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Use Your Bonus as a Financial Building Block

Today's fast-paced environment has at least one positive side effect for many servicemembers — bonuses. Increased re-enlistment incentives and critical skills retention bonuses will result in additional monetary incentives, which could be substantial for those who continue to serve our nation.

If your bonus is on the way, you may dream of what it can buy. Where does "financial security" fall on your list? Spending the bonus may seem like fun, but building financial security is one move you won't regret. Before heading off to the car dealer or your favorite electronics store, consider using your bonus to accomplish one or more of the following:

Ditch the Debt

Paying the minimum on your credit card is just what the credit company wants — but certainly not what is in your best interest. In most cases, paying off credit card debt should be your top priority, even ahead of saving. The double-digit interest rate you pay on your credit card is probably higher than what you can earn from investments — and the interest savings on credit cards is guaranteed and immediate.

Save for Emergencies
An emergency fund is one of the cornerstones of a solid financial plan. The fund should cover three to six months of basic living expenses, such as house and car payments, food and utility bills. Put your emergency fund in a savings or money market account to ensure the cash is accessible and safe. These types of accounts can be set up with your bank or mutual fund company.

Start a Nest Egg
Your bonus can be ideal to jump start your program to save for retirement, college, a family vacation, or the down payment for a new home.

For retirement, consider a Roth IRA and the military?s Thrift Savings Plan (TSP) has tax-advantaged ways to put your money to work for you. Many servicemembers don't realize that they don?t pay taxes on what they contribute to a TSP. For college, a Coverdell Education Savings Account or 529 college savings plan may be ideal. Finally, if you want to ?put aside some monies for another goal consider setting up a no-load mutual fund or funds in your name or jointly with your spouse. Although you won?t get any tax benefits, your investment can potentially grow over time. When it comes to savings, your biggest decision is the one to start saving now.

If you're not sure what to do first, meet with a financial planner who does not work on commission. A basic financial plan can cost as little as $200. When your bonus comes in, use it to make a big impact on your financial future.

Joseph Montanaro is a salaried CERTIFIED FINANCIAL PLANNER™ practitioner with USAA Financial Planning Services, one of the USAA family of companies. Montanaro is a lieutenant colonel in the U.S. Army Reserves and served six years on active duty following graduation from West Point. USAA is a diversified insurance and financial services organization that has served the military community since 1922.

USAA Financial Planning Services™ refers to financial planning services and financial advice provided by USAA Financial Planning Services Insurance Agency Inc. (known as USAA Financial Insurance Agency in California), a registered investment adviser and insurance agency, and its wholly owned subsidiary.

For more banking and saving advice, visit's Finance channel.

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