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Budgeting your Military Service Separation

Separating from the military can be a bittersweet event. You’re moving away from a lifestyle and community you grew accustomed to and are now starting a new phase in life.

It can be exciting to purchase a new home, perhaps a new car, start a new career and establish your family’s new life.

But before you get too inspired, consider the budget changes you’ll undergo and how they will factor into potential purchases.

Here are some changes to consider:

Income Tax

If you reside in one of the several states that offer a state tax exemption while you were active, you may have grown accustomed to a large net pay. Unless you decide to permanently reside in Alaska, Florida, Nevada, South Dakota, Texas, Washington or Wyoming, that net pay may decrease dramatically.

Health Insurance

Your TRICARE benefits will end after 180 days of separation, meaning you’ll have to consider a private insurance plan. According to the National Conference of State Legislatures, the average annual health insurance premium for families was more than $15,000.

TRICARE offers multiple plans for active members, which may be dramatically cheaper than private plans. Multiple factors will determine your new plan, but be prepared to budget more money in the health insurance arena.

Life Insurance

After 120 days of separation, your Service Member Group Life Insurance ends and you have a year to apply for Veterans’ Group Life Insurance, which again will come with a price increase. As of 2008, for a $400,000 coverage policy, an active member will pay a $27 per month. For VGLI, a person under 29 years of age will pay $32 whereas a 48-year-old will pay $68.

Basic Housing Allowance

Your BAH disappears after you leave the military, so when you’re looking for new employment, be sure to factor the amount into your income profile.


The job market isn’t always favorable, especially to those who have served their country. The unemployment rate for veterans is higher than the civilian rate. If you find yourself still struggling to obtain a job after your severance pay ends, most states offer 26 weeks of unemployment.

If that still isn’t enough time, you can apply for federal extensions as suggested by the Military Wallet. Be sure to consider the risks of unemployment and play it safe when establishing your civilian life.