Don't let post-deployment celebratory purchases wreck your finances
Returning home post-deployment can be almost as stressful as the deployment itself. Read on to learn how not to let post-deployment celebratory purchases wreck your finances.
Even though it feels like it should be a happy time — and in many cases it is — returning from deployment is 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 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 deployed, and you deserve something fun. That's how I felt. But protect yourself financially by setting a limit on how much of your deployment “extra” you'll spend on celebratory purchases.
USAA 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 from 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. You may have your sight set on a new truck but forget about the long-term commitment to monthly payments and other costs like registration, maintenance, and insurance.
When you think about the total cost over time, is that really 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 had the feeling of regret that follows an impulse buy. Not only can you feel a sudden pang of buyer's remorse after a purchase, but it can also sting you later on if it hurts your finances. Here are some steps you can take to enjoy your new purchase 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, that 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 item over time. Or use it to help you achieve a savings goal you've been working toward.
That's the exact approach I took to buy my new flat-screen. 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 your homecoming 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.
Follow these guidelines if you need help prioritizing your spending:
- Establish a $1,000 emergency fund.
- Pay off high-interest debt like credit cards.
- Fund your emergency savings with enough to cover three to six months' worth of essential living expenses.
- Start or beef up your retirement savings.
- Consider paying off your remaining consumer debt.
- Set aside up to 10% for fun money — you've earned it.
- Start or continue to save for other financial goals.
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 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.