Deployment Financial Preparation: Complete Money Management Guide

Bottom Line Up Front: Deployments offer unique savings opportunities (combat pay tax-free, fewer expenses, CZTE, SDP 10% guaranteed return). Most service members save $10,000-$30,000 per deployment with proper planning. Key: Max out Roth TSP with tax-free income, use SDP, set up auto-pay for bills, create budget for spouse, avoid buying stupid stuff when you return.

Deployment Pay & Allowances

Combat Zone Tax Exclusion (CZTE)

What it is:

• ALL pay earned in combat zone is TAX-FREE (up to maximum officer pay)
• Includes: Base pay, hostile fire pay, hazard pay
• Excludes: BAH, BAS (already tax-free)

Example: E-5 in Afghanistan (6 months)

• Base pay: $3,500/month × 6 = $21,000
• Normal tax: 12% = $2,520
• Combat zone tax: $0
• Savings: $2,520

Example: O-3 in Iraq (12 months)

• Base pay: $6,500/month × 12 = $78,000
• Normal tax: 22% = $17,160
• Combat zone tax: $0
• Savings: $17,160

Hostile Fire Pay / Imminent Danger Pay (HFP/IDP)

• Amount: $225/month
• Tax-free (in combat zone)
• Automatic in designated areas

Hardship Duty Pay (HDP)

• Amount: $50-$150/month (varies by location)
• Compensates for harsh conditions

Family Separation Allowance (FSA)

• Amount: $250/month
• After 30+ days separation
• Paid to service member, supports family at home

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Savings Deposit Program (SDP) - 10% Guaranteed Return

What Is SDP?

Best investment available:

• Deposit up to $10,000 during deployment
• Guaranteed 10% annual return (compounded quarterly)
• FDIC insured
• No stock market risk
• Tax-free interest (if combat zone deployment)

Eligibility

• Deployed to designated combat zone
• Must be in theater 30+ consecutive days or 1+ day in 3 consecutive months

How It Works

Example: Deploying for 12 months

• Month 1: Deposit $1,000
• Month 2: Deposit $1,000
• Continue until $10,000 total
• Interest accrues at 10%/year
• After deployment: Withdraw principal + interest

Total return on $10,000 for 12-month deployment:

• $10,000 principal
• Average time invested: 6 months
• Interest: $500
• Total: $10,500

If left in SDP for 90 days after deployment:

• Interest continues accruing
• Total return: ~$1,000 on $10,000 (10%)

Where to Find SDP

• myPay (while deployed)
• Finance office on deployment location
• Set up allotment to SDP

Best Strategy

• Max out ASAP ($10,000)
• Leave for full deployment + 90 days after
• Withdraw before 90 days post-deployment (interest stops)

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Roth TSP Strategy for Deployments

The Golden Rule: Switch to 100% Roth TSP Before Deployment

Why:

• Combat pay is TAX-FREE going in
• Roth TSP is TAX-FREE coming out
• Double tax-free benefit = NEVER PAY TAXES

Example: E-5 deployed 12 months

• Combat pay: $42,000 (tax-free)
• Contribute $23,000 to Roth TSP (2025 max)
• At retirement: Withdraw $23,000 + growth TAX-FREE
• Effective tax rate: 0% forever

Compare to Traditional TSP:

• Same $23,000 contributed
• Tax-free going in (CZTE)
• But TAXED when withdrawn (22% bracket)
• Lose $5,060 to taxes
• Roth is clearly better

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Deployment Budget for Family at Home

Create Two Budgets

Budget #1: While You're Deployed

• Spouse spends less (no entertainment, date nights, your expenses)
• But some costs increase (childcare if needed, home maintenance)

Example monthly budget:

• Rent/mortgage: $1,500
• Utilities: $200
• Groceries: $600
• Gas: $200
• Kids activities: $150
• Misc: $200
• Total: $2,850/month

Budget #2: Your Income During Deployment

• Base pay: $3,500 (tax-free)
• BAH: $1,900
• BAS: $460
• HFP: $225
• Total: $6,085/month

Savings potential: $6,085 - $2,850 = $3,235/month

Over 9-month deployment: $29,115 savings

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Setting Up Auto-Pay (Before Deployment)

Bills to Automate

1. ✅ Rent/mortgage (via bank auto-pay)
2. ✅ Utilities (electric, gas, water)
3. ✅ Car payment + insurance
4. ✅ Credit cards (minimum payment, not full balance)
5. ✅ Phone bill
6. ✅ Internet/cable

Why: Prevents late payments, protects credit score, reduces spouse stress

Give Spouse Financial POA

• Allows spouse to handle emergencies
• Access accounts if needed
• Pay unexpected bills
• Free at JAG office

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Common Deployment Financial Wins

Win #1: Max SDP ($10,000 at 10%)

Gain: $500-$1,000 interest (tax-free)

Win #2: Max Roth TSP ($23,000)

Gain: Never pay taxes on this money (worth $5,000-$10,000 in future tax savings)

Win #3: Reduce Spending at Home

Gain: Save $2,000-$4,000/month (fewer expenses while deployed)

Win #4: Deployment Savings Account

Gain: Build 6-12 month emergency fund ($20,000-$40,000)

Total deployment savings potential: $30,000-$50,000

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Common Deployment Financial Mistakes

❌ Mistake #1: Coming Home and Blowing All Savings

Reality: You save $30,000 during deployment. Come home. Buy $40,000 truck (with loan). Savings gone + in debt.

Fix: Set rule: Savings stay in HYSA for 90 days after return. Don't make big purchases immediately.

❌ Mistake #2: Not Switching to Roth TSP

Reality: You leave TSP in Traditional during deployment. Miss out on $5,000+ in tax savings.

Fix: Switch to Roth TSP before deployment. Switch back after if you want.

❌ Mistake #3: Not Using SDP

Reality: You leave $10,000 sitting in checking account earning 0.01%. Could've earned $500-$1,000 at 10% in SDP.

Fix: Max SDP ASAP during deployment.

❌ Mistake #4: Spouse Overspending While You're Gone

Reality: You deploy. Spouse spends $4,000/month (vs. $2,800 budget). You return to $0 savings + credit card debt.

Fix: Create budget together BEFORE deployment. Weekly spending check-ins. Transparency.

❌ Mistake #5: Not Setting Up Auto-Pay

Reality: You forget to pay car payment. Credit score drops 100 points. Can't get mortgage later.

Fix: Auto-pay everything before you leave.

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Action Steps

30 Days Before Deployment:

1. ✅ Switch TSP to 100% Roth
2. ✅ Create budget for spouse
3. ✅ Set up auto-pay for all bills
4. ✅ Get financial POA for spouse
5. ✅ Open high-yield savings account (for deployment savings)

During Deployment:

1. ✅ Max SDP to $10,000 ASAP
2. ✅ Contribute 50%+ of pay to savings
3. ✅ Track spending weekly (even from deployed location)
4. ✅ Resist buying junk at PX (no, you don't need another knife)

After Deployment (First 90 Days):

1. ✅ Withdraw SDP (after 90 days to get full interest)
2. ✅ Don't make big purchases (new car, jet ski, etc.)
3. ✅ Keep savings in HYSA
4. ✅ Reintegrate financially (discuss spending with spouse)

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Related Guides

• Savings Deposit Program (SDP) Complete Guide
• TSP Roth vs Traditional Complete Guide
• Deployment Communication Strategy

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Remember: Deployment is the best savings opportunity in your military career. Tax-free income, SDP 10% return, minimal expenses. Most who plan well save $20,000-$50,000. Those who don't plan come home broke. Be the first group.