5 Financial Tips for Military Members Transitioning to Civilian Life

When William Curtis left the U.S. Army after seven years of service, he made what he figures is a $90,000 mistake.

The San Antonio resident says he skipped filling out some simple paperwork that could have put him in line for free degrees at both the undergraduate and graduate levels. Now, instead of a state program paying to further his education, he's left to foot much of the bill himself.

Financial mistakes among military members are common, and experts say those transitioning to civilian life should follow these five tips to help move smoothly between the two worlds.

[Read: 7 Tax Tips for Military Members.]

Select your home of record carefully. Despite planning to live in Texas after his discharge, Curtis listed his home of record as Florida, a previous residence. As a result, he's not covered by the Hazlewood Act, a Texas law that provides up to 150 hours of tuition-exempt higher education to veterans, their spouses and dependent children.

Curtis earned his bachelor's degree after discharge and would like to pursue a graduate education, but he's not sure how to cover the cost. "If I had literally filled out three pieces of paper, I could have had that paid for," he says.

Before discharge, military members should take some time to investigate their home of record options and the corresponding state veteran benefits to ensure they won't miss out on valuable perks.

Have an emergency fund ready. Transitioning to civilian life "scares the hell out of you," says Edward Dropic, senior vice president for Tampa-based 21st Century Financial, an agency of the Penn Mutual Life Insurance Company. Dropic knows because he spent six years in the Marine Corps.

Dropic's advice to those preparing for discharge is to give themselves up to a year to find a job they like and settle into life outside the military. However, the only way to make that type of gradual transition work is to have money in the bank.

[Read: 11 Ways to Boost Your Emergency Fund.]

Those who are unable to save up a sizeable emergency fund prior to discharge may find they can sell back vacation time for extra money. Meanwhile, retirees with 20 years of service may be able to collect a pension to bridge the gap between military discharge and the time they find the right job.

Budget extra for all your expenses. Michael Meese, chief operating officer of the American Armed Forces Mutual Aid Association and a retired U.S. Army Brigadier General, says military personnel should also be ready for sticker shock after their discharge. "They sometimes take for granted all the benefits they have in the military that are costly when they leave," he says. Gym memberships, child care, housing and medical care are all provided free or at a subsidized rate for many military members. However, after discharge, "everything can get more expensive," Meese explains.

Rather than expecting to keep the same budget used in years past, military families should revise their spending plans to accommodate extra costs. It's better to budget too much for certain categories than to find yourself short of cash.

Remember to negotiate your salary. Expenses can go up after a person's discharge, but so too can income, says Leslie Roberts, a former military spouse and investment advisor at Stillwater Financial Group with offices in Boca Raton, Florida, and Plymouth, Pennsylvania. "There's no pay negotiation in the service, but you can negotiate a paycheck in the civilian world," Roberts says. Former military members may forget employers can and do expect a little back and forth when ironing out the details of a compensation package. As a result, they may be leaving money on the table if they fail to ask for a better offer.

Don't ignore your Thrift Savings Plan. Military members can contribute to the Thrift Savings Plan, which works similarly to 401(k) plans offered to private sector workers. After discharge, that money can be left in the plan or rolled over to an IRA.

Roberts advises people to consider moving their money to an IRA. "It's like grocery shopping at 7-11," she says of the investment options in the Thrift Savings Plan. "There are only so many choices."

IRAs may offer more fund options, but they can also come with higher fees. "Some people make the mistake of rolling [their Thrift savings] over to a more costly plan," Meese says. His advice to discharged military members is to review the fees carefully before automatically assuming an IRA is a better place for retirement money.

[See: How to Reduce Your Tax Bill by Saving for Retirement.]

Back in San Antonio, Curtis says he was less than impressed with the support services offered by the military during his discharge. Rather than rely on their programs to make the transition to civilian life, he suggests service members do their own research and consider advice such as the tips above. "No one [in the military] tells you these things," he says.