Finance 101

Reading Your LES

Your Leave and Earnings Statement (LES) is a one-page document that tells you exactly what the Army paid you, what they took out, and what you have left. It is published on the 1st and 15th of every month on myPay. If you cannot read your LES, you cannot manage your money.

Key Sections of the LES

• ◆Entitlements — Everything the Army pays you: Base Pay, BAH, BAS, special pays, bonuses. This is your gross income before deductions.
• ◆Deductions — Everything taken out: Federal tax, state tax (if applicable), FICA, SGLI, TSP contributions, AFVCP, dental/vision.
• ◆Allotments — Voluntary deductions you set up: savings transfers, loan payments, dependent support. These come out before you see your paycheck.
• ◆Leave — Your accrued leave balance, leave used, and leave lost. You earn 2.5 days per month (30 days per year). Use-or-lose above 60 days.
• ◆YTD (Year-to-Date) — Running totals of everything earned and deducted since January 1. This is what matters for tax season.

Example: E-3 at Fort Cavazos, No Dependents

What Is Taxable

• ◆Only Base Pay is subject to federal and state income tax.
• ◆BAH is tax-free. BAS is tax-free. This is one of the biggest financial advantages of military service.
• ◆If you are in a combat zone, your entire paycheck becomes tax-free (Combat Zone Tax Exclusion).

Common LES Mistakes to Watch For

• ◆Wrong BAH rate — Especially after PCS. If your ZIP code changed but BAH did not update, you could be losing hundreds per month.
• ◆Wrong state tax withholding — You are taxed by your state of legal residence, not your duty station state. Texas and Florida have no state income tax.
• ◆SGLI amount incorrect — Should show $30.00 for $500K coverage unless you opted down.
• ◆TSP contribution rate not matching what you set — Especially after re-enlisting or changing your election.

The TSP — Start Now

The Thrift Savings Plan (TSP) is the military's version of a 401(k). It has the lowest expense ratios of any retirement plan in the country — as low as 0.043%. This means more of your money grows instead of going to fund managers. If you do nothing else financially, start TSP.

BRS Matching

• ◆Under the Blended Retirement System (BRS), the Army automatically contributes 1% of your base pay to TSP.
• ◆After 2 years of service, the Army matches your contributions dollar-for-dollar up to 3%, then 50 cents on the dollar for the next 2%. Maximum match = 5% total from the Army when you contribute 5%.
• ◆If you contribute less than 5%, you are leaving free money on the table. That is literally the Army giving you a raise that you are refusing.

Auto-Enrollment and Limits

• ◆Since 2020, all new servicemembers are auto-enrolled at 3% of base pay after 60 days of service.
• ◆2026 contribution limit: $24,500 per year (elective deferral limit). Under age 50, that is your ceiling.
• ◆You can contribute from 1% to 100% of your base pay, special pay, or bonus pay (up to the annual limit).
• ◆Roth TSP option: contributions are post-tax, but growth and withdrawals in retirement are completely tax-free.

Fund Options

Strategy for Servicemembers Under 30

• ◆Recommended allocation: C Fund 80% + S Fund 20%. This gives you maximum exposure to U.S. equities with a small-cap kicker.
• ◆You have 20-30 years until retirement. Market dips are buying opportunities, not reasons to panic.
• ◆Avoid the G Fund trap — many new soldiers leave everything in the G Fund (the default). It barely beats inflation. Move your money.
• ◆If you do not want to think about it, pick the L Fund closest to your expected retirement year (L 2060 or L 2065).

BAH — How It Works

Basic Allowance for Housing (BAH) is the monthly payment the Army gives you to live off-post. It is tax-free and based on three factors: your rank, whether you have dependents, and your duty station ZIP code. Understanding BAH is understanding how to build wealth in the military.

How BAH Is Calculated

• ◆The Department of Defense surveys rental costs in every military ZIP code annually. Rates are updated every January.
• ◆Your rank determines your rate tier — higher rank = higher BAH, because the DOD assumes you need more space.
• ◆Dependency status: "With dependents" rates are significantly higher. One legal dependent (spouse or child) qualifies you.
• ◆Duty station ZIP: An E-5 at Fort Cavazos gets ~$1,371/mo. The same E-5 at Fort Liberty gets ~$1,299/mo. Location matters.

Rate Protection

• ◆If BAH rates decrease for your ZIP code in a new year, your rate is grandfathered — you keep the higher amount as long as you stay at that duty station.
• ◆Rate protection only applies if you are continuously receiving BAH. A break in BAH (like moving to the barracks) resets your protection.
• ◆PCS to a new duty station means you get the new location rate, even if it is lower than your old one.

Dependency Status Changes

• ◆Marriage = immediate upgrade to "with dependents" rate. Effective date is the date of marriage on the marriage certificate.
• ◆Birth of a child also triggers the higher rate, but you must update DEERS and submit paperwork through S-1.
• ◆Divorce may drop you back to "without dependents" rate unless you have custody of a child.

BAH Math: How to Profit

SGLI — Life Insurance

Servicemembers' Group Life Insurance (SGLI) is the military's life insurance program. It is one of the cheapest life insurance policies you will ever have access to. For $30 per month, you get $500,000 in coverage. No medical exam. No questions asked. It is automatically applied when you enlist.

Coverage Details

• ◆Maximum coverage: $500,000 for $30/month. You can reduce coverage in $50,000 increments or decline entirely (not recommended).
• ◆Coverage is active from day one of service and continues for 120 days after separation.
• ◆Traumatic SGLI (TSGLI): Automatic rider that pays $25,000 to $100,000 for qualifying traumatic injuries (loss of limb, sight, etc.). Costs an additional $1/month.
• ◆Family SGLI (FSGLI): Covers your spouse up to $100,000 and each child for $10,000. Separate enrollment required.

Beneficiary Designation

• ◆SGLI does NOT automatically go to your spouse. You must designate a beneficiary through SOES (SGLI Online Enrollment System).
• ◆If you do not designate a beneficiary, the payout follows a statutory order: spouse, children, parents, executor of estate, next of kin.
• ◆You can split the benefit among multiple people (e.g., 50% spouse, 25% each to two parents).
• ◆Review and update immediately after: marriage, divorce, birth of a child, or death of a designated beneficiary.

After ETS: Converting to VGLI

• ◆You have a 120-day window after separation to convert SGLI to Veterans Group Life Insurance (VGLI) with no medical exam.
• ◆VGLI is more expensive than SGLI and rates increase with age. But it is guaranteed-issue during that 120-day window.
• ◆After 120 days, you must provide evidence of good health (medical exam) to get VGLI. Do not miss the window.
• ◆Alternative: If you are young and healthy at ETS, you may get cheaper rates from a private term life policy. Compare before converting.

Financial Rules That Actually Matter

The military gives you a stable paycheck, free healthcare, tax advantages, and access to wealth-building tools most civilians do not get. The soldiers who leave the Army broke are the ones who ignored the basics. These six rules will put you ahead of 90% of your peers.

• ◆Rule 1 — Live below your means. The car dealership outside the gate knows your paycheck schedule. That $45,000 Camaro at 22% APR will eat your entire career's savings. Drive a $5,000 car. Invest the difference.
• ◆Rule 2 — Build an emergency fund first. Before investing, before buying anything — save 3 to 6 months of expenses in a high-yield savings account. This is your "the Army screwed up my pay" fund, your "I need to fly home" fund, your freedom fund.
• ◆Rule 3 — Understand COLA at OCONUS stations. If you PCS overseas, you may receive Cost of Living Allowance (COLA). It fluctuates with exchange rates and local prices. Do not budget around COLA — it can drop suddenly.
• ◆Rule 4 — Tax advantages are real. BAH and BAS are tax-free. An E-5 earning $55,000 in total compensation only pays federal tax on ~$30,000 of base pay. That is a massive advantage over civilians earning the same amount. Use it.
• ◆Rule 5 — Use the VA Loan as a wealth-building tool. Zero down payment, no PMI, competitive rates. Buy a house at your duty station, live in it, then rent it out when you PCS. Do this at 2-3 duty stations and you leave the Army with a rental portfolio.
• ◆Rule 6 — Automate everything. Set up automatic TSP contributions, automatic savings transfers, automatic bill pay. The less you have to think about money, the less likely you are to spend it impulsively.

Common Financial Mistakes

These are the six mistakes that ruin more soldiers financially than anything else. Every single one is preventable. If you avoid just these six things, you will be ahead of most of the force.

• ◆Buying a brand-new car on credit right after Basic. You just got your first real paycheck and a dealership gives you "military financing" at 18-24% APR. That $35,000 truck costs you $55,000 by the time you pay it off. This is the #1 financial killer for junior enlisted.
• ◆Ignoring TSP for your entire first enlistment. If you start TSP at 18 contributing $200/month in the C Fund, you could have over $1 million by age 55 without increasing your contribution. If you start at 22 after your first enlistment, you lose 4 years of compounding that are worth over $200,000.
• ◆Not checking your LES. Finance errors happen constantly — wrong BAH, wrong tax state, incorrect SGLI, double deductions. Soldiers who do not check their LES for months end up owing thousands in overpayments or missing thousands in underpayments.
• ◆Taking predatory loans from on-post or near-post lenders. Payday loans, title loans, and "military lending" shops near every base charge 200-400% APR. If you need emergency cash, go to Army Emergency Relief (AER) first — they offer interest-free loans.
• ◆Spending 100% of your BAH on rent. If your BAH is $1,500, find a place for $1,100-$1,200. Live with a roommate if you have to. The $300-$400 you save every month is $3,600-$4,800 per year in tax-free money that can go straight to your emergency fund or TSP.
• ◆Not updating SGLI beneficiaries after major life events. Got married? Had a kid? Got divorced? If your SGLI still names your parents or your ex, the wrong person gets $500,000. Log in to SOES and update it today. It takes 5 minutes.

Your First Budget — The 50/30/20 Rule

Most soldiers never budget because the military covers so much. Housing? BAH. Food? BAS or the DFAC. Healthcare? Tricare. So when real money hits your account, it feels like it is all disposable. It is not. A budget is the difference between leaving the Army with $40,000 saved and leaving with $40,000 in debt.

The Military 50/30/20 Breakdown

The classic 50/30/20 rule works, but you need to adapt it for military pay. Your BAH and BAS are already earmarked, so the budget applies to your net take-home after those allowances do their job.

Example: E-3 Budget at Fort Cavazos

Avoid Predatory Lenders

There is a reason payday loan shops, buy-here-pay-here car lots, and "military discount" furniture stores cluster around every military base in America. They are there for you. They know your pay schedule, your rank, your financial illiteracy, and your guaranteed paycheck. You are their business model.

The Predators Outside the Gate

• ◆Payday loans — Borrow $500 today, pay back $575 in two weeks. Sounds manageable until you realize that is a 391% APR. The Military Lending Act (MLA) caps interest at 36% for active duty, but lenders find loopholes. Some do not comply at all. If you need emergency cash, go to Army Emergency Relief (AER) first — they offer interest-free loans up to $2,000.
• ◆Title loans — You hand over your car title as collateral for a short-term loan at 100-300% APR. Miss a payment and they take your car. You lose your transportation AND still owe the remaining balance. This is financial suicide.
• ◆Rent-to-own stores — That $800 laptop "for just $29.99/week" costs you $1,560 by the time you own it. That is a 95% markup. Buy used or save up and pay cash.
• ◆"Military discount" car dealerships — The ones right outside the gate advertising "E-1 and up approved! No credit, no problem!" They are giving you a $25,000 car at 18-24% APR with a 72-84 month loan. Your total cost: $38,000-$45,000 for a car worth $20,000 the day you drive it off the lot.
• ◆"Military discount" furniture and electronics stores — Same game as rent-to-own but dressed up with an American flag. They offer "military financing" at rates that would make a loan shark blush. Your barracks room does not need a $4,000 sound system on payments.

How They Get You

• ◆They target E-1 through E-4 — young, first real paycheck, no financial education, guaranteed income from the government.
• ◆They know DFAS deposits on the 1st and 15th. Their payment schedules are synced to your pay cycle.
• ◆They use emotional triggers: "You deserve this after Basic" or "You served your country, you earned it" to justify terrible financial decisions.
• ◆They offer "instant approval" because they already know your income. Your LES is all they need. They do not care about your credit score because the interest rate covers their risk.

Your Chain of Command Can Help

• ◆Army Emergency Relief (AER) — interest-free loans and grants for soldiers in financial distress. No credit check, no judgment. Go to your unit AER rep or the installation AER office.
• ◆Military OneSource — free financial counseling, 12 sessions per year, completely confidential. Call 800-342-9647.
• ◆The MLA (Military Lending Act) gives you protections: 36% APR cap on most consumer loans, no mandatory arbitration, no prepayment penalties. If a lender violates the MLA, report them to the CFPB.

Building Credit From Zero

Many soldiers show up to their first duty station with no credit history at all. No credit is almost as bad as bad credit — landlords, car dealers, and banks see you as an unknown risk. Building credit while you are in the military is one of the smartest things you can do because you have a stable income and low expenses.

Credit Score Basics

• ◆Your FICO score ranges from 300 to 850. Above 740 is "excellent" and gets you the best rates on everything — car loans, mortgages, credit cards.
• ◆Payment history (35%) — Pay every bill on time, every time. One 30-day late payment can drop your score 50-100 points and stays on your report for 7 years.
• ◆Credit utilization (30%) — How much of your available credit you are using. Keep it under 30%, ideally under 10%. If your credit limit is $1,000, never carry a balance above $300.
• ◆Length of credit history (15%) — The longer your accounts are open, the better. Open your first card now and never close it, even if you stop using it.
• ◆Credit mix (10%) — Having different types of credit (credit card, car loan, installment loan) helps. Do not take on debt just for this — it comes naturally over time.
• ◆New inquiries (10%) — Every time you apply for credit, it creates a "hard pull" that dings your score 5-10 points. Do not apply for 5 credit cards in a month.

Step-by-Step Credit Building Plan

• ◆Step 1 — Get a secured credit card. Navy Federal, USAA, and Capital One all offer secured cards for people with no credit. You deposit $200-$500 as collateral, and that becomes your credit limit. Use it for gas only, pay it off in full every month.
• ◆Step 2 — The STAR Card (Military Star). Available at AAFES (the PX/BX). Low credit limit, easy approval for military. Use it for small purchases and pay it in full each month. It reports to all three credit bureaus.
• ◆Step 3 — After 6-8 months of on-time payments, apply for a regular (unsecured) credit card. Look for no annual fee cards with cashback rewards. Do NOT carry a balance.
• ◆Step 4 — Set up automatic payments on every account. Not minimum payments — full statement balance. You never pay interest if you pay in full every month. Autopay eliminates the risk of forgetting.
• ◆Step 5 — Check your credit report for free at annualcreditreport.com every 4 months (one bureau at a time: Experian in January, Equifax in May, TransUnion in September). Dispute any errors immediately.

The STAR Card — Use It Right

• ◆The Military Star card gives you 10% off your first-day purchases at the Exchange. After that, it earns 2% back on all Exchange purchases.
• ◆Interest rate is around 12.99% APR — lower than most retail cards, but still expensive if you carry a balance.
• ◆The right way to use it: charge your PX purchases, pay the full balance every month, collect the rewards points. Never carry a balance past the due date.
• ◆The wrong way: max it out on electronics and pay minimum payments for 3 years. You will pay double the retail price.

The Car Buying Trap

This gets its own section because it is the single biggest financial mistake in the military. Not payday loans. Not gambling. Cars. Specifically, brand-new cars bought on credit by E-1 through E-4 soldiers within their first year of service. The parking lot at every Army base tells the story: brand-new Camaros, Chargers, Mustangs, and lifted trucks — owned by soldiers who cannot afford them.

The Math Nobody Shows You

What That Money Could Have Done Instead

How to Buy a Car the Right Way

• ◆Rule 1 — Never buy a car within 30 days of arriving at a new duty station. You are emotional, you feel like you "need" it, and every dealer in town knows it. Wait.
• ◆Rule 2 — Pay cash if possible. $3,000-$8,000 gets you a reliable Honda Civic, Toyota Corolla, or Ford Fusion that will last 5+ years. Have your mechanic inspect it before purchase ($100-$150).
• ◆Rule 3 — If you must finance, get pre-approved at USAA or Navy Federal FIRST. Their rates for E-1 to E-4 are 5-9% APR — compared to 18-24% from the dealer. Never let the dealer run your credit before you have your own pre-approval.
• ◆Rule 4 — Total car costs (payment + insurance + gas + maintenance) should be under 15% of your take-home pay. If your take-home is $2,100/month, your total car cost should be under $315/month.
• ◆Rule 5 — Full coverage insurance on a new car for an under-25 military driver: $200-$350/month. That is on top of your payment. Budget for it before you sign anything.