Before I start this post, I know you’re reading the title and saying, “okay, duh,” but I feel like it is so much more than that, and I need to write about it to have somewhere to go back to as a reinforcement next time the temptation comes.
In the military life, there is a lot of income that is reasonably expected without a timeline. There are a lot of things you can expect to get reimbursed for, bonuses you may receive, special pays that will kick in at the next duty station, and allowances that may increase due to any circumstance. With military income, other than government shutdowns, you pretty much know what you’re entitled to, and can reasonably expect to receive it without a problem. Knowing all of these factors makes it really tempting to make a plan for money you expect to receive in the near future, and sometimes to act on that plan before the money has been deposited into your account.
In our life, most recently this occurred when Eric got a phone call that re-enlistment bonuses were brought back for his rate. He was planning to re-enlist anyways and was waiting for them to maybe re-instate the bonus offer, so he was ready to act on it as soon as we got home from our Christmas leave. In the excitement of receiving this news, he went gun shopping, and instead of being hesitant as he would normally be within our regular budget, bought himself a new gun for $1400, stating he planned to take it out of his bonus. (We traditionally try to save most of bonuses, but we give ourselves parts to spend as we’d like.) Imagine his surprise when he returned to work and was told he was not eligible to re-enlist yet and would have to wait, and the bonus might not be available then. Besides the fact that I now have to pull $1400 from elsewhere in our budget to pay for the gun he already purchased.
Normally, we don’t spend money we don’t have. We have lived the credit card float many times before (paying off this month’s credit card statement with next month’s income), but we now usually have all of next month’s income at the end of the current month. This is not something we would normally do, but that reassurance that there would be a bonus to pay the credit card statement was too reassuring.
And you might be reading this and saying, “well, we don’t get re-enlistment bonuses, so this is irrelevant to me.” But I think there are so many other scenarios where this is relevant. As a submariner’s wife, I’ve had times I’ve expected Eric to receive Family Separation Allowance (extra $250/month) and had made a plan for the funds, and he returned before it was long enough to earn the allowance. There may be an allowance such as DLA (dislocation allowance) for moving. How many of us know what our tax refund is and start making plans before the IRS has even accepted our return? There are many situations in which we can get excited about a windfall and make plans for money we don’t have yet. If we start acting on that plan, and the windfall gets disrupted (our tax refund was incorrect, a bonus smaller than expected, a change in orders that delays DLA), we may be on the hook for all the money we just spent until it gets sorted out.
In our case, we had enough in a savings account (which we were saving toward buying a home) that I was able to cover the spending even though we didn’t get a bonus. But what if he had spent the entire expected amount? What if he borrowed from our home savings with plans to replenish it when the bonus came in? I would be frustrated that the savings we had accumulated went to something just for him, instead of a home for our family.
In other scenarios, consider when you increase your standard of living based on a pay raise. A specific situation that comes to mind is much of the spending that increases after sailors are selected as a Chief Petty Officer. Although Eric is not a Chief, many have told me that it can take up to a year to receive the pay increase that comes with the title. However, it may seem tempting to reward the milestone before the pay increase, such as by buying a new truck or motorcycle, or taking a big vacation. Obviously, you’re going to receive the pay increase sometime, but do you really want to inflate your lifestyle before that even happens? What if taxes are higher than you expect, and your take home pay doesn’t increase like you’d planned, but you’ve already committed that money somewhere, like a payment?
Even in the civilian world, there are jobs that can pay overtime. I have heard many, many people tell me, “I make $xx,000, but I will work a lot of overtime this summer, so I can afford it.” What if there isn’t overtime? I always suggest budgeting on the minimum you absolutely know you will receive. If you know your last paycheck had Family Separation Allowance, or 6 hours of overtime, and you don’t usually receive it, don’t make plans for your budget as if you will always receive that pay. If you think you’ll work overtime in August because you always do, don’t spend too much in July with the expectation to pay it off. Debt is definitely a cycle and it all starts with little steps here and there and good intentions.
I have been in credit card debt several times (paid it all off, and charged them up again), and I never started with the intention to rack up debt. It all started with the idea of, “Well, I’ll pay this off when that check comes in.”
