The New Year has begun, and along with resolutions of daily Bible reading and hitting the gym to improve your fitness score, you\u2019ve got another burning question:<\/p>\n
What are you going to do with all that money?<\/em><\/strong><\/p>\n The Defense Authorization Act passed by Congress includes a 1.4% pay raise for active duty military members.\u00a0 Combined with the New Year it provides an excellent opportunity to review your financial stewardship, whether you\u2019re a brand new Lieutenant or a \u201cseasoned\u201d senior officer.<\/p>\n Of course, it is difficult to be wise about your finances when you don\u2019t even know where your money goes.\u00a0 If you don\u2019t have one already, it\u2019s time\u2026for a budget<\/em>.\u00a0<\/p>\n While that may make some cringe or scoff, realize that a budget — even a very basic one — will help you be a good steward of the resources God has given you.\u00a0 While the parable of the talents in Matthew 25 actually goes beyond money, its truth is applicable:\u00a0 all we have God has given us, and He expects us to be good stewards of His stuff.<\/p>\n A budget will give you the freedom to contribute to God\u2019s work, give you disciplined control of your finances, and help you enjoy the fruits of your labor.<\/p>\n As a basic foundation, think about giving to God, paying taxes, and saving.<\/p>\n Offerings, Tithes, and Charity<\/strong><\/p>\n There are many opinions on Christian giving, and the fine details aren\u2019t important here. The universal truth is that Christians should contribute a portion of their income back to God\u2019s work.<\/p>\n Let\u2019s assume that you choose to give 10% of your income to your church or chosen Christian cause. Based on the 2010 military pay scales, an O-1 basic pay was $2,745.60.\u00a0 Work the complicated math of the 1.4% pay raise, and a new Lieutenant can plan his budget on a monthly pay of $2784.04.\u00a0 So, if you were already giving $275 for your monthly offering in 2010, in 2011 you should plan on $278, depending on how you choose to round.<\/p>\n True, this is not based on your \u201ctake home\u201d pay. Personally, I am a proponent of calculating the percentage of charitable contributions on gross pay (before taxes).\u00a0 Though there are a variety of valid theological arguments, in my opinion, this just makes budgeting simple.<\/p>\n Unfortunately, not everything is<\/em> simple in the military pay scale.\u00a0 Consider this, if you haven’t already thought about it:\u00a0 Will you “tithe” off your TDY pay\/reimbursements?<\/em>\u00a0\u00a0You may find that’s a bit more complex than you\u00a0initially thought.<\/p>\n Pay Your Uncle<\/strong><\/p>\n They say there are two certainties, death and taxes.\u00a0 Christians know that death has been conquered, and even Jesus dealt with the ancient version of the IRS.\u00a0<\/p>\n Public funds sustain much in the United States, from roadways to the standing military that daily protects our liberties. While citizens should hold their government accountable for the collection and use of public funds, they should also be willing to support the public infrastructure from which they benefit. In short, don\u2019t be too quick to complain about paying taxes.<\/p>\n Each person\u2019s individual finances will be slightly different, but even a new O-1 will probably pay about 22% of his paycheck back to Uncle Sam. To update your budget, increase all of your tax withholdings from 2010 by 1.4%.\u00a0 This will work as an initial hack, and you can update your numbers when you receive your January Leave and Earning Statement near the end of the month.<\/p>\n Saving and Investing<\/strong><\/p>\n Many financial advisors recommend automatically saving 10% of your income. If you follow that advice, you Ensigns should plan to move about $278 into some form of savings account each month. It is wise at this point in your career to begin to save for larger expenses you see in your future.<\/p>\n Debt<\/strong><\/p>\n It\u2019s also important to pay down debt.\u00a0 This is a particular challenge for many newly commissioned officers who may have debt from necessary purchases or lingering credit card bills from college expenses. Increasing payments to those debts will allow them to be paid off sooner, which is a fine display of financial stewardship.<\/p>\n By the same token, to the maximum extent possible you should avoid incurring new debt.\u00a0 The guy who gets his couch off someone\u2019s curb but has a flatscreen TV and game console isn\u2019t a cheapskate, he\u2019s just on a budget.\u00a0 He\u2019ll get what he can afford now (the TV), and defer other large expenses until he can afford them or absolutely needs them.\u00a0 (In the case of some guys, the \u201cneed\u201d for furniture, beyond a recliner, is often delayed until about the time he gets married\u2026)<\/p>\n What\u2019s Left<\/strong><\/p>\n Obviously, you\u2019ll need to budget for groceries, gas, clothes, and other needs. Everyone\u2019s technique for budgeting these expenses varies. There\u2019s a happy medium between Starbucks every morning and living exclusively off Ramen and Sam\u2019s Cola by the gross. Still, the \u201csmall\u201d expenses can add up to large debt for some people who otherwise have control of their finances.\u00a0\u00a0 Even if you\u2019re not challenged by how much you should allocate for rent or groceries, there are some excellent Christian financial management books and resources that can help you should you need it.\u00a0 The goal is not to be blind to your own finances.\u00a0 Even if you\u2019re \u201ccovered\u201d now, you want to be in the habit<\/em> of knowing where your money goes.<\/p>\n The One Constant: Change<\/strong><\/p>\n Once you\u2019ve updated (or started) your budget, you\u2019ll probably use it less than six months before you have to revise it. Why?\u00a0 Depending on the economy and politics, you\u2019ll probably still see a small pay raise as a result of the new Department of Defense budget each January. Around six months after that, depending on your commissioning source, you\u2019ll have the \u201canniversary\u201d of your commissioning. Depending on your branch of service, you can also expect to see your pay increase with promotions every two to four years.<\/p>\n Each time you get a pay raise, you\u2019ll have to modify your budget, but I\u2019d suggest you use a consistent philosophy: consider your tithe\/offering, taxes, savings, debt, and major expenses — in that order<\/em>. For an easy budget update, simply increase each of these by the same percentage of your pay increase.<\/p>\n Final Suggestion: The Invisible Pay Raise<\/strong><\/p>\n After you\u2019ve budgeted for the increased expenses, you can use the remaining pay raise as you wish, of course, but allow me to offer a suggestion: Try to adjust your budget so that you never \u201csee\u201d your \u201cextra\u201d money. Each time you receive a pay raise consider increasing your charitable giving and savings to a point that you \u201csee\u201d little or none of your raise. The goal is to live off the same paycheck in January that you did in December.<\/p>\n Now why would anyone do a crazy thing like that?<\/em><\/p>\n Using this philosophy keeps you from getting used to a more expensive lifestyle every time your pay increases; one of the side benefits is the financial freedom for amazing opportunities. Granted, your cost of living will undoubtedly rise as years go by, and certain life changes will require consideration in your budget, like buying a house, getting married, and having children. So you can\u2019t entirely \u201chide\u201d your pay raise from yourself.\u00a0<\/p>\n But if you can keep your cost of living fairly constant\u2014rather than raising your lifestyle to match your pay increase every time\u2014you may be less likely to focus on (or worry about) money.\u00a0 Remember, our goal on this earth is not the accumulation of wealth or the presence of a wealthy lifestyle.\u00a0 While money is not evil in itself, it is a means to an end, not an end in itself.<\/p>\n If you can continue to live on something close to your current income, then your pay raises present an amazing opportunity for both ministry and savings.\u00a0 As you rise in the ranks and increase your time in service, your pay increases with the increasing experience and responsibility.\u00a0 If you can live near your O-1 pay level even after being promoted to O-2, you\u2019ll have an \u201cextra\u201d $400 a month\u2014or nearly $5,000 a year\u2014in base pay.\u00a0 That can give you the financial freedom to contribute more to God\u2019s work and store away significant savings.<\/p>\n Though these concepts and the math above may seem \u201csimple,\u201d life is never so cleanly laid out.\u00a0 Each person will have to evaluate their own circumstances to determine their capabilities.\u00a0 Fortunately, by God\u2019s grace the greatest financial challenge for a military officer is generally what to do with the money he has<\/em>, not figuring out how to get the money he needs<\/em>.\u00a0 (In recent memory, outside of involuntary separations there has never been an institutional pay cut in the military.)\u00a0 How you choose to address your pay raises, bonuses, TDY pay, combat pay, tax-free pay, and the host of other ways you\u2019ll receive your wages is up to you; having a budget, however, will at least ensure you actually know you are<\/em> addressing it.\u00a0 More than anything, as a Christian officer you need a heart for God and a proper attitude of financial stewardship.\u00a0 That will guide you in the way you should go.<\/p>\n If you start out your career with a decent budget framework, you will lay a strong foundation for a life of good stewardship and without significant financial worry. If you’re already into your career, its never too late to begin that financial framework.\u00a0 It won\u2019t always be perfect, but you\u2019ll always have a starting point and a plan.<\/p>\n