How to Make the Most of Your Enlistment Bonus

Chelsy Meyer  | 

Getting a large sum of money in the form of an enlistment bonus has a tendency to burn a hole in the pockets of many new recruits. Big trucks and new tattoos are popular purchases, but they’re not always the best choice. What not to do with an enlistment bonus is just as important is knowing what you should do with it. Though much of it depends on your current financial standing, you’ll want to avoid putting yourself into deeper debt and work on paying your way out of some financial pitfalls. However, there are some splurges that can pay off in the long run.

What Not to Do with your Enlistment Bonus

Enlistment bonuses are designed to help seal the deal for new recruits and help the military fill positions – especially for hard to fill jobs. For brand new recruits, it can feel like winning the lottery. Coming into a large sum of money is enticing, and it can be difficult not to spend it on whatever your heart desires. They key is not to look at this sum of money as “free money” to do with what you want. In reality, it’s money you’ve earned by agreeing to your contracted time in the military. Instead of looking at this initial sum of money as fun money, look at it as money to help jumpstart your financial stability.

  • Don’t forget to budget: Make a personal budget before you spend. Debt, credit cards, overdue bills, or other payments may need that bonus in order to keep your credit in a good place. Young military members make more than many of their peers, but don’t make the mistake of ignoring a budget and blowing your bonus on something that won’t advance your financial standing.
  • Don’t forget your debt: Paying off debt is a lot more important than a new vehicle, which has the potential to put you further into debt should your financial stability flounder. Use that enlistment bonus to help eliminate existing debt, which will ultimately help your finances long term.
  • Don’t make a large purchase first: Big trucks, tattoos, vacations, and motorcycles are fun, but those shouldn’t be your first purchases. Bonuses don’t grow on trees, so don’t blow it all when you might need it later.
  • Don’t sacrifice your credit: Your credit is your financial backbone in terms of investing and making large purchases later in life. Your debt-to-income ratio is a large portion of your credit score, so keeping debt down is a lot more important than fancy purchases. A military career can help your credit in the long run, but don’t start off by blowing an amount of money that has the potential to change your current credit standing.
  • Don’t forget about tax: Don’t spend your enlistment bonus before you get it. Nothing is promised until it’s in your bank account. Not only that, but your bonus will most likely be taxed, so spending the amount of your bonus on a credit card and paying it back when you receive it has a lot of flaws.

What to Do with Your Enlistment Bonus

Making the most of your enlistment bonus involves understanding your financial situation, planning for the future, and preparing for emergencies. Delayed gratification is a key component in mature spending, and the enlistment bonus is definitely a test of delayed gratification. Responsible spending isn’t the sexiest option, but it is the smartest. Making the most out of your enlistment bonus involves looking into your own finances, finding the pain points, and using your enlistment to help those pain points.

  • Repairing bad credit: Repairing your credit with your enlistment bonus is an important step if your credit is not in a good spot. Especially if you’re planning to deploy during your time in the military, know that it’s not as easy to help your credit while you’re away. Use your enlistment bonus to pay overdue bills, lower your debt-to-income ratio, and have some financial security so you don’t have to worry about payment history if you get behind again.
  • Starting a savings account: If you don’t have a savings account, you need to start one. This will help in case there is an emergency, provide security, or it can be used for other aspects of your future such as schooling, a family, or a deposit on a home one day. Not only that, but end of life planning in the military is a serious consideration in this type of career. Saving money can also be helpful for family if the worst were to happen. The military can also create a lot of quick changes that can be easier done with money saved, such as frequent moving – so having a cushion can help your organization during a military relocation.
  • Paying off debt: Credit cards, loans, or personal loans are all things that you can begin paying off with that enlistment bonus that will help your financial standing in the long run. Just be aware that paying down a credit card is great, but closing that account can have negative repercussions on your credit. Paying things off is great for everyone, but it can make things a lot easier financially if you deploy as it’s one less thing for you to worry about when you’re away.
  • Thinking about retirement: It’s never too soon to think about retirement, and the sooner you start saving, the better off you’ll be. The military has many perks in terms of retirement savings, but you can also start your own retirement account with some of your bonus that will pay off later in life.

Purchases That Pay You Back

Having a splurge or two is not a bad thing, and having a portion of your enlistment bonus go towards something fun isn’t financially reprehensible. The important thing to remember is to ensure the majority of it goes towards your financial betterment long term. Some big splurges are purchases that can pay off in the right financial atmosphere. They may not be splurges like a jetski or a trip to Mexico, but they are big purchases that have the ability to be both exciting and helpful for your overall credit and financial health.  

  • Vehicle purchase: We just spent a lot of time talking about the typical recruit buying a vehicle and why that’s not a great idea. However, for the recruit with good financial standing, this can be a helpful purchase in terms of credit – just as long as they’ve budgeted correctly and this purchase comes after savings, paying down debt, etc. Be sure to go through your finances realistically and decide if buying a car is good for your finances.
  • Buying a home: Not only do many service members get better mortgage rates, but buying a home can be an important step in financial security. As long as your credit is in good standing, and your other finances are in order, your enlistment purchase can be used as a portion of a down payment.
  • Paying for school: The military does have many options for paying for your schooling, but it may not pay for all of it. Your enlistment bonus can go towards loans, tuition, books, or financial security while you’re going to school.
  • Investing: Investing is a way to spend money in a way that will pay you back later, like the equity gained from owning a home. Talk to a banker about investment opportunities that you may be interested in.
  • Starting a small business: If you’re interested in starting a small business, your enlistment bonus can be a great tool in that venture. Not only are there great loans available for military veterans, but it’s also a way to help your future.
  • Home improvement: If you already have a home, using your enlistment bonus for a home improvement project is not a terrible use of that sum of money. Home improvement projects have the ability to pay back big time in terms of reselling options. Talking to your real estate agent can help you decide which projects pay off the most.

Deciding how to spend your enlistment bonus involves a deep understanding of your own finances, understanding why credit matters, and what the future has in store for you. Since many new recruits are young, it’s best not to make purchases that can mean more debt. Look at your enlistment bonus as a way to improve your finances and stability and put it wherever makes the most sense for your credit health. And, maybe spend a small portion of it on something fun as well.


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Chelsy is a writer from Montana who now lives in Boise, Idaho. She graduated with her journalism degree from the University of Montana in 2012. She enjoys talk radio, cold coffee, and playing Frisbee with her dog, Titan. Follow Chelsy on Twitter @Chelsy5

This post was updated October 10, 2017. It was originally published October 4, 2017.