Maximize Your Deployment Investing: Healthier, Wealthier, and Wiser | Military Money Manual Podcast Episode 13

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Military deployments can be tough. Usually the “98% boredom, 2% sheer terror” rule applies. Learn how to maximize your military money in the The MIlitary Money Manual: A Practical Guide to Financial Freedom

If you have downtime on a deployment, you can grow not just your net worth, but your health, fitness, and knowledge as well.

A military deployment gives you the unique opportunity to increase your income and decrease your expenses to near zero. You can achieve 90%+ savings rates and make huge improvements to your financial situation.

Debt repayment, maxing out your Roth retirement accounts, and saving for financial independence are all possible on a military deployment.

If you have down time while your deployed, take the time to educate yourself through good podcasts, books, and articles. Come up with a plan and execute it with ferocity.

Pay down your debts, build your investment portfolio, and leave your deployment in a better position than when you started.

Military deployment articles:

Military Money Manual Podcast Episode 13 Links

Military Money Manual Podcast Episode13 Transcript

[00:00:00] Spencer: Welcome to another episode of the Military Money Manual podcast. I'm your host Spencer. And today we're going to discuss maximizing your deployment finances.

[00:00:17] Jamie: And I'm Jamie. And we just want to give a quick disclaimer that obviously deployments can vary greatly of what it means. You could be an isolated FOB in Afghanistan.

Hopefully not in Afghanistan anymore, or you could be on a cush, almost TDY to Bahrain. So we want to give general guidelines and tips that may not work for your specific deployment, but hopefully there's going to be some things you can take away and make progress on your personal finance journey.

Deployment really can be one of the most financially beneficial times of your military career.

[00:00:45] Spencer: On deployment. You have almost. A unique opportunity other than possibly offshore oil platform workers to drop your expenses to almost zero and increase your income simultaneously. So for myself personally, I did three deployments over my 12 year military career.

First one was to Kyrgyzstan. We were at Manas air base flying missions into Afghanistan. I've also been to Qatar and to Oman as well. And then I had a pretty awesome opportunity. I I struggled to even call it a deployment. It was really a two year PCS, but it was in a tax free area. So a lot of the same financial considerations that you have on deployment also applied while I was in a tax free area.

And I got to live in the United Arab Emirates in Abu Dhabi for two years. And that was pretty awesome because while I wasn't able to drop my expenses to zero, I was able to really enjoy the experience out there. And I've got two years almost 26 months of tax free income. So Jamie, I have three deployments, Kyrgyzstan, Qatar, and Oman.

How about yourself?

[00:01:53] Jamie: So I had four over 10 years of active flying time during my more than 12 years in the military so far for deployments between Kuwait and Romania plus literally hundreds of TDYs and overseas missions. During that period, one of the nice things that's unique for air crew or anyone else that gets experienced to do short Kind of stopovers or flights over a combat zone tax exclusion area where you get tax repay is even a one day stop in, in Bagram or somewhere where you can earn tax free can give you a lot of the same advantages that we'll talk about on deployments.

Yeah, that's my experience there. Yeah.

[00:02:29] Spencer: Yeah. I know for myself I, there's a few deployments I had where I was probably in some real danger, but I definitely don't want to make it seem like I'm this combat hardened veteran when, there's our army and Marine and Air Force and Navy brethren out there who have actually been on very serious deployments with a lot of stuff happening.

So like we said in the beginning of the episode, your experience is definitely going to vary on deployment. But for a lot of people, you can take a lot of these principles and apply them to whatever situation you're in. And I would say for most deployments you are able to really minimize your expenses and increase your income.

And like we were talking about before the episode started, Jamie, That's really all there is to financial or personal finance, right? And achieving financial independence is to minimize your expenses and increase your income and then invest the difference between those two.

[00:03:28] Jamie: Yeah. And if you play it your deployment could accelerate your journey towards financial independence by a huge percentage.

You may even be able to double. Your net worth during a deployment or pay off all your debt during a deployment and that progress in the three, six, twelve, fifteen months you're deployed is going to pay huge dividends over probably the next 50 years of your life. If you just come up with a plan, do a little bit of research before you go and have a little bit of discipline to do what you need to do to meet your goals.

And that's really what it's all about is accelerating your journey towards financial independence.

[00:04:05] Spencer: I'd like to start with talking about decreasing your expenses, and then we can talk about increasing your income while you're on deployment. And then Jamie will talk about some of the unique investment opportunities that are available to you while you're deployed.

So let's get into decreasing your expenses. I'll take we've got a list here of about eight or nine ideas. I'll take the first couple, Jamie, and then you can take the next. Few, but starting with suspending your cell phone service. So have you ever done this when you were deployed?

[00:04:35] Jamie: I Didn't personally, because we were always on a plane with my wife or something.

And then especially when the days of T Mobile came around with international plans, I definitely wanted that service overseas, but I have plenty of friends, especially I think AT&T is the really good carrier for deployment benefits are huge. So I haven't personally.

[00:04:54] Spencer: I think I did in my first deployment and, but every deployment since then I've either had T Mobile, which in case you didn't know, has a great military discount, a great military plan.

And they also offer overseas data just included in the price of your contract. And then Google fi is the other one I want to mention is just absolutely fantastic. And now they're doing digital SIM cards. So if you have a. Android or iPhone models that were produced, I think, in the last two or three years or more recently, you're able to add that service to your phone without even getting the physical SIM card and you can swap between whatever provider you're using in Google Fi.

And I know. For myself, when I go TDY or if I deploy, as soon as I land anywhere in the world, I take my phone off of airplane mode and I'm immediately connected with full LTE high speed data. And then texting calls, I think only texting is free and then calls are only 20 cents a minute. So I'm a big fan of Google Fi, have reliable wifi wherever you're going, then you might want to look into possibly suspending your cell phone service and all the military.

Or excuse me, all the cell phone companies will do this for military service members, I think up to 36 months. And you can also suspend the payments on your phone as well for a lot of those cell phone companies, a lot of those.

[00:06:11] Jamie: I've even had friends who specifically with AT & T had friends who AT&T paid off the remainder of their device payment plan when they submitted their deployment orders.

So I can't guarantee it's going to work for everyone, but I have a handful, more than one or two of people who that's worked out for. So there's definitely some benefit to call on your cell phone provider and seeing if there's an opportunity to save some money there.

[00:06:33] Spencer: Okay. The other decreasing your expenses ideas I'll talk about here are putting your utilities into vacation mode.

This was, I'm trying to remember which deployment I did this on. I think it was my first one where basically, I wasn't using the internet and we didn't have anybody in my house. So I just called up my internet service provider and said, Hey, I'm going to be out of the out of state for three months and they, I think they dropped the monthly price down to a dollar or something, just to keep it active in the background.

And then the other one was suspending your auto insurance. So again, Geico, USAA, Allstate, any of the major auto insurance providers, you just tell them, Hey, I'm going overseas. Here are my deployment orders, and I'm going to be storing my car at this address. And as long as nobody's using it.

Then you can suspend your auto insurance. And for USAA, actually, when I went overseas for two years, they had special overseas military coverage. And I think it was very cheap. I think it was like $30 a year. And it allows you to keep building your USAA membership continuity. So you get several, you keep adding years to your membership, which pays or increases your USAA membership dividend that gets paid out annually.

And it also allows you when you rent a car overseas, you're still covered by your USAA insurance, but it's only $30 a year. So on, once you like from. For myself, I have Chase Sapphire Reserve and Amex Platinum. I usually use the Chase Sapphire Reserve for rental cars because it has primary rental car insurance.

And then on top of that, with the USAA 30 a year I've also got auto insurance through USAA to cover me as well. So you can save, depending on your, especially if you're younger, under the age of 25, usually your auto insurance rates are much higher. Suspending your auto insurance when you are deployed overseas can be a great way to save money.

So while you're deployed, you could go on a spending freeze and essentially drop all of your expenses to zero. Now, if you've suspended your cell phone service, like we talked about, or if you're, maybe you keep it active because you want to stay in touch with people. I think that's a great way to do it.

But if you've got your other utilities in vacation mode, you suspended your auto insurance. While you're deployed, you're getting all of your lodging paid for, you're getting all of your food paid for. You really don't have to, gym membership is free. There's really nothing to spend money on when you're deployed.

I don't know about you, Jamie, but occasionally I would order some stuff from Amazon just to have a package to look forward to. But when I didn't have any friends or because I didn't have any friends that are, yeah, nobody sent me care packages. All right. That's a sore subject, what about you, Jamie?

Did you find, besides, you, when on your deployments. I would, I'm guessing you had the wife and possibly a kid or two back home, so obviously they couldn't stop spending money, but did you notice that your own personal expenditures dropped significantly while you're deployed?

[00:09:31] Jamie: For sure, we, because I'm the spender of the relationship, even our, eating out costs and grocery costs, stuff like that went down clothing I did. Still spend a little bit, these quote unquote deployments that we were talking about where I still went to the, BX and did a shelf check and I would buy random crap or there's one like shawarma place in Kuwait where we would go a couple times throughout the deployment by Chinese food or shawarmas or bounce back and forth for the halfway point or almost time to go home kind of thing.

I remember one time. On the other side of Kuwait, there was a McDonald's. And so we like drove, loaded up in a van and drove to McDonald's one day. And I don't remember why, but we were still spending a little bit, but we were able to significantly cut costs for sure.

[00:10:17] Spencer: I see a lot of people when they're on deployment, they're going to the BX, a couple of times a week, they're shopping online a lot, maybe they're spending a lot on video games and stuff, and I, that's great if you're using that to entertain yourself, but if you're just if it's unconscious spending of just mindless.

Then I think there's definitely other things if you want to, if you have the time, if you have the resources, you can download some Kindle eBooks or you can listen to some podcasts. There's a lot of things that you could spend your time doing that are going to make you a lot wealthier and richer.

Then, spending money at the BX on, on, whatever crap they have on the shelf.

[00:10:55] Jamie: Yeah, for sure. Or just be healthier, with exercising, eating well, stuff like that can go a long way too, depending on where you're deployed. So there's a lot of things you can do other than just wasting time, spending money mindlessly, like you said, but really just imagine if you had a savings rate while you're deployed, if you're single, your savings rate easily should be 95%.

Or around there on a deployment. If you're married, you might be able to still hit 70 or 50%. If you're married with kids, maybe you're closer to 50 percent to 30%, or depending on where you're starting at, but there are some definite goals you can make if you are just intentional with it. And use this as an opportunity to really accelerate your financial independence journey, or to get out of debt, if you're still in debt.

[00:11:40] Spencer: Okay. So those are some good tactical tips for people to apply whether they're in the middle of their deployment or about to go on another deployment.

Jamie, are there any other ideas that we could have for people in terms of reducing your expenses?

[00:11:57] Jamie: Yeah. One other common one you'll see, especially for younger single types is you may even break your lease which you're allowed to do under protections of law when you're presented military orders.

You could give your military orders to your landlord and get out of your lease. So let's say, you're in downtown Seattle, and you have an apartment or a condo that you're renting, and you could then bank your BAH. You pay a small fee for moving your stuff into storage and then storing it in a storage facility, and maybe, you sleep on a friend's couch or something like that for a couple of weeks during your pre deployment training or during your R&R or whatever it is when you get back and then you just move right back into a new apartment.

So there's a little bit of turmoil and a little bit of pain potentially of moving your stuff, storing it, things like that, but. You're allowed to break your lease and then you can take that BAH, like I said, and just bank it towards your financial goals. 

Another idea, which you Spencer actually did is you guys rented out your place on Airbnb during one deployment, right?

[00:12:57] Spencer: Yeah, that's right. We had a condo in Tacoma, Washington, when I was stationed at McCord air force base. And that was actually one of the most financially beneficial things that we did was rent out the place. The first time, the first deployment, we rented it out and we had a minimum rental period of two weeks.

I might've, I think it was two weeks. And so the problem there is we hadn't really set up a system to have someone turn it over for the next guest. And we ended up just relying on our friends and it was good. We made, I think, a couple thousand dollars. Over the two or three month deployment that I was on, but we, there was a little bit of turmoil with turning over the condo from one guest to another, and then by the third deployment, we were still, we were happy to rent out the place, but we didn't want to deal with any of the turnover stuff.

So what we said was it was a one month minimum lease and we ended up getting a couple in there. And they rented the place for the whole deployment when I was gone, making, I think we ended up making three times our mortgage payment per month. So it was actually we paid off six months of our mortgage and just two months of renting the place out.

So yeah, short term rentals are awesome. Yeah, that's there's a lot of things that you can do with short term rentals, a lot of money making potential there, but we found that and, check with your homeowners association or if you're in a condo, there might be some rules and regulations you have to do if you're going to short term lease out your place.

But usually, as long as it's a minimum of 30 days and you own the place, sometimes even, landlords will let you sublet. So if you have, if you have a buddy who's coming into a new duty station or is about to PCS and they want to move in, save some money somewhere, then you might want to look into subletting your place and, basically having your rent or mortgage covered, and then you get to bank the BAH while you're deployed.

[00:14:56] Jamie: Yeah, that'd be great. The other way in addition to decreasing your expenses, the other way you can benefit financially from a deployment is by increasing your income. The best way to do that is some of the special advantages we have for deployment. One of the big ones is CZTE, we'll call it tax repay, but combat zone tax exclusion is really just where they don't take federal taxes.

I don't pay state taxes. I'm a Florida resident. I believe most states, or if not all of them wouldn't charge state tax. Is that true?

[00:15:27] Spencer: I believe that's correct. I think if you're getting The fed, the federal month tax free. I think most states also give you that month tax free as well.

But I was lucky enough to become a resident of Texas when I was in my first training duty station. So I haven't paid taxes in 12 years.

[00:15:47] Jamie: Same. Neither of us had to deal with that. No, we went to school in Florida, so we've been Florida residents our entire adult life for my wife and I, but tax repay is great.

So basically to summarize that at the most basic level is if your take home pay from the military is $80,000 a year and all of it is earned tax free, then to the IRS, you earned 0 from working for the military during that year, which means you have no tax burden. Now, if you have investments or anything else where you're earning income aside, hustle, you may still have taxes from that, but from your pay.

It's tax free. And so you will either get a fat check back in April from the previous year, or the best part is you get paid more each year. Once you're on deployment and they say you're deployed, then they stop taking taxes out. And that's where it really is great. So tax free is a huge benefit that's unique to being in a certain location.

And like we said, the proper term is CZTE, and those tax free locations are primarily in the Middle East, but there's a few random gotchas. And when you're in that area, even for one minute of the month, you earn that entire month's pay tax free.

[00:16:57] Spencer: Yeah, one thing to know is that the exclusion is limited for officers up to the highest E nine bracket, I think.

[00:17:07] Jamie: So I can't remember the air force pay. So I looked at that this year with a pay increase and some other special pays and your tax free you may not get all of it. If you're making probably O-4 level or O-5 level for sure it won't be 100 percent tax free up to that max cap of chief mass sergeant of the Air Force level.

The E-9 senior enlisted for the service E-9 pay.

[00:17:32] Spencer: Yeah. So like Jamie was saying, I think you usually don't have to worry about it until you're getting on in the years as a major, lieutenant colonel and then you're still going to get a lot of your pay tax free. It's just that you might have to pay federal taxes on a little bit of your pay.

And then you'll also note that when you look at your LES, if you get a tax free month, you are still on the hook for Medicare taxes and social security taxes as well. So it's only the federal income tax that is actually not taken from your paycheck when you're in a combat zone tax exclusion area.

And the easiest way to figure out, am I in a tax exclusion area is just Google “CZTE IRS”, and they'll, they have a great website there and they lay it all out and note that it's not determined by the IRS CZTE areas are dictated by either congressional action or executive order.

Don't go blaming the IRS if you're not getting tax free pay for being, even though you're deployed to a combat zone, I would say that in general, most of the classic areas are, the Persian gulf, but it's funny because you could be in Bahrain or in the United Arab Emirates, on vacation and essentially on vacation Abu Dhabi or Dubai, and you're still getting the same tax free benefits that something deployed to Iraq or Afghanistan is.

[00:18:56] Jamie: Asfar as tax free goes, it's the same, but that's a good segue into one of the other special pays is hazardous duty pay. And that kind of comes up depending on where you are and the danger of that area. 

So hazardous duty pay is another opportunity to increase your income. Anything on that one?

[00:19:17] Spencer: No. I can't remember. I think I've received hazardous duty pay for a couple of locations. I know I've received hardship duty location. I think that one was about $150 bucks. Hazardous duty pay. I can't remember. It's a couple of 100 bucks. And then the other one that you'll get depending on your location or depending on if you see action.

So for instance, if you're in an aircraft and you're engaged by enemy ground fire or a missile or something. Thanks for joining. You might see hostile fire. Slash imminent danger pay, and you'll see that on your LES as IDP imminent danger pay. And I think that one's only $225 a month right now.

[00:19:55] Jamie: So the imminent danger pay is per day in the combat zone. I think it's $750 a day if I remember correctly. And this is a recent change, maybe seven or eight years ago. So hostile fire pay, if you are, like you said, Spencer, if you're engaged, you're shot at, your FOB is attacked, mortar attacked. Then you get hostile fire pay for the entire month, which I believe is $225 if you're not, but you're in an area where you're in imminent danger, say you're in Afghanistan, but you're not actually engaged.

Then it's just $750, I believe per day. So those two go hand in hand, depending on the danger and the threat of the area that you're at.

[00:20:33] Spencer: Yeah. One of the other pays That a lot of people can forget about, especially if you're on a TDY is family separation pay. So once you, I think it kicks in, is it 30 days separated from yep.

It's 30 days. And that's something that, people can lose track of, they might go on a TDY that's supposed to be only three weeks long and it ends up being five weeks long. They get back, they filed their DTS voucher and they go about their life. That's, if you don't follow up with finance and say, Hey, I was gone for this amount of time, then you'll never see that pay.

So usually on a deployment. It's, they have just a script and they'll run through it and they'll make sure that you get your family separation pay. And I think for most of my deployments, I actually didn't receive it while I was deployed. I just filed for it when I got back and then got it in a lump sum.

Was that your experience?

[00:21:21] Jamie: I'm a, I'm a. A little more aggressive spreadsheet taker, keeper, maintainer. So I was like day, day 31, I had a reminder in my phone to go set up my SDP and start family separation pay. I'm all about, every day that the government pays me, what I'm entitled to is another day I can apply that towards debt or financial independence for most of my deployments, at least the first.

I guess maybe two, two, I was in debt and two, I was out of debt off top of my head. I would, I believe. So every day you can try to go to, if you're at a base that has a deployed finance Kuwait Bagram, Baghdad, all these places that won't even be around in a couple of years, probably hopefully not.

I, indeed. And you have a finance office, then take advantage of that. If you're stuck on a ship, I'm not sure exactly what they have on there, but I'm sure there's a way to file stuff like that. I would highly recommend trying to do it the day you're eligible versus waiting to the end of your deployment.

It just gives you more money to use towards your goals in the middle of it. Another interesting note about family set family separation is actually allowance. So Spencer, can you describe a little bit of the difference between an allowance, if something is imminent danger pay. And it ends in the word pay.

What's the difference between that and family separation allowance or BAH, BAS that are both or any of the other allowances, right?

[00:22:41] Spencer: The biggest difference is just how they're taxed. So any pay is going to be subject to federal income tax and then any allowance is not. 

[00:22:52] Jamie: Yeah, one of the big benefits about our BAH is that it's not taxed.

And so what you're actually feeling you're getting paid in the military is a lot lower than what the IRS is billing you for tax purposes. Family separation allowances are currently $250 a month. So it's not a ton, but Depending on your pay grade, that could be a nice little chunk of change to throw towards your goals for sure.

[00:23:16] Spencer: So now that you've decreased your expenses and you understand how you're going to increase your income, the other thing we didn't mention as well is depending on your location, you might be receiving per diem as well. So for most of the combat zone tax exclusion areas, I think there's a clause or provision that reduces your per diem to $3 and 50 cents a day.

But, after a 100 day deployment you can take your wife or husband out for a nice dinner for the $350 you earned, but some locations, it can be substantial depending, especially if there's no dining hall available and you have to procure your meals out on the economy.

So now that we've decreased our expenses, we've increased our income. Let's talk about some of the unique investment opportunities that are available. So one thing you mentioned earlier, Jamie, was the SDP. 

Do you want to walk us through what the savings deposit program is?

[00:24:15] Jamie: So, the SDP is a great opportunity to get a guaranteed investment.

And this may sound like a scammy thing, but it's, this isn't like investing in Jamie or Spencer. It's a Federal government program called the savings deposit program. And if you call right now, the first hundred callers from this podcast, just kidding. No, it's available to anyone that's deployed and you can open it after 30, 30 days of deployment.

You can open your SDP and what it gives you is you can do up to $10,000, right? Guaranteed 10% annual return, and you can keep it open while you're deployed. And then up to three months after you return from your deployment. So if you are in a position where you're debt free or you have some extra money available, using the SDP while you're deployed is an excellent way to get 10 percent return with literally no risk because it's backed by the federal government as a benefit for your deployment.

[00:25:14] Spencer: One thing I always did when I went on deployment was I made sure that before I went, I built up my emergency fund to at least $10,000. And then I had that money available to throw into the SDP. Now, unfortunately, recently they've changed the rules substantially. So you have to be in the combat zone for 30 days.

I believe before they even start counting your pay and then you have to, you can only contribute pay that's not allocated. So for instance, if you put $1,500 a month into your TSP, that's deducted from your pay available to contribute to the SDP you can still deposit through the, they. A couple of years ago, they were using the eagle cash card.

I'm not sure if they're still using that. But when I first got in and we were just writing checks because it was the 1820s and Abraham Lincoln was still president. But, yeah, the SDP is, it's a fantastic opportunity, 10 percent guaranteed return. And if you throw the full $10,000 in there, you can essentially earn a risk free $1, 000 per year off your $10,000 investment. Like I said, I always made sure that my emergency fund was topped up to $10,000. And then I threw my entire emergency fund into the SDP. And then I try to keep it in there as long as possible. So once you leave the combat zone, the SDP will remain open for 120 days after you depart the combat zone.

And if you're lucky or unlucky enough to be redeployed to a combat zone during that 120 days, it resets your clock and allows you to continue to keep the SDP open. Interesting side note. One time they. I hit the tax free zone during the 120 days, but somehow, the paperwork didn't get through finance and get to DFAS, and they ended up paying me or they essentially saw that I hit 120 days since my last tax free zone, and they sent all the money to me.

I sent them an email and said, Oh, there's been a mistake. Like I was in a tax free zone on this day. And it was a pretty funny correspondence because they essentially said it's too hard to open the account back up. So I'm just going to credit your account, $250 of interest.

[00:27:37] Jamie: I think it's it's only, I think, 90 days after deployment, I'm just, I'm looking at it now, but I think it's 90 days, but yeah, and another way you can be eligible for the SDP, this is a unique one, probably only for maybe someone on sea duty or for.

Air crew, maybe. But if you have one day in each of the three consecutive months, you can also participate in the program. So if you're a young crew member who's going TDY a lot and hitting tax free zones, you have three months in a row of tax free and you can open the SDP and keep it open by continuing to get a tax free at least once every 90 days before it closes.

And then it continues to stay open. Another concern some people have when you're talking about A lump sum of 10, 000. You can't quite open it initially with 10, 000. They have limits on how much you can contribute. Like you mentioned, Spencer, I think it's no more than your base pay per month. Are you familiar with that?

I'm going to try to look it up. 

[00:28:35] Spencer: Yeah that's right. So you can contribute as like I was saying your base pay minus any allocations that you have. So if you have money going into the TSP they deduct that money. So if you, let's say your base pay is 5, 000 a month and you're contributing $1,500 to the TSP, then they'll say, okay, you have $3,500 available to contribute to the SDP.

So if you were deployed for three months, then $3,500 times three is $11,500. And then you'd be by the end of month three, you would be able to contribute the final amount into the STP up to the $10,000 limit. Another thing to know is the 10 percent interest. It is only paid up to $10,000. So even if you leave money in there it just continues to grow 10 percent on the $10,000.

So that happened to me when I was, I opened up my SDP when I was deployed, excuse me, PCS to Abu Dhabi. And I had my SDP running for two years out there with $10,000 in it. And every year I just made an extra thousand dollars. So it didn't continue to compound once, once you hit that $10,000 limit.

[00:29:49] Jamie: That's interesting.

That's a unique situation. I guess most people probably don't get that's unique. And one other note I just found is the SDP a reminder. I did know this at some point, but the interest compounds monthly. And it's paid quarterly. So you can divide 10 by 12 and figure out your monthly gains.

So that's how the SDP works. Definitely a great benefit, definitely something to take advantage of just knowing that you got to be a little bit patient with getting it up and running and then pay attention to trying to keep it updated and keeping it active. Once you're there. What I started to say earlier about a concern people have about dropping in $10,000 is locking that money up.

Should an emergency arise and you're, you are able to take money out. Should something happen like a family emergency or something like that, you just need your commander's approval. So during my deployment I've seen people have to pull money out in a family emergency kind of situation, and it was like the first O-4 in the chain that was designated as a commander was able to sign that paperwork for them.

And it was not a big deal to take out what they had deposited into there. But hopefully you're in a situation where $10,000 being locked up for the duration of your deployment isn't going to be a make or break kind of deal. So that's a lot about the SDP. You have anything else to add, Spencer?

[00:31:10] Spencer: The only other thing I'll add about that is maybe it's because I was in O-3.

I'm not sure, but I was actually able to request the money one time. I needed the money a little bit. Earlier out of my SDP, then when it automatically withdraws and deposits to your bank account, the other thing to note there too, is when the money automatically withdraws and deposits your bank account, it just goes to the same direct deposit that you have on file with my pay.

So you just have to make sure that you're getting your monthly paycheck and then the SDP will go to that same account. But I was actually, I think I was able to go on to my pay and request the withdrawal. And it was automatically approved and I had the money within three days. So I might've already left the combat zone at that point.

Yeah.

[00:31:56] Jamie: If you're that checks, if you're, if your deployment is over, you can withdraw on your own, if it's during the deployment, that's when the commander. Endorsements needed but a lot of goodness there. Definitely something to research. Another great investment opportunity is your ability to invest in Roth retirement accounts, Roth IRA, Roth TSP, basically everything Roth is a good rule of thumb when you're getting ready to deploy.

Why would we recommend Roth as a deployment benefit or strategy?

[00:32:25] Spencer: I guess Roth accounts open up the triple tax benefit of military deployments. For military service members. So when you're deployed, right? Like we were talking about, you get your CZTE, your combat zone tax exclusion pay, and you're not paying federal taxes on that money.

And what Roth accounts allow you to do is contribute funds to the account and the money grows tax free. And then when you get after age 59 and a half, you can pull the money out of your Roth IRA or Roth TSP account. And again, you don't pay taxes on it. So let's review. You earned the money tax free, it grew tax free.

And after age 59 and a half in retirement, you can pull the money out tax free. So you never paid money on that tax or you never paid taxes on that money. 

[00:33:14] Jamie: In 40 years or so.

[00:33:15] Spencer: Exactly. Hopefully if you're smart about it, you put this money into, let's say you went on deployment, you're 25 years old and you put 6, 000 into your Roth IRA and you put it into, just a traditional Vanguard index fund, total stock market index fund.

It grows at 7 percent a year. And now at age 65, you have to pull that money out. And it's doubled, let's see, four times, so that'd be 6, it's going to be over $48,000 of cash sitting there and you are going to be able to pull all that money out tax free. And you never paid taxes on it when you earned the money.

It just sat in there and you never had to pay taxes on the dividends while it grew in your Roth IRA. And now in retirement, you get to pull it out tax free. So this is really a. A very unique military benefit. If you go and talk to a CPA or a tax advisor or a financial advisor, make sure you ask 'em the question about how would you contribute combat zone tax, exclusion pay, or how would you invest your combat zone tax exclusion pay?

Because, and if they can't answer that question, or if they don't realize that money is untaxed, it can go into your account. And grow untaxed, and then you can get it back in retirement untaxed. If they don't realize that you have that benefit, then maybe you should look at using a different financial advisor or CPA, or just show it to them and explain how it works to them.

And if they get it right away and they realize wow, you have a very unique opportunity here because, 40 years of contributions. To a Roth IRA, if you maxed out five to $6,000 a year into your Roth IRA, invested in a very low cost Vanguard index fund, you'll have over a million dollars in a Roth IRA by the time you retire.

[00:35:06] Jamie: Yeah. We've had a similar experience with CPAs and investment guys before. Typically when we show them, especially with spouse taxes is a very challenging situation to try to convince them of. You really need any time a spouse goes for a new job. Whenever you PCS, you have to reteach that company's HR department about those tax laws, for example, for us, like I said, we're Florida residents and it's a hundred percent legitimate to claim Florida residents because that's where we commissioned from.

We entered active duty in Florida or for you being stationed in Texas in the past, a hundred percent legitimate, not shady at all, and so we're taking advantage of the opportunity to be Florida residents, but for the military to move us around. So as we move around, my wife does not pay Alabama taxes on her income that she earns here while we're ordered to be stationed here for the military.

She pays Florida taxes, which in our case is none. And so that's another great thing, Spencer is, you really have to both educate yourself and educate those around you sometimes on, on some of these benefits. Source documents, IRS. gov and things like that are going to be better than what your friend said on Facebook.

So just keep that in mind to do your research and be prepared to present good evidence.

[00:36:21] Spencer: Yeah. One thing I messed up there was it's not a million dollars in your Roth IRA. If you do the $6,000 contribution over 40 years at 7%, that ends up being 1.28 million in your Roth IRA. And then based on the 4 percent rule right there, you can pull out what's that can be like 50 Yeah.

$51,000. Yeah. Pull a year off of that money. Tax free. You're never paying any taxes on it. So that's, and I, again, like $51,000 tax free, you would have to earn maybe 60 or 70, 000. Of taxable income to get the same spending ability that $51,000 of tax free income gets you. So it's really, it's a 1.28 million Roth IRA account, but if you put the same money into your traditional TSP, you would have to be maybe a 1.6 or 1.8 million traditional IRA. And the other we talked about the Roth IRA. The other one I want to mention is the Roth TSP. So you have two options with your thrift savings plan. You can contribute to your Roth TSP or your traditional TSP.

If you contribute to your traditional TSP with CZTE pay, the contribution is untaxed and is withdrawn untaxed. So the TSP keeps track of your CZTE contributions. To, to the TSP, but if you contribute the, your CZTE pay to your Roth account, then they don't have to keep track of it because it's going to come out untaxed in the end anyways.

Again, with the contribution limits and 2022, there were suspecting that they're going to go up to $20,500 a year, plus probably a $6,000 Roth IRA contribution. If you're deployed in 2022. Or 2023, you could probably get over $25,000 of tax free pay into these Roth accounts. And again, triple tax benefit, it's going to grow on tax.

It's going untaxed. And then when, after age 59 and a half, you can pull it back out. Untaxe.

[00:38:21] Jamie: It almost sounds too good to be true, but it's just one of those military benefits that Congress and the law allow because of how they value deployments. And just because you're not, in a FOB in the middle of nowhere in the mountains getting shot at every day doesn't mean you're not entitled to some of these same things.

So it's nice to know. It's one of the great benefits, our pay in general. Does not compete with the civilian sector, but things like this, the SDP tax benefits of CZTE pay deployment pay. The way BAH is not taxed, things like that can help catch us up to our civilian counterparts. So again, invest in the SDP, take advantage of raw things.

We've talked before about diversifying between Roth and traditional. It is a decent strategy and is good, but on the deployment, probably not the time to diversify. You probably want to go all in with Roth while you're not being taxed on your contributions and take advantage of that triple benefit that you were mentioning a minute ago, Spencer.

[00:39:21] Spencer: One thing that I think military deployments really provide for military service members is an opportunity to start getting ahead. And I know psychologically that was one. Of the toughest things for my wife and for myself after we graduated from college and I was, I'd gone through a long training pipeline.

It took about 2 years. We had a lot of student loan debt. I had over $60,000 of student loan debt. We were paying off the debt. So our net worth. Was increasing every month because we were paying off our student loans, but we weren't accumulating any income producing assets. So I felt like I was running as fast as I could just to stay in place.

We had cut our spending to the bone. We were making 50 percent more payments every month in our debt than was required. It was, I didn't feel like we were getting ahead at all. And it was very, it was tough psychologically. To think why are we making these extra 50 percent payments on this debt?

Wouldn't we, would we enjoy life more if we cut back on the payments a little bit, or if we weren't saving as much. And honestly, at the time we weren't even saving that much. We were just, we were paying off the debt and we were maxing out my Roth IRA. We weren't even contributing to my wife's Roth IRA.

By the time I got to my first deployment, I'd finished my training pipeline. I was a first Lieutenant. So it was an O-2. I had just promoted at, at the year, at the, 24 month the two year mark and on the pay scale, you get a pay bump when you're a three year, O-2, it was right in the middle of my first deployment where I got that I hit that three year mark, I was making O-2 pay.

I finally, it was on deployment when I finally felt like we were starting to get ahead. What we did on that deployment was we maxed out the SDP. So we put the full $10,000 into there. I saved up cash and actually I tapped into our emergency fund a little bit because I could see the goal line.

I could see the finish line for the USAA career starter loan. And we talked about that in episode nine about how to smartly use the USAA career starter loan. But I had $5,600 left on it in the middle of my deployment. And I had, I think it was probably $6,000 in my emergency fund. And we also had the money in the SDP as well.

We had access to other money and I just thought, Oh man, like this is it. I could knock this off. And I could be done with the USAA paying off my USAA career starter loan two years early and it was so liberating. We, because my payment was $471 a month. And so on the USAA career starter loan.

And so by knocking that out now, essentially the rest of my life, I had $500 more a month in my pocket that I got to choose what I got to do. What I want to do with that money, whether it was spend it, whether it was invested, to achieve financial independence, it was awesome.

And that was what, on my, that was what my first deployment allowed me to do was start to not just get ahead on the spreadsheet, but feel like I was getting ahead emotionally and psychologically.

[00:42:29] Jamie: Deployments can be so tough for both the member that's gone and the families back home. So being able to identify the big wins like this, and you might not be able to do it until you're looking back on it, 11 years later in your case or whatever, try to recognize the benefits that it can bring.

I'm definitely not saying go volunteer for all the deployments to make more money because that's not what matters in life but. If you do have to go or it's right for you and your family and you choose to go, then recognize there's some things you can do to help set your family up for success.

Now, if you're looking at, do I take this deployment that they're asking me if I want to go on and it say it's nine months long and running the numbers, it's going to allow me to achieve financial independence 22 months earlier. Then you have something to weigh. 

Is it going to be hard for us to be gone? Of course, it's going to be hard for you to be gone. If you're in any kind of normal family and by normal, messed up family that loves each other most of the time or tries to, at least it's going to be tough, but there are huge advantages. And I think the financial aspect is definitely one side of it.

And there's a whole nother side of the non deploy non financial stuff of a deployment where you can make huge gains as well.

[00:43:49] Spencer: Yeah, that's right. A deployment can be a really great opportunity to grow, not just financially, but in so many other aspects of your life. So I know I had a deployment. It was going to Al Udeid in Qatar.

It was supposed to be for six months. I managed to dodge it by volunteering for two years in Abu Dhabi. But some of my goals that I set for myself before I headed out there was, first of all do your job and do it well, like you, you join the military they're deploying you, hopefully they're deploying you for a reason and you're going to have actual work to do while you're out there, first and foremost, do your J.O.B. And then once that's set and you've got that taken care of, then you can move on to the other goals. For myself, I found that, once I got to the deployment, it took me about a month to get comfortable in my job. And then once I was there, I could focus on some of the other things I wanted to do.

Some of which were workout six times per week. And I primarily just focused on a lot of running and weightlifting at least in Air Force deployments, we tend to have really nice gyms, but I've been to some pretty remote, army and marine bases. And even there, they usually have at least some kind of weight equipment or TRX or something that, that you can keep your fitness keep your fitness up.

And then the other one was. There's, and the dining halls, there can be a lot of trash food, but just focusing on vegetables there's almost always, eggs and chicken and stuff you can get a lot of protein out of that and then just water, a lot of the deployed locations are hot.

And you just got to, you got to stay hydrated or are you going to get behind on your health and then also reading at least one book a month. I know some guys who can knock out a book a week but I'm actually not that person. I like to just read slowly, take notes and savor and enjoy the book.

Deployments can be a great time to focus on your physical health, your financial health, and just. When you leave the deployment, you really should, hopefully you should look back and think man, like I, I grew so much richer on that deployment, not just financially, through knowledge through fitness and there's, you can listen to podcasts, you can read books, you can read blogs.

If you have, if you have internet out there and if you don't have internet, then you can go and grab hardcover books. And if you have a Kindle, you can download the MWR. The DOD military libraries are excellent and they have so many free books. I've been using the Libby app, which I think is replacing the overdrive app, or is like a compliment to the overdrive app.

And it's fantastic. You can get just millions of books on there and send them straight to your Kindle. And it's a great way to continue to grow your knowledge.

[00:46:41] Jamie: Yeah on one deployment, my first one, I guess I actually doubled up on master's classes during my first master's degree.

I took two classes at a time because I didn't have, when I wasn't working, when I wasn't flying, I had the opportunity to just do more schoolwork than I would if I was at home with my wife and one kid at the time. Even if you're working 12 hours a day on a deployment, you don't really have anything else to do other than eat.

Work out, sleep, and then rinse and repeat your 12 hour cycle. Now, obviously, like we said before, some people are going to be in a more remote location where maybe you're at more of a FOB spot for a few weeks or a couple months, and then you get to come back to a main base like a Kandahar Bagram, then take advantage of that time to really achieve some of those goals, check in, do all these things like downloading more books or podcasts like we talked about.

Even if you don't have the opportunity to do it every day, there's still the opportunity to set personal goals that aren't just financially related for sure. And make yourself better despite the situation, despite the fact that you're gone away from your family and your loved ones, take something positive away from your time deployed.

[00:47:50] Spencer: One thing I want to mention before we start wrapping up here is a more advanced technique while you're deployed is a traditional IRA to Roth IRA conversion. And you can do that almost tax free or actually tax free up to the standard deduction and possibly even a little bit above if you have other tax credits like a child tax credit or something.

And what that allows you to do is if you put money in, let's say like for me, I had the two years of tax free and one of those years, 2018, the entire year, every single month was a tax free month because I was technically in a CZTE for the entire time period. So what I did was I made traditional IRA contributions in the years leading up to the deployment because my income and my wife's income was high enough that traditional IRA made more sense in the Roth IRA and then in the 2018 time period where my.

Income dropped to zero according to the IRS because of the CZTE pay, I converted my traditional IRA to the Roth IRA, I paid my taxes on the conversion, but because I had no taxable income, it was pretty easy to pay the tax and then anything above the standard deduction was just 10%, the lowest tax bracket.

And that allowed me to move money from my traditional IRA to my Roth IRA and pay very little taxes on it. So that's more of an advanced strategy. And I just, but I just want to mention it because it was something that no one had really shown me before. And, if you Google traditional IRA or traditional IRA to Roth IRA, Tax conversion, military deployment.

You should see my article pop up there and I walk you through how to do it. I did it on Vanguard. It was very easy, very minimal taxes. And it enabled me to get, additional 20, 30,000 from my traditional IRA to my Roth IRA. And now I'll be able to grow that money for years and then pull out tax free in retirement.

[00:49:50] Jamie: That's great. We talked a lot about Everything today from tax repay, some allowances like family separation allowance, cutting expenses, pausing your phone bill, pausing your utilities, cutting down on your insurance coverage things like that. 

But Spencer, what would you say are the three main takeaways that you would have out of all the topics and suggestions we had today for the listeners and then I'll follow.

[00:50:14] Spencer: Sure. So my three main takeaways for the listener is make sure you are maximizing your Roth TSP and your Roth IRA contributions while you're deployed. The triple tax benefit of the Roth contributions from CZTE pay are huge. They can really set you on the road to financial independence much more quickly than your civilian counterparts.

So that's number one. Number two, reduce your expenses to near zero as possible when you're deployed. Take the time to cut your subscriptions. If you have a lot of entertainment subscriptions, maybe it's now the time to call and see what you are actually using and what are you still getting value from and what are you just paying for because you've been paying for it for years.

So use the opportunity of a deployment to reduce your expenses. And then number three, boost your income and your knowledge. You should leave the deployment much richer in experiences, knowledge. And financial wealth. And one other thing I'll mention is after the deployment, when you get home, take time to decompress, spend time with your friends and your family and your loved ones, go travel, go see a family member, a grandparent.

Or someone that you haven't seen in a long time and relax, take the time to decompress before you jump right back into work. And especially for, a lot of people who deploy, they deploy very often, if you're in the special forces community, you might be on a six months on six months off routine and you need to take that six months at your home and invest in your family because when you leave the military, the military is going to be done with you.

You want your family to still be there for you when your military is done with you. So my three takeaways, Roth, TSP Roth IRA, reduce your expenses and boost your income and your knowledge. And then bonus takeaway is just take some time to decompress when you get back from your deployment.

[00:52:04] Jamie: I think that's really important.

I just want to reemphasize the fact that you may see things on your deployment. We, they make us take these, the DHAs what does it stand for? Deployment health assessment or whatever. And, for 99 percent of people deploy, it's can seem like a waste of time and, I'm not considering suicide.

I didn't see anything crazy. I, I'm fine. I'm fine. I'm fine. I'm fine. But in reality, Some of your buddies, or even you, may have had an experience where you need to talk about it, and that's okay, too. Please don't miss the opportunity to make yourself fully well after a deployment. If you need to go talk to a Military One Source.

Counselor or MFLC or something like that, take the time to do that and get fully recovered. Integration with the family is tough. And, so I can speak from my soft air force deployments, even just something as simple as coming back in and parenting again with a child or with multiple child children.

The spouse was in survival mode while you were gone and they did the chores. They did the bills that whatever they had to do to pick up the slack while you were gone and they were doing it alone. They did it in survival mode. You can't come back on day one and just expect everything to be like it was 12 months ago, right? So that reintegration is going to take time. And that's something you should take very seriously. Now I will step off my soapbox and I will go to three questions. I'll leave with the listeners to ponder because the takeaways you mentioned are so good. I can't top them anyway.

So the three questions I'll leave you with today are how much can I do? 

How far can I go to advance my personal finance journey to get out of debt or to increase my net worth. Just play with the numbers, make a spreadsheet, run some online calculators. Can I cut my savings, my expenses to this and increase my savings rate to this and see what that does?

That goes into question two, which is how much will it advance my journey? I think if you take the time to do a little bit of research and do the math and see that no kidding, if I can cut my expenses, say you're single. You can move out of your house or your apartment and just go all in.

And your savings rate is 90 percent on this deployment, punch that into a quick calculator on Google spreadsheets because you're hip and don't use Excel anymore. And I think you'll be amazed at how far it can advance your journey and accelerate financial independence for you. And then that can be a motivation for you along the way.

Third is just what goals do you have? If you have a deployment coming up or you're going to deploy soon, try to keep this in mind, what goals, both personal, physical and financially do I have? So don't isolate yourself on deployment or when you come back, talk about it with people you're deploying with and before you go set goals.

Talk about what it's going to be like both financially, personal goals and physical fitness, health goals, whatever it may be. So those are the three questions I'll leave to you to ponder with today.[00:55:02]

Spencer: Thanks, Jamie. Those are great questions, and thank you for listening today. This has been the Military Money Manual podcast with Spencer and Jamie.

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