Top 10 Things to Do with Your Drill Pay

In today’s post, I want to share my thoughts on the top 10 things you can do with your drill pay.  I’ve found that many Soldiers, especially young Soldiers, don’t manage their money wisely. They end up spending more more than they earn, go into debt and end up living paycheck to paycheck, sometimes day-to-day.

While the thought of collecting a military pension is a great idea for most folks, just think about how much more money you could have in your retirement years if you learned how to invest and manage your money wisely.  The truth is, just about every Soldier could retire in comfort, regardless of their rank if they take the time to educate themselves about money and create a plan for their financial future.

Listed below, I want to share 10 simple things you can do to get started towards financial independence.  These tips are listed in no particular order.

  1. Pay Off Debt:  If you have a lot of consumer debt such as car payments, college loans or credit cards, you can take your drill pay and use it to reduce your debt each month.  Start with your smallest debt first.  Get that paid off and then work on your next smallest debt.  Keep doing this until all your debt is paid off.
  2. Invest in the TSP: The Thrift Savings Plan is a great way to plan for your retirement. You can contribute all (or a portion) of your drill pay into your retirement account. Even if you don’t want to contribute all of your earnings, you should contribute something. Small amounts invested monthly over a period of years can really add up to a big number, especially when you do your free efile and figure in compound interest. The sooner you get started doing this the better off you will be.
  3. Give to Charity: You could take part of your drill pay and give to a charity you are passionate about.  This might include your church, a local non-profit, or someone in need that you know.  It’s always a good idea to tithe.  What goes around comes around.
  4. Contribute to a Roth IRA: You could take your drill pay and contribute it to your ROTH IRA.  This is a tax exempt retirement account.  At the time of this writing, you can contribute $5k per year into your ROTH IRA.  This is a great way to build a tax free retirement income.
  5. Save for a Home Down Payment: If you are trying to buy your own home, you can use your drill pay to fund your down payment.  If you saved your drill pay for a few years, depending on your rank, you could have between $10k and $30k in the bank to use as a down payment.
  6. Build Up Your Emergency Fund: You could use your drill pay each month to build up your emergency fund.  Try to save 3-6 months worth of living expenses.  Everyone needs an emergency fund so they can handle the unexpected and stay out of debt.
  7. Establish a Travel Fund: You could use a portion of your drill pay to create and fund a travel account.  This could be your family’s yearly vacation money.
  8. Max Out Retirement Accounts: You could take your drill pay and max out your retirement accounts each year.  This could be your TSP, 401k, ROTH IRA or even a self-employed retirement fund.
  9. Reduce Your Spouse’s Work Time: If you are trying to get your spouse to stay home with your children, you could take your drill pay and put it in your joint account.  The extra $300 or more each month could help them reduce their hours at work so they can spend more time at home with your kids.
  10. Save for Taxes: If you are expecting a large tax bill, you could use your drill pay to pay your taxes.  You could pay quarterly taxes or save it in an account so you have it at tax time.

By no means am I saying you HAVE to do any or all of these things with your money.  After all, it is your money.  My only goal today is to get you thinking about how you can best manage the money you do make from your drill pay.  I understand that most of these things aren’t sexy.  It’s much more tempting to take the money and go on a vacation, buy a new car, get the new IPhone, or have a night out on the town.    But if you want to get ahead financially in the long run, you will need to make some short-term sacrifices.

Final Thoughts

In summary, these are my top 10 things to do with your drill pay.  I would love to hear some of your ideas about what is the best thing to do with your drill pay.  If you would like to share your ideas about the best way to save/invest your drill pay, just leave a comment to this post. Also, if you have any questions about this post, you can post those below.  Thanks.

chuck holmes

Chuck Holmes
Former Army Major (resigned)

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10 thoughts on “Top 10 Things to Do with Your Drill Pay”

  1. Of all the items you mention, misuse of credit cards as one’s main source of money to be spent can be devastating. Maxing out high interest credit cards can destroy credit rating and can be a detriment to retirement planning. Next, giving to a charity is a good thing to do, but it is also a nice tax write-off.

    1. I agree with you Suzanne. I struggled with credit cards for a long time and still have to watch myself. It’s very easy to spend a few grand without even realizing it. I think the best option is to get rid of credit cards and stay out of debt.

  2. Neil ODonnell

    Great advice! First, paying off any debt is a great way to start, because it will ultimately lessen the interest that debt usually accrues. An emergency fund is likewise an important safety net to put in place to cover repairs to a home or car or unforeseen medical expenses. I am definitely in favor splurging now and again on something that is fun or relaxing like a pizza or a night at the movies. However, it is wise to prepare for future expenses, and your suggestions definitely provide a good plan to start with.

    1. Thanks for the comment, Neil.

      I’m a big fan of living debt free. If you have to, I could justify having a mortgage payment. But other than that there’s no reason to have a car payment, credit cards, personal loans, etc. Those things simply crush your cash flow and keep you enslaved to your job.

      I truly believe that if all soldiers saved even 10% of their drill pay every month they could enjoy a much more comfortable retirement in the years ahead.

  3. Agree about debt being top on the list. Obvious things like credit cards are number one, followed by more subtle forms of debt like car loans and mortgages. Anything that I owe to anyone gets taken down a bit. I’m not in the military, but often end up with extra funds from investment yields, and a few other unexpected sources. After debt is obliterated, I tend to lock money into long-term savings and give 10 to 15 percent to local charities that I know, like animal shelters and religious organizations.

    1. Sounds like you are good at handling your personal finances, Larry. That’s great. I agree with you that paying off debt is a great way to get started. If you could use your drill pay toward a credit card payment each month, you could reduce your debt quickly. Of course, that assumes you cut up your credit cards and stop spending.

  4. Number one should always be pay off debt! It’s so important to me that you pay off your various debts as much as you can, no matter how small the payment you can offer up. Every little bit counts.

  5. This is great advice. I don’t think that it is any accident that your first bit of advice is to pay off debt. I agree – that is even more important than putting the money into savings or investing it. Unless it is a mortgage (and sometimes even then), debt is bad. It is hard to take care of yourself when you owe the shirt on your back to someone else.

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