Every member of the reserve component understands they may be activated. In many cases, such as formal training schools or Professional Military Education (PME), you will have time to prepare and plan for the activation. However, in some cases, such as a national emergency or natural disaster, there may be a short turnaround window to prepare for your activation.
Being activated without notice can be difficult and may cause problems for your family, career, and finances. Hopefully, you have worked through this possibility and have a plan in place. Our goal today is to examine how being activated can impact your finances, and what you can do to prepare for this possibility.
Three types of activations; two types of pay.
Depending on whether you serve in the National Guard or reserves, you may be activated under one of three statuses: Title 10, Title 32, or state-level orders.
Title 10 of the U.S. Code applies to members serving on active duty, the reserves, and members of the National Guard who have been activated for federal missions. Being activated under Title 32 orders covers state missions that are funded by the federal government. This can include full-time National Guard members and those activated for federally funded missions, such as a federal disaster response. Members who fall under these two statuses receive the same pay and benefits as active–duty members.
Finally, National Guard members may be activated for state-level missions that are approved by the state governor and paid for by the state. In essence, you become a state employee during this time and your pay and benefits are based on your state’s employment laws and policies.
If you serve in the National Guard, take the time to familiarize yourself with your state activation guidelines, pay, and benefits. You may find there is a large pay discrepancy between your military pay grade and the rate you would earn if you were activated on state orders. Some states also only pay their members after the activation has been completed, meaning you may find yourself without a paycheck for longer than you were expecting.
How much will you earn if you are activated?
Understanding the ways you can be activated and what your pay and benefits will be is essential to understanding the impact to your finances.
With this information at hand, you can calculate what your pay and benefits will be under each type of activation. Be sure to calculate your base pay and any benefits such as BAH, BAS, and the potential for other benefits such as family separation pay, special duty pay, hazardous duty pay, hostile fire pay, etc.
If you are activated under state orders, be sure to coordinate with your state liaison to ensure you understand what your pay and benefits will be while you are activated, and ask when you will be paid. Again, some states only pay their members after the activation has ended. This may cause problems if your activation drags on longer than expected.
Be sure to consider whether or not your civilian employer offers differential pay or additional military leave. If so, you may be able to double-dip, at least for a short time frame.
Will your expenses change if you are activated?
Next, take a hard look at how your expenses might change if you are activated. Be sure to compare your current living and working situation to what it might look like if you are activated. Will there be changes to your commuting expenses, living expenses, or food costs — beyond per diem?
If you have a family, consider how your activation may increase expenses such as child care or hiring someone to do tasks you won’t be around to do, such as lawn care, car repairs, or home repairs.
On the flip side, you may see some expenses decrease. TRICARE may allow you to pause your civilian insurance program, potentially saving you some money each month. You may also gain access to other benefits that save you money.
How does activation impact your financial situation?
Finally, take your military compensation when you are activated, add in the changes to your living expenses, and compare them to your current budget. If your military compensation exceeds your current day job income and you won’t have too many extra expenses, then you’re in the clear. You may even be able to bank a little extra cash while you are activated.
However, if your military compensation and changes to your living expenses fall short of your budgetary needs, you will run into a shortfall. Knowing this ahead of time gives you the information you need to plan for being called up. If this is the case, then take the time now to figure out how you can make your situation work.