During my time in the military, I saved and invested a lot of money, but I never saved as much as I did while I was on deployment. This applies both in terms of actual dollars during my military career, but it also applies in terms of my savings rate both during and after my service. If you ever deployed, you could probably relate to that feeling of having excess cash coming in or maybe you know someone who did deploy and heard the stories. For me, back in 2007 during my deployment to Iraq I remember some months spending as little as $5 a month when I decided to splurge at the local Green Bean for a sugary coffee.
It turns out that it is no coincidence that people feel like they have extra money during deployment. It's because they actually do. In this blog post I will dive into many of the factors that make deployments so lucrative and how to make sure all that money isn't blown the second you get back home. Afterall, it doesn't matter what you make if you can't keep any of it.
Increased Income
Extra Pay for Being in Danger
It is no mystery that deployments by their very nature are more dangerous than your day job is back state-side. You are probably working longer hours, operating around heavy equipment and feeling the stress of the seriousness of your task at hand. That of course is nothing compared to getting shot at, dodging IED's and artillery, or avoiding a drone attack. The DoD has a variety of ways to pay you if you find yourself on orders for deployment. Depending on the circumstance you might qualify for Hardship Duty Pay (HDP), Hostile Fire Pay (HFP), or Imminent Danger Pay (IDP).
There is also a long history of these types of pay being given to service members dating back to WWII and the amount of pay tends to stay stagnate between major conflicts before being revised up during the next conflict. At the time of this writing these types of pay maxed out at $225 per month or in some cases is prorated to $7.50 per day in addition to your normal pay.
Family Separation Allowance (FSA)
Another way service members receive increased compensation during deployment is through something called Family Separation Allowance, or FSA for short. While this incentive pay is not specific to deployments it does apply for those who find themselves on deployments and happen to have a wife or kids back home. While this is indeed "extra pay" I wouldn't go so far as to say it offsets the costs incurred by you being away from your family. It is easy to imagine that your partner would use that money and then some to help run the household while you are gone. So, while this may be extra pay, I wouldn't count on any of it being leftover at the end of the month. All the same, it is important you know about it. Currently this pay maxes out at $250 per month or can be prorated to $8.33 per day (less than a single Chick-fil-A chicken sandwich combo meal).
Assignment Incentive Pay (AIP)
Assignment Incentive Pay (AIP) is another pay that is not necessarily specific to a deployment but might apply given the right circumstances. On deployment AIP kicks in if you are involuntarily extended. This happened to more than a few of the people I served with during GWOT but back then we didn't get any extra pay for it. It's nice to see they are at least trying to acknowledge that it sucks to get the rug pulled out from under you. They also provide an option for voluntary extensions of tour that depending on your job role can increase the extra pay you receive from $800 per month up to $1,000 per month. Recently the military has been using AIP almost as a catch all to increase pay for various reasons but that is a topic for another day.
Decreased Expenses
Food and Housing
Possibly the biggest savings, especially for single service members, is the fact that you have food and housing paid for while you are deployed. These two categories of a person's budget are usually quite high, and housing is often the biggest expense people encounter.
If you are single you may be asking yourself, "Won't I lose BAH while I am deployed if I give up my apartment or lease?" Not necessarily. If you are receiving BAH when you deploy you will continue to receive during deployment. This leaves you with some options to save extra money. You can sublease your apartment or rent out your room to a friend. If your lease is due to expire while deployed, you can move your items to storage and find a new place to rent when you return home. Really your creativity becomes the only limit. There are many ways to navigate this but the important thing is to have a plan because you don't want to end up without a place to stay when you get back home.
Even for those of you who have a family and own a home the carrying costs for things like utilities will drop noticeably simply by your absence. This clearly goes for the food portion of your budget but things like water and electricity will be impacted too.
One of my favorite parts of deployment was the never-ending supply of food. If there is one thing the military gets right it is making sure we were fed. While admittedly not all of the meals were five stars they were at least decent and more importantly they were free.
Auto Insurance
One expensive line item in most people's budgets, especially for young service members, is auto insurance. When you get orders for deployment you can call up your insurance provider and let the know you have orders to go on deployment and will be parking your vehicle in storage somewhere. It used to be that the military would provide storage lots but I recently heard that was no longer the case. However, you can always find a friend with a little extra space in their garage. Just make sure you buy them a beer when you get back home. This one move could easily save you a few thousand dollars during your deployment.
Phone Plans
I often encounter people who pay well over $100 per month for their phone plans. If you are deploying to an operationally sensitive area where you may get direct fire from the enemy, you probably shouldn't have your cell phone with you for your own safety anyways. How many Russians learned the hard way that turning on their phone meant catching a fresh round of arty fire from the Ukrainians? Best not to make the same mistake and so why not save money at the same time? Most phone providers will happily put your plan on pause while you are deployed, and you can even force them to cancel the plan by leveraging the Servicemembers Civil Relief Act (SCRA). Besides, you will almost always have access to a phone or the internet via MWR or your local signal unit.
Tax Breaks
One very important benefit while on deployment is the tax breaks that you have access to. Chief among those benefits is something called the Combat Zone Tax Exclusion (CZTE). Imagine if your income taxes (not social security and Medicare taxes) were zero. Wouldn't that be nice? Well, if you are on deployment they likely will be thanks to the CZTE. About the only exception to this rule is for commissioned officers and they are capped at the highest excludable amount an enlisted service member can receive. What's more is they do not pro-rate this exemption. One day in country entitles you to a full month of income tax free benefits.
While getting thousands of dollars in savings by not having to pay income taxes is great there is a way to really supercharge these benefits to leverage tax-free growth via their TSP contributions.
While deployed to a CZTE you are allowed to not just contribute up to the normal annual contribution limit (currently $23,000 if you are under 50) but they will let you contribute up to the Annual Additions Limit (currently $69,000). Beware that you don't want to negate the DoD match though which is counted as part of that Annual Additions Limit.
Why is this so powerful? This is powerful because by contributing your extra savings to the TSP you are less likely to blow that money on a brand-new Mustang or Charger when you get back home (everyone knows that guy). Also, if you were to max your contributions for just one year while deployed to a CZTE and leave it invested for 30 years at a 9% rate of return you would have a little over $915,000 at the end of that period. That is far more money than most people ever accumulate for their retirement. Can you imagine having done all of the retirement savings you ever need to do in just one year?
In short, I encourage you to do a little planning before your deployment to make sure you can make the most of some of the many benefits that are afforded to you during your deployment. Remember failing to plan is planning to fail.
Disclaimer: This blog post is intended for educational purposes only, it should not be construed as tax advice or financial planning advice. Consult a professional for tax and financial planning advice before making any changes. All photos are from open source domains.