Even though it feels like it should be a happy time — and in many cases, it is — returning from deployment can be a tough adjustment for everyone involved.
Still, homecoming is a cause for celebration. And for many, marking the occasion with a celebratory purchase not only eases the stress, but it also feels like a fitting reward for a job well done.
Plus, it can give service members something to look forward to.
When I was deployed to Afghanistan, much of the conversation centered on what everyone was going to buy once we all got home. I had my eyes on a new TV. Other people talked about getting a motorcycle or a new car.
While it's not a bad thing to make post-deployment celebratory purchases, consider the cost of impulse buying. Before you celebrate today with a credit card charge you may regret later, think it through by asking yourself a few questions.
Do I really need it?
Some financial problems are caused by the "need versus want” dilemma. You may think you need an item, so you go out and buy it right away. But you could probably easily do without it.
Of course, that doesn't mean buying things you want is wrong.
You've just returned from deployment, away from friends and loved ones, and you deserve something fun. That's how I felt. But protect yourself financially by setting a limit on how much of your deployment pay you'll spend on celebratory purchases.
USAA Federal Savings Bank recommends spending no more than 10% of your extra income and bonuses from deployment as fun money. That way, you won't be tempted to overspend on an impulse purchase. That's what I did when it came to my new TV.
I truly didn't need the new TV. I just wanted to upgrade my 8-year-old tube TV to an LED flat screen. In the end, I decided to bring it home, but not before I ran the numbers to be sure it fit within my budget.
Can I afford it?
To see if your celebratory purchase is affordable, consider the total cost of ownership.
For some items, the initial purchase cost isn't as much as the ongoing costs. That wasn’t the case for my TV, where the purchase cost was the total cost of ownership But if you have your sight set on a new vehicle, think about the long-term commitments — monthly car loan payments, annual registration, regular maintenance and insurance. When deciding how much car you can afford, most people often only focus on the auto loan. But that’s just one expense to consider. These other expenses add up to the true cost of your new vehicle.
When you think about the total cost of your purchase over time, ask yourself if that’s how you want to spend your money? If the answer is no, you may want to reconsider.
Remember the opportunity cost, too. In other words, you're not just deciding whether you want a new truck. You're also deciding whether you want to take money away from other goals such as:
Will I have buyer's remorse?
At some point in our lives, just about all of us has have felt regret after an impulse buy. That sudden pang of buyer's remorse after a purchase can also sting later on if it hurts your finances. Here are some steps you can take before making the purchase that can help you enjoy your new toy guilt-free.
Sleep on it.
Impulse buying usually leads to buyer's remorse once the newness wears off. After you make your decision, sit with it for a couple of days before you make the purchase. You just might see things differently.
Items I've purchased are always shinier in the store than when I get them home. That's a lesson I've learned the hard way.
Phone a friend.
In general, it's a good idea to have someone who can help you stay on track as you work toward your financial goals. Choose someone like a spouse or a close friend who you can trust to hold you to your plan. Before you get caught up in the excitement of a celebratory purchase, talk to someone who'll tell you what you need to hear — not what you want to hear.
Save for it.
If you've considered everything and decide that you can't afford or don't want to make your post-deployment purchase right now, it doesn't mean you can't ever have it.
One idea is to use some of your deployment money as a strong start to save up for the items over time by setting the money aside in a dedicated savings account. Or use it to help you achieve another savings goal you've been working toward.
That's the approach I took to buy my new flat-screen TV. It was going to cost me $1,200, so I saved $600. Then my hostile fire pay made up the other $600, allowing me to have fun and feel financially responsible at the same time.
Pay cash.
Deployment and coming home are demanding enough without adding financial stress to the mix. Consider paying cash for your post-deployment celebratory purchase to avoid racking up a big credit card balance that you can't pay off.
Celebrate the opportunity to accomplish other financial goals.
It's fun to have a shiny new toy, but it's also fun to have the peace of mind that comes with financial security. If you want to improve your financial situation, this extra deployment money gives you a great opportunity to grow your wealth in other areas.
Here are a few suggestions if you need help prioritizing your spending:
- Establish a $1,000 emergency fund.
- Pay off high-interest debt like credit cards.
- Build up your emergency savings so you have enough to cover three to six months' worth of essential living expenses.
- Start or beef up your retirement savings.
- Consider paying off any remaining consumer debt, like student loans, mortgages and auto loans.
- Set aside up to 10% for fun money — you've earned it.
- Start or continue to save for other financial goals.
As you’re looking to spend your fun money from this deployment, try to get the most bang for your buck. Don’t pay full price for an experience when you can get it at a discount. One way to find discounts is through sites like USAA Perks®.
And most importantly, take your time before making any big financial decisions. Post-deployment, give yourself time to take a deep breath, readjust and allow your stress level to reduce. Fight the urge to let a momentary celebration wreck your finances for years to come. A waiting period can help you avoid impulsive purchases.
Need to create or update a budget?
Take time today to create a plan for how you will spend your money.