New Recruit Financial Mistakes

5 Financial Mistakes You Make at Your First Duty Station and How to Fix Them

Your decision to join the military provides many perks. One of them is having a source of steady income and the freedom to spend it however you please. Many new recruits arriving at their first duty station aren’t thinking about savings and being thrifty. But not doing so can lead to unforeseen financial hardship down the road. Set yourself up for success and avoid making these common financial mistakes:

1. You fail to budget

Many financial problems arise out of the failure to plan for expenses including rent, utility bills, food, and recreational activities. Because this is your first time having a steady paycheck and maybe even the most money you’ve ever had coming in, it can be tempting to assume you can easily afford a night out or that new TV. However, not budgeting your monthly expenses can often lead to serious debt later.

THE FIX: Before you make any financial decision, including opting to move off-base, sit down and write your minimum monthly expenses. Include your cell phone bill, car insurance, student loans, food, etc. compared to your monthly income. This will determine how much is left for additional expenses. If you’re uncomfortable or inexperienced with budgeting, visit your installation’s financial support officer who provides free help with financial planning. Taking this step will help you avoid the other common financial mistakes outlined in this article.

2. You buy a brand-new car

Most Americans can’t afford a brand-new car. Yet, recruits with little credit history who make around $30,000 annually purchase one. The barracks parking lot of many military installation looks like a car dealership. Remember that even if you’re approved for $25,000, you still have to pay for interest and insurance. This can add hundreds of dollars to the bill. Just because you’re approved doesn’t mean you can afford it.

THE FIX: Don’t be afraid to buy a moderately-priced used car, or, if you live on base and can get around on foot or bike, consider saving for a few months to make a down payment. This goes back to budgeting. Again, speak with your financial support officer to determine how much you can actually afford.

3. You rent your furniture

So, you’ve moved in to a new apartment and can’t afford to outright furnish it. So, you turn a rent-to-own furniture store. The monthly bill is low, so no big deal, right? Although these establishments advertise low interest costs in the beginning, you will inevitably end up paying more than the actual price of the product. Sometimes you will overpay by hundreds of dollars and for longer than it actually states.

THE FIX: Bargain hunt for furniture. If you have a tight budget for household goods, check out your nearest thrift store, Craigslist, and/or the bulletin boards around base. The one stable thing about military life is that people are constantly moving which means people are always selling their personal belongs for cheap. If necessary, visit your installation’s resource center to see if there’s a lending closet with household items that you can borrow for temporary use.

4. Living in the moment (financially)

You’re having a night out with your friends when you decide to buy drinks and pay for meals. The next thing you know, you’ve spent $500 in a matter of hours. Although showing your friends how much you appreciate them by picking up the tab is a noble idea, this public display of affection can put a strain on you later. What if your car unexpectedly needs serious maintenance and you realize that you spent way too much on a night out? Or worse, you later realize you’ve spent your rent money.

THE FIX: Say it with me, “budget.” Plan ahead and take a set amount of cash with you when you leave the house. Once you’re out of paper currency, that’s it. There’s no shame in wanting your friends to have a good time, but it shouldn’t be at the expense of your future self.

5. Not planning for your future

When you’re just starting your career, retirement seems and is 40 or more years away. Knowing that you’ll have plenty of time to save for retirement makes it easy to put off. If you don’t start building your nest egg with that very first pay check, you might find yourself in a situation where retiring in 40 years starts to look more like 50.

THE FIX: Start contributing to the government’s form of a 401(k)-retirement plan, your Thrift Saving Plan (TSP), right away. Consider this: According to the Federal Retirement Thrift Investment Board, if you start contributing 10 percent of your paycheck to your TSP when you are 25 years old, then you’ll have $1 million saved for retirement by age 65. Comparatively, if you wait until age 40 to start contributing 10 percent then you’ll have a about $300,000 saved by age 65. The numbers are clear. Starting to plan for retirement now can make a world of difference in living comfortably later.

Everyone has financial setbacks and missteps when they’re just starting out. If they didn’t, we wouldn’t be able to warn you of the common mistakes new recruits make. Keep these tips in mind. Remember to budget and plan ahead to break the cycle.

Kristen Baker-Geczy is a communications specialist, active duty military spouse, and former MWR marketing coordinator. She was also deployed to Southwest Asia as an Air Force contractor.