Some notable challenges associated with saving money in the military include overshooting credit card limits, spending on unnecessary objects, difficulty adhering to a budget, and so on.
Tips on Saving Money in the Military
When serving the country, monitoring your finances and making the necessary investments can become extremely challenging. However, financial planning is one of the mandatory steps you should take to secure your family's future. So, it would help if you took time from your busy schedule to care for them.
Here is a comprehensive guide on saving money in the military, its importance and some popular investment options to park your funds.
14 Tips for Saving Money in the Military
1. Create a BudgetCreating a budget becomes imperative if you are planning on saving money for your family. The first step that you should take for this purpose is tracking your expenses and eliminating needless expenditures. You can also suggest your family follow the same. This will ensure judicious use of funds allowing you to save more.
2. Avoid Going into DebtTaking debt for unnecessary reasons can lead you to repay extra interest. This can deplete your savings to a great extent and make it difficult to make ends meet. Under such circumstances, it might become challenging for you to save and invest to grow your wealth.
3. Build an Emergency FundAn emergency fund can help you with funds when you or your family members are in dire need of money. Wondering how much to save in the contingency fund? You can put about six months of your family's expenses in it. Also, to generate returns, you can put this money in a low-risk investment fund which is highly liquid.
4. Save for Future ExpensesApart from an emergency fund, you can make small emergency accounts like rainy-day funds to help you cover one-time expenses. You can ask your family for these so that they will not have to use the contingency fund money to cover their smaller one-time expense.
5. Create a Savings AccountCreating a savings account ensures the safety of funds and allows you to earn from them in the form of interest. Furthermore, you can automate the payment of insurance premiums and emergency funds to stay worry-free. You can also transfer your money to the family members when they are in need of funds.
6. Start Saving for Long-TermUsually, long-term savings plans allow you to build sufficient wealth over a longer duration because several long-term investments provide substantial returns. It will eventually allow you to fulfil your financial goals. Also, you can provide monetary support to your child for their education and career.
7. Be Careful with Credit CardsOvershooting the credit card limit is a problem that many individuals experience. However, you should note that this can lower your credit score and make the repayment difficult. Also, it will leave a very small amount for saving every month. Hence, spending within the card limit is mandatory when you or your family members are shopping using it.
8. Build a Good Credit ScoreA good credit score can present you with numerous benefits. These usually include lower EMIs on credits, instant loan approval, reduction of insurance premiums, and so on. So, it would be best to review your credit report when you have sufficient time. This will help you to get an idea of this score and take steps if it is low.
9. Use Military Benefits WiselyThere are several military benefits available to all soldiers fighting for their country. You can use them for saving more and investing more so that you can receive a sumptuous amount in case of your untimely demise. This ensures a financially secured retirement when the regular cash inflow vanishes.
10. Shop for Necessities on BaseYou can shop for all your necessities from the base itself to get a discount on your bills. Also, you should ask your family so they can save a sufficient amount on necessities. This way, you can put the remaining funds in various savings accounts so that you have enough money during emergencies.
11. Purchase a Life Insurance PolicyLife in the military service is full of risks. So, purchasing a life insurance policy that can supply you with enough funds in case anything happens to you becomes imperative. Furthermore, this can also help you save more and invest in various financial instruments that can help in wealth creation.
12. Save for RetirementKeeping aside sufficient funds for your retirement is vital; so that you and your family do not have to depend on others. Also, you can fulfil all the financial requirements of your kids without having to rely on credits. You should know how to make more money in the army and save and invest strategically.
13. Avoiding OverspendingOverspending while shopping or meeting other lifestyle luxuries can drive you into severe debt. Also, at times it can lead to the wastage of money, making it difficult to arrange financing when facing monetary crises. So, tracking your expenses and avoiding overspending to stay financially secure becomes important.
14. Automating Your Savings
When in the army, paying the EMIs, premiums, and investments on time can become difficult. Also, delaying them can lead to severe adverse consequences. Hence, you can automate your savings to automatically transfer the amount. This will provide you with limited cash and help you to make judicious use of funds.
However, only knowing how to save money in the army is not enough. You should also know the importance of saving and investing to stay aligned and take steps accordingly.
Importance of Saving Money in the Military
When in the military, you might not be able to increase your income sources. So, it becomes mandatory to save for countless reasons. Some of the crucial ones among them include:
- Provides for children’s education: Education has become highly expensive recently. So, to ensure that your kids receive the best education, you should start saving as early as possible.
- Offers you peace of mind: You can stay worry-free about your family meeting any financial emergency. This allows you to go to the battlefield without additional tension about your family.
- Helps achieve short-term goals: Fulfilling short-term monetary goals is as important as financing long-term ones. Your savings in a bank account and smaller funds can help your family achieve the same.
- Provides security to your family: Since you are away from them and might not be able to contact them daily, it becomes crucial to ensure that they always have sufficient funds to meet any financial emergency.
- Gives you a better future: A proper saving plan ensures sufficient funds after retirement. This can help you plan your retirement the way you want without facing any financial constraints.
You can choose several policies for investing while in the military. However, finding the right ones can become difficult at times.
Policies to Invest Money When in the Military
These are the ones which fluctuate as per changes in the money market. So, even though they can provide you with substantial returns, there is also a chance of facing immense losses. Some of them include:
- Direct Equity: The stock market fluctuates rapidly, making it vital to be monitored continuously. Also, you must study the stock market over time to select the right ones to invest in. Once done, you can receive substantial returns over a shorter duration.
- Debt Mutual Funds: Compared to equity, they are less volatile and can provide steady returns. You can easily estimate the returns from these funds as interest remains fixed. They include financial instruments like treasury bills, commercial paper, corporate bonds, government securities, etc.
- Unit Linked Investment Plans (ULIPs): Are you looking for investment and life cover under one premium? This is possible by purchasing ULIPs. One part of the premium goes for life cover, and the other is deposited in money market funds. So, there is a chance of facing losses when selecting the wrong assets.
Medium Risk Investment
This type usually offers a balanced and diversified investment. This usually requires you to divide your money into equities and debt mutual funds. Thus, you can get sufficient returns with moderate risks of losses so that you can create substantial wealth over a longer duration. These usually include the following options:
- Monthly Income Plans: These are debt-oriented plans where about 70% to 80% of your investments are parked in debt funds.
- Arbitrage Funds: These are equity-oriented hybrid funds that leverage arbitrage opportunities in the market.
- Hybrid-Debt-Oriented Funds: These are a combination of equity and debt funds where the percentage of investment in debt funds is slightly more than equity.
The returns from these funds are not dependent on market sentiments. Hence, you can park money in these funds to generate a stable income over a longer duration. Some of the best investment plans of this type include:
- Public Provident Fund: This scheme usually has a tenure of 15 years and offers a safe investment and stable and tax-free returns. Thus, you can invest in them if you are looking for a safe option.
- Bank Fixed Deposits: FDs provide a high-interest rate ensuring stable returns on parking money in these accounts. Also, there are several additional benefits that you can reap, making it a good investment option.
- Gold: The price of gold keeps increasing, making it a suitable investment option. You can purchase gold coins from numerous banks and sell them at a higher price to any jeweller when you need funds.
FAQs About Saving Money in the Military
Some military benefits available for the army personnel include enhanced family pension, army group insurance, death cum retirement gratuity, leave encashment, etc. So, you should ensure to reap maximum benefits from these compensations.
When in the military, monitoring stock market fluctuations can become difficult. So, you can invest a portion of your savings in equity and the other in debt to balance the risk of losses and earn sufficiently from your investments.
An army officer can save up to 70% to 90% of their salary when in the Indian army. This is usually sufficient for the family members of the officers to maintain a good lifestyle and invest appropriately for maximum returns.
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