clear indication of where your money is going each month. This can help you identify problem areas and will give you a starting point for building your budget.

For a more granular snapshot of your discretionary spending, consider breaking out specific categories, such as:

  • Dining out
  • Entertainment (concerts, movies and sporting events)
  • Travel
  • Consumer goods (clothing, furniture, household supplies and décor)

If you make most of your purchases using a credit or debit card, many banks and credit card companies keep track of spending by category. Check your latest statement or online account to see if this information is provided.

Assign your expenses to your income. By assigning certain bills to specific paychecks, you can keep track of spending and know when each bill will be paid and what will be left over. For example, you can schedule your car payment for the latter part of the month and attribute that cost to its corresponding paycheck. This method of budgeting can help you be more methodical about your spending because you will know exactly how much is left over from each paycheck after taking care of bills, investments, retirement and savings.

Build an emergency savings fund. Life doesn’t always go as planned. That’s why it’s imperative to set aside rainy-day funds. Most experts recommend saving three to six months of income to fall back on when unexpected expenses pop up. While three to six months of income may seem like a lot, regularly adding to your emergency fund will help build that amount little by little. Just remember – this isn’t your vacation money or money you should spend on that expensive new pair of sunglasses you just couldn’t pass up. It’s for those true spending emergencies. Like fixing the brakes on your car or paying for a plane ticket home if you’re suddenly needed. It might also help to set savings goals and forecast the amount you will have saved by the end of the year or in five years. Seeing your savings grow can help motivate you to stick to a schedule. Use our debt consolidation calculator to help you plan.

Pay yourself first. It’s important not to forget yourself when budgeting. So don’t save what’s left over at the end of the month – as if there is anything left over most months! Pay yourself first by allocating money to your long-term goals. Then figure out how to live on what’s left over. One option for building retirement funds is to enroll in the Thrift Savings Plan (TSP). The TSP is similar to a 401(k) in that it allows you to set money aside on a pre-tax basis. If you are in the Blended Retirement System (BRS), you will also receive matching contributions on the first five percent you contribute, and an automatic contribution of one percent. If you have been in the service for at least 60 days, you are eligible to contribute to the TSP.

Overpay on credit cards to tackle debt over time. Managing debt is important to consider when building a budget. If you have credit card debt, allocate extra funds to your monthly payments so you can tackle the debt over time. When you make the minimum monthly payment, you’re just treading water. By paying more, you can work to actively lower your total debt. This principle also applies to student loans, medical bills or any other payment plans.

If you have considerable high-interest debt, you might want to consider what is commonly referred to as a debt consolidation loan. This type of loan allows you to combine several high-interest debts into a single lower-interest loan, which can accelerate the amount of time it will take you to pay off the debt and reduce the total amount of interest you will pay.

Work with a Financial Advisor. Financial Advisor can help you build a budget, plan investments and teach you how to save money for retirement, college or other financial goals. Four out of five First Command Financial Advisors are veterans or military spouses. They understand military family finances and offer complimentary financial planning to active-duty military members and their families.

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