Military Banking Rates

What to Do With Military Sign-Up Bonus


Posted in Savings Account

I received a small bonus when joined the military. It was only $3,000, but it gave me the opportunity to buy an inexpensive car when I reached my first duty station. The military often offers cash bonus incentives for initial enlistments and re-enlistments for positions that are typically hard to fill. If you receive a relatively small bonus like I did, then it isn’t difficult to decide how to use the money. A car was perfect for me. But it might be a little different if you are receiving a larger enlistment or reenlistment bonus – some of which can easily reach the five figure mark.

You need a plan before you spend your bonus money (literally or mentally). Check out these ideas, then adapt them to fit your specific needs.

What to Do With a Military Bonus

Establish an Emergency Fund. The military is a dangerous occupation and it often puts military members at higher risk, both in a physical sense and a financial sense. For example, think about being stationed overseas. Do you have enough money to make an emergency flight home to visit your family if something unexpected happens? Do you have the funds to cover a large home or auto repair? Some things are unexpected, but you can prepare for them by saving cash in an emergency fund. A financial windfall is a perfect first deposit to get you started. By budgeting each paycheck to include additional smaller deposits, you’ll have a stash of cash you can access when you need it most.

Paying Off Debts. Depending on the size of your bonus, you may be able to eliminate the majority of your debts. Getting out of debt is one of the best financial moves you can make. It is the same as making money from investments and equates to an increased monthly cash flow – giving you more money from your paycheck on the 1st and 15th. The increased cash flow can be used to repay any remaining debts, save more in your emergency fund, invest, or increase your standard of living. If your bonus does not cover all of your debts, it is still smart to use the money to pay off some of your debts. Check out the Debt Snowball method if you aren’t sure where to start.

Investments. If you are already investing money for retirement, you can add to your portfolio with the bonus money. If you have not started investing any of your money, now might be a good time to start. You can check with a financial advisor or use the Internet to research all of your investment options. Allocate a certain amount of your bonus to start investing and use the rest of the cash to stash into savings if you don’t want to gamble everything.

Use Common Sense. It can be difficult to get rid of the feeling that your bonus is burning a hole in your pocket but with some perspective, patience, and common sense, you can do many important and financially-smart things with a windfall of cash. Use a percentage rule if you don’t have specific debts to pay off or other immediate use for the money. Put 20% into savings, 20% into investments, 20% into a vacation fund, 20% into emergency fund and so on. Consider the important financial goals you have set for yourself and use the money in increments to work towards meeting each goal.

Ryan served a tour in the US Air Force and is the primary author and editor of Cash Money Life. He also runs the military money website The Military Wallet.