The transition to civilian life is not only marked by profound personal and emotional changes in a service member’s life but also renewed financial difficulties. 

Many service members are forced to adapt to larger tax burdens, thanks to a loss of their tax-exempt housing allowance. 

Furthermore, former members who didn’t serve at least 20 years of service will also lose access to Tricare health benefits, costing them hundreds of dollars monthly. 

For this reason, many veterans struggle with a litany of financial stresses, including debt and vulnerability to fraud.  

Fortunately, there are ways to combat these financial strains by following a few simple financial tips, which we will outline here. 

And the sooner you begin to plan for your transition to civilian life, the easier the transition will be.

1. Budget Accordingly

The number one thing service members can do to cushion the financial blow of their transition to civilian life is to start saving as much as possible during their service. 

Saving for six months or more will give you emergency funds, enabling you to stay afloat as you search for a new job, move to a different city, or even stay home to pursue your degree. 

We also recommend adjusting your spending habits before transitioning to civilian life to anticipate the higher costs you will incur. Some of these costs include:

• Higher tax bills: You will be taxed federally and by your state like a normal civilian and lose exemption status. 
• Higher housing costs: You will most likely lose access to tax-exempt housing and food allowances. 
• Healthcare: Unless you serve 20 years, you must budget a few hundred extra dollars a month for health insurance premiums. 

We recommend you take advantage of the Continued Health Care Benefit Program, which extends healthcare coverage for 18-36 months during this transition so you stay covered. 

2. Explore Military Transition Services

The military and private sector provide many resources designed to educate and prepare military members to transition into civilian life.

Some notable organizations and programs include:

• Transition Assistance Program (TAP): TAP begins a year before the end of your service and provides counseling, educational materials, and access to veteran benefits designed to ease your transition. 
• USAA: The veteran-friendly insurance company provides car and home insurance discounts to veterans and a wide range of educational materials designed to empower former members financially. 
• American Corporate Partners (ACP): ACP is a non-profit that works with veterans to help them find jobs, network, and build their financial portfolio, such as by starting a business. 
• Entrepreneurship Bootcamp for Veterans with Disabilities (EBV): EBV provides free educational materials in collaboration with eight different colleges to train veterans with disabilities on entrepreneurship. 
• Veterans Employment Center (VEC): The VEC is a federal program designed to help veterans find careers in the public or private sector. 

We should note that many veterans have access to a wide range of jobs in the public sector via the Department of Defense and many private sector jobs through their training and technical experience.
In fact, veterans earn $11,000 more on average when compared to ordinary civilians in both sectors, meaning that there are many opportunities to support a living using your knowledge and skills. 

3. Maximize Benefits to Reduce Costs

Managing everyday expenses can be made easier with the right resources, but what about life’s big expenses, such as buying a house or going to college? Fortunately, this is where veterans receive the most financial coverage. 

Thanks to the Post-9/11 GI Bill, veterans who serve up to 90 days in active combat can receive more than $25,000 annually in tuition reimbursement and money for books and supplies.

VA loans through the federal government provide premier access to housing loans at reduced interest rates and with very few downpayment requirements. These programs enable veterans to navigate life’s hardest financial decisions without wiping out their savings accounts. 

4. Enter Into a Long-Term Retirement Plan

Another benefit of your service can also come in the form of a tax-advantaged retirement plan. 

Veterans with more than 20 years of service have access to legacy pension plans, but most former service members are enrolled in a Thrift Savings Plan (TSP).

A TSP is similar to an IRA or 401(k) and can be structured as a Traditional or Roth account, allowing you to invest in stocks and bonds with pre-tax or after-tax dollars. 

TSPs come with low fees but have minimal investment options compared to other retirement accounts.

People looking to expand their investment horizons into something more tangible can roll over their TSP into a self-directed IRA. 

With the same tax structure as a Roth IRA, self-directed IRAs allow you to invest with after-tax dollars in alternative assets like real estate, Bitcoin, and more. 

Regardless of what account you choose, be sure to maximize contributions early to compound the interest of your investments and save more for retirement, which you can access at a later age. 

5. Consider Your Life Insurance Options

Like healthcare, veterans only have 120 days post-service to maintain their life insurance policy. Many groups, such as Servicemembers Group Life Insurance (SGLI) and Veterans Group Life Insurance (VGLI), allow veterans to apply regardless of pre-existing conditions and offer extensive benefits.

Whole life insurance plans are available at higher premiums, which provide better coverage. One benefit of this plan is that it enables you to access lots of capital through a concept known as infinite banking. 

While somewhat complicated, infinite banking allows you to use borrowed funds from your life insurance policy to fund major expenses, including investments, which you can use to diversify your portfolio. 

6. Diversify Your Investments

While we can sit here and talk about budgeting, saving, and finding the right job, you’ll never be entirely financially secure without building real wealth. 

To do so, you must own assets with cash flow or high equity. 

We strongly recommend you pursue an investment strategy tailored to your risk tolerance. One advantage of the self-directed IRA we described earlier is that it allows you to invest in everyday assets, like rental properties, without paying taxes.

Divert a portion of your investments to your retirement portfolio to boost your wealth, and use a portion of your savings to invest in cash-flowing assets like real estate, private equity, a small business, or whatever best suits your preferred strategy. 

7. Learn to Avoid Fraud

Due to their special financial circumstances, veterans are at a higher risk for fraud than most ordinary civilians. However, you can easily reduce your chances of being defrauded by educating yourself on proper programs and following these tips:

• Avoid scammers that target your cell phone or email (The VA will usually contact you by mail).
• Perform your due diligence on companies that promise special offers to veterans.
• Don’t give out personal financial or contact information without reading any contracts or terms. 
• Research charities and non-profits before donating or conducting business with them.

Transitioning to civilian life can be extra stressful when you tack on financial woes. 

Fortunately, by following these simple tips and building wealth in your post-service career, you can be financially set for the rest of your life.