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Military Budgeting 101 – Tips for Service Members

Military service members and their families understand there should always be a plan. And having a budget is just that! It represents financial structure, freedom, and much less stress. We’re here to help you learn how to set one up and answer all your personal finance questions. 

How to create a budget

Given you make a certain amount of money each month, how do you decide how to split it up to cover the costs of housing, food, insurance, health care, debt repayments, and fun on top of all of that? A budget is your answer. It’s not a magic solution, but it’s a way to organize your funds to make sure you cover what you need, a little of what you want, and prepare for the future. Keep reading to learn more.

Sergeant First Class, U.S. Army Green Beret (Ret.) John Wayne Walding breaks down the budgeting basics.

The 50/30/20 rule

The 50/30/20 budget rule became popular because of its simplicity. And the rule is truly simple: divide up your after-tax income and allocate it to spend 50% on your needs, 30% on your wants, and 20% on your savings. Let’s get more specific. 

Allocate 50% of income for “Needs

Needs are anything that you absolutely must pay for and are necessary for your daily life. This can include rent or mortgage payments, groceries, health care, utilities, and minimum debt payments. Dedicate 50% of your after-tax income to cover any and all obligations. After budgeting to cover these expenses, you might see areas in your spending habits you could downsize, such as taking public transportation instead of Uber every time or cooking at home instead of eating out. 

Set aside 30% of income for “Wants

Wants can be anything you buy that isn’t essential. A new handbag, the latest iPhone, dinner and a movie, or tickets to a sporting event. Basically anything in this category is considered optional (although you may try to argue otherwise). Of course it’s important to spend money on things that will make your life more enjoyable, but get thrifty when you need to budget. Watching sports on TV with your friends or working out at home instead of paying an expensive gym membership. 

Don’t touch 20% of your income for “Savings

The remaining 20% of your net income should be set aside for savings and investments. This could be adding money to an emergency fund, investing in the stock market, or making IRA contributions to a mutual fund account. Aim to have at least 3 months of emergency savings available just in case the worst happens. Best case, you continue to save that money for retirement or reaching other financial goals in the future.

Choose a budgeting plan and stick with it

Whichever budget plan you utilize, it must cover all your needs, some of the things you want, and have leftover for emergency savings and the future. Some budgeting plan examples include the envelope system and the zero-based budget, but more on that later.

First start by calculating your after-tax income. If you get a regular paycheck, that amount has probably already had all your taxes taken out–things like health insurance and deductions for a 401(k). Then, add in any other types of income you might have, such as freelance work or side gigs. Subtract anything that would reduce those figures, like taxes and business expenses. This should give you a picture of how much money you have to allocate each month. Keep in mind your income, expenses, and priorities will change over time though! Adjust your budget as need be, it’s just important to always have one.

Envelope System

The envelope system is a budgeting method that requires you to physically separate your monthly income from your different spending categories. It’s basically like having multiple piggy-banks but you’re actually #adulting. Here’s how it works: Buy a box of envelopes and label them with specific expense categories, things like rent, groceries, and loans. Then, put the money you plan to use towards those expenses into its designated envelope. You can do this with actual cash or download an app like Goodbudget.

Zero-based Budget

The zero-based budgeting method encourages you to give every cent of your income a purpose. Meaning, you should allocate every penny you make each month–but not on one big shopping spree. Also known as a zero-sum budget, the goal is to make your income minus your expenditures equal zero by the end of the month. Create spending categories and aim to spend the same each month, and if you spend under budget, simply add the remaining amount to next month’s budget. Or even better, move it to an emergency fund.

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Money Sensei is an online tool that uses personalized AI to understand your finances and help you make better decisions with your money. It’s super easy and quick to use (plus, it’s free!). Simply sync your bank and credit card accounts to get instant, personalized recommendations specific to your finances. You’ll see an increase in cash flow, plus create a plan to pay off any outstanding debts.

Contributing to a Thrift Savings Plan (TSP)

A Thrift Savings Plan (TSP) is an employee sponsored retirement savings plan. It’s very similar to a 401(k) plan, but it’s only available to federal employees and members of the uniformed services. You’ll then contribute a fixed amount of your paycheck to this account for future use (i.e. retirement). This type of account is tax-advantaged, so there are tax benefits for depositing money and saving it until retirement age. You can either choose to be taxed on your contributions now, which makes the most sense if you have a low tax rate. OR, you can opt to have contributions taxed when you withdraw them. Try to deposit as much of your income as you can. A good starting goal is 10% of your base pay, or a minimum of 5%.

Living off-base with Basic Allowance for Housing (BAH)

Service members typically receive housing allowances or access to military housing facilities due to the nature of the job. You can use your Basic Allowance for Housing (BAH) for barracks for single or unaccompanied soldiers or on-base or near-base housing or apartments for members with families. These accommodations are low-cost and sometimes free. Eligibility is entirely dependent on your marital status, dependents, rank, and the availability of housing near your duty station.  

If you are married and living with your spouse or minor dependents, you are eligible to live in on-base housing or you’ll receive BAH. If you are single, you’ll reside in on-base dormitories or barracks. Policies pertaining to single military members living off-base on the government’s dime vary by military service.


Their policy allows single members in the paygrade of E-6 and above to live off-base at the government’s expense. On some bases, E-5s are also allowed to move off-base, depending on the occupancy rates of the barracks.

Air Force

Their policy generally allows single E-4s with three or more years of service to reside off-base at the government’s expense.


Their policy allows single sailors in the E-5 pay grades and above, as well as E-4s with more than four years of service, to reside off base and receive a BAH.


Their policy allows single E-6s and higher to live off-base at government expense. And depending on the barracks occupancy rates at certain bases, single E-4s and E-5s may also be authorized to reside off-base.

Contacting your service’s aid society

Emergencies happen, and sometimes you won’t have the extra funds to cover the relief. This can be anything from last-minute travel for leave or being a little short on rent. If and when that time comes, there are plenty of resources available that provide no interest loans and sometimes emergency grants for those who are active-duty. Keep reading to learn more.

Army Emergency Relief

The Army Emergency Relief (AER) is a non-profit, charitable organization independent, but closely associated, with the United States Army. They help soldiers and their family members who are experiencing financial emergencies by providing funds for situations like rent and utility needs or emergency travel. AER also gives emergency funds to surviving spouses, soldiers’ orphans, and offers undergraduate scholarships to spouses and children of active and retired army members. 

Air Force Aid Society

The Air Force Aid Society (AFAS) is the official charity organization of the United States Air Force. It’s a private, non-profit whose mission is to alleviate the financial distress of Air Force members and their families, as well as help them in financing their higher education goals. It’s available to all active-duty and retired Air Force members, their dependents, and any dependents of deceased Air Force personnel who died on active duty or in retired status.

Navy-Marine Corps Relief Society

The Navy-Marine Corps Relief Society (NMCRS) is available for any actively duty and retired Navy and Marine Corps personnel and their families. They provide emergency financial assistance for basic living expenses, such as food, rent, and utilities, as well as help with emergency transportation, funerals, medical and dental bills, essential car bills, and other needs. The assistance is provided with loans or grants, depending on the individual’s financial needs.

Coast Guard Mutual Assistance

The Coast Guard Mutual Assistance (CGMA) is the relief society of the U.S. Coast Guard. It is an independent, non-profit charitable organization and is run by Coast Guard members for active members and their families. They believe in extending compassion towards one another in times of need, and serve as a vital safety net by promoting financial stability, general wellbeing, high morale, and a sense of loyalty to the Coast Guard. There’s a true sense of community and human compassion within the organization.

Other financial resources for military members and veterans

There are plenty of military financial benefits that could help you if you need it. It’s just about knowing all that’s available to you! Read on to learn about other financial resources that could be of service to you.

Free financial coaching

There are certain financial questions every service member asks themselves at some point:

  • Where do I go if I need a low interest loan?
  • How do I get help paying for emergency leave if I’m overseas?
  • I’m moving and don’t know how to apply for Advance BAH, what do I do?

When these financial questions pop up, turn to an expert who can provide free advice, support, and guidance. Our financial coaches are a great resource for achieving your money goals and answer all your questions.

Money Sensei™ budgeting app

We’ve gone over creating a budget, but talking about it versus actually doing it are two very different things. Especially when your schedule (and sometimes financials) are as unpredictable as military life requires. Money Sensei makes the “actually doing it” part completely stress free (and we might even save you some cash!). This budgeting app and money tool also offers a free credit score. Get started and see just how easy it can be to change your finances to fit your lifestyle, and not the other way around.

Abigail Masterson

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