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By Barbara O’Neill, Ph.D., CFP®

Only three months into 2022, there’s still plenty of time for military families to make good on long-abandoned New Year’s resolutions or to take positive action to improve their finances.

Below are ten smart money moves for Personal Financial Managers (PFMs) to suggest to military families in briefings and 1:1 counseling sessions:

  1. Increase TSP Savings – The IRS raised the maximum contribution limit in 2022 to $20,500 ($27,000 for workers age 50+), a daunting number for young adults. Instead, start with an additional 1% of pay. On base pay of $25,000 at age 20, saving 1% more ($250) would add $89,226 to retirement savings at age 65. This figure assumes 3% average annual pay increases and a 6% return. Government match is not included.
  2. Fund a Roth IRA – The 2022 maximum contribution limit for Roth IRAs is $6,000 ($7,000 for workers age 50+). Roth IRAs are funded with after-tax dollars so there is no tax due in later life when savers could be in a higher tax bracket. Like TSP contributions, even small savings add up. Saving $1,000 annually with a 6% return starting at age 20 will amass $225,508 at age 65.
  3. Track Expenses – The best way to improve cash flow is to understand current spending including housing, utilities, groceries, gas, insurance, health care, pets, and occasional expenses (convert the annual cost to a monthly payment). Tracking can be done with a pocket notebook or personal finance app.
  4. Review Auto Insurance – It is always good to do an insurance review periodically to make sure all available discounts are taken and that policy coverage, especially liability limits, is adequate. Liability coverage should be at least 100/300/50 and deductibles should be commensurate with emergency savings.
  5. Check Credit Report and Score – Under federal law, free credit reports are available annually through a website, toll-free number, and mailing address set up by the “Big Three” credit reporting agencies: Equifax, Experian, and TransUnion. Many banks and credit card companies provide free credit scores for their customers as a “goodwill gesture” to attract and retain them.
  6. Build Emergency Savings – The standard advice is to save three to six months of essential living expenses, but any savings is better than none. Aim for at least two months’ expenses to start. For example, $200 of monthly savings over 24 months will produce a $4,800 nest egg, plus interest.
  7. Rebalance Portfolio – Over time, asset class weights (e.g., stocks, bonds, cash equivalents) in a portfolio shift due to market performance. Rebalancing brings a portfolio back to its original target weights (e.g., 60% stocks and 40% bonds) by selling overweighted assets or putting new money into underweighted assets.
  8. Check Social Security Report – All workers should regularly check to make that their earnings are being reported correctly and to gain insights into their future Social Security benefit at different ages.
  9. Calculate Retirement Savings – Online calculators can help service members see what they could save at various ages and calculate how much money they need to save for a comfortable retirement. A good source of useful calculators is the Thrift Savings Plan website
  10. Take a Vacation – Life is short and everyone needs a break, including military families. This generally entails developing specific activity plans and a budget. Frugal vacations can be planned by looking for deals, traveling at off-peak times, and using credit card reward points to pay for hotels and airfares.

Photo by Alexander Mils from Pexels