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5 Smart Ways to Invest a Military Bonus Thumbnail

5 Smart Ways to Invest a Military Bonus

Investment Retirement Funding TSP Military Pay and Benefits

There are several bonuses available to military military members.  They can range from enlistment and re-enlistment bonuses for the enlisted force to aircrew retention and health professional officer bonuses.  The amounts can be substantial so you'll want to get the most from the bonus you receive.

Here are four ways a military member can effectively use a bonus.

1. Pay off Credit Card Debt

While this may not seem like a common investment, if you have a large amount of credit card debt and struggle to pay it off each month, ridding yourself of it will be a strong investment in your future as well as your credit score. Most credit cards carry a high interest rate and carrying too much credit card debt can significantly hinder your ability to borrow in the future and it can also have a negative affect on your security clearance. 

2. Max out Your Thrift Savings Plan or Retirement Contribution

One of the most important parts of financial security is planning for the future. Having a well-padded retirement account can allow you to retire early as well as give you the freedom to do what you want without worrying about making ends meet. If you can, max out the amount to the maximum allowed by law to your TSP and/or an IRA. If you are covered by the Blended Retirement System, make sure you contribute at least 5% of your annual salary to get the government's match.  It's free money.

3. Invest in an Asset or Activity That Makes You Happy

One of the first things everyone wants to do after coming into a financial windfall is buy something they've always wanted or partake of some activity like a big trip. It is o.k. to do so and it is actually important to indulge yourself with a little something to enjoy the money. Just be sure to budget for it appropriately and then don't exceed that budget. 

4. Set Up an Emergency Fund for Your Post Military Years

You'll leave the military at some point.  You'll either separate or retire.  Most of you will look for another job and may have some time without an income or at least an income that is smaller than what you're used to.  Having 6 - 9 months of living expenses covered with funds in an account you can access immediately with no risk of loss will make the transition period less stressful.

5. Create Both a Short- and Long-Term Portfolio

It might be wise to retain the services of a financial advisor to either build on your current portfolio or start one that offers both short- and long-term investments. The short-term portfolio will be used to address the next five to ten years in terms of goals and other financial needs you incur.   You'll want to minimize market risk for any goal that is within 5 years.  This generally means staying away from stocks or stock based funds for these goals.

Then take the balance of the money and invest in long-term financial goals with a higher return, but a potential higher risk, such like stocks and bonds or funds that hold them. It is important to include both short- and long-term financial goals so that you can not only have money for short-term goals but also investments to take care of you in the long game.  

Planning is essential to ensure you make smart investments with your bonus. If you need help determining the best course of action to take with your new-found fortune, follow the tips above or contact a financial planner to discuss your options.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.



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