Financial Advice for Military Reduction In Force (RIF)

Most departments in the Department of Defense are facing a Reduction In Force (RIF) which is the military's version of "downsizing".  The Air Force is currently looking at military members with more than 1 year of service and less than 18 years.  Officers and enlisted have different programs, but leaving at 10 years or more would have significant financial implications for many.  Here are some suggestions on planning for a potential RIF.

1. Emergency Savings - The most important thing in financial planning and for preparing for emergencies is to have an emergency savings account.  This should be about 6 months of living expenses in a "high-yield" savings account that you can access when needed (1 week or less).  I use Capital One 360, and I have a referral link and more analysis on this blog post: Capital One 360 Link.  This emergency savings account will be your first line of defense against a RIF.
2. Post-Service Entitlements - Make sure you take full advantage of all post-service entitlements.  If the military isn't going to be as loyal as you were during your military service, then take as much as of the entitlements as you can.  The Montgomery GI Bill and Post 9/11 GI Bill will be the primary sources of entitlements for those going back to school if RIF'd.  But some entitlements have a time limit to use them like a VA home loan and both GI Bills (usually 10 years after service).
3. Start Saving Now! - If you were reluctant to start saving before, then now is a perfect time to take advantage of the ROTH or Traditional Thrift Savings Plan.  You will be unable to contribute to these once you are separated, but you can roll it over to an IRA.  It's a cruel system, but unless you qualify for the 15-year retirement that may be offered, then you get 0% of your retirement.  In a civilian company you would retain some portion of your pension and/or your 401(k) with employer contribution.  In the military, you get NOTHING!  It's called the retirement cliff and is a quick way for the military to make and save money in the long-term.
4. Reduce Your Debt - If you get notified that you will be RIF'd, you may be facing limited to no income for a while and you should use your current income to reduce your overall debt totals.  I suggest going for the smallest balances first and then roll all that money into the next smallest balance.  If you two balances are similar then pay off the higher interest rate.
5. Lastly, Stay Connected - If you get RIF'd, it's not a good idea to start all over with a new passion in a new place you've always wanted to go.  There are few exceptions where this has worked for people, but the best thing to do is to go where you have support (i.e. family, old neighborhood, old job) and find a job in a similar field you were in to ensure you have continuity.  Unemployment may have dropped to 7%, but some people (like me) feel this is just economic trickery and doesn't reflect an actual increase in jobs.  Corporations are able to borrow money at low to no interest rates and are able to hire people because it doesn't affect their bottom line.  The interest rates will have to go up soon and corporations will cut employment to restore their bottom lines.

This is a tumultuous time for many but smart financial moves now can help reduce anxiety and prepare for a possible RIF.