Pay raises in uniform and in retirement are more than numbers on a Leave and Earnings Statement. They’re chances to change your financial trajectory, accelerate your goals, and buy back some of your future freedom. Each bump in basic pay, COLA increase, or BAH adjustment can quietly disappear into day-to-day spending—or it can become the fuel for debt reduction, savings, and long-delayed personal priorities.
In 2026, servicemembers and retirees will see multiple upward moves at once. Active-duty troops get an across-the-board basic pay raise; many will hit new time-in-service or promotion steps; retirees receive a 2.8% COLA on retired pay and VA compensation; and BAH is rising by an average of about 4.2% across the force. Taken together, it is not unusual for a household to see several hundred dollars more per month. The key is to decide in advance that at least some of those new dollars will not be spent—they will be reassigned to missions that matter.
Understand Where the Raise Comes From
For active-duty members, the first piece is the annual basic pay raise, which for 2026 is roughly 3.8% across grades and years of service. On top of that, time-in-service increases and promotions move you to higher steps on the pay chart, often adding another meaningful bump. Housing allowances are also increasing: BAH payments will rise by about 4.2% on average in 2026, which can be a significant monthly boost depending on rank, dependency status, and duty station.
For retirees and veterans, the 2.8% COLA applies to military retired pay, Survivor Benefit Plan (SBP) annuities, and VA disability compensation. That means a retiree or 100% disabled veteran receiving over $3,800 per month could see more than $100 added to their monthly benefit. The exact numbers vary by situation, but the pattern is clear: many households will find themselves with an extra $200–$400 a month once all the increases are in place.
Give Every New Dollar a Mission
Many people never decide what the raise is for; they just notice that the account isn’t as tight at the end of the month. Lifestyle quietly expands to match income. The antidote is intentionality: treating every new dollar as a resource with a specific mission. This is where two simple tools—50/30/20 budgeting and zero-based budgeting—can work together.
The 50/30/20 guideline says that roughly 50% of your take-home pay should go to needs (housing, utilities, food, minimum debt payments), 30% to wants (eating out, subscriptions, travel), and 20% to savings or extra debt payoff. This isn’t a requirement, it is intended to be a guide; it is a starting point. When you get a raise, you have a choice: let at least some of that new money drift into your 20% “future you” category before it all ends up in your 30% “wants” category.
A powerful approach is to keep your existing lifestyle the same when the raise hits and direct a large portion of the increase—not necessarily your entire income—to savings or debt reduction. If your household sees a $300 net monthly take-home pay monthly bump, assign half or more of that ($150+) straight to specific goals before you ever see it sitting unassigned in your checking account.
Use Zero-Based Budgeting to Lock in the Change
Zero-based budgeting takes this idea further. In this method, you assign every dollar of income a job on paper before the month begins, so income minus planned expenses equals zero. That doen’t mean you have nothing left; it means every dollar is accounted for: bills, groceries, savings, debt payments, and even fun money all have orders.
This approach fits naturally with military thinking: nothing is left loitering without a task. When a pay increase or BAH adjustment hits, you update your plan and intentionally create new budget lines—“extra principal on my highest-interest debt,” “automatic transfer to savings,” or “TSP/IRA contribution increase.” You’re not just tracking the raise; you are weaponizing it.
Combining the two ideas looks like this: use the 50/30/20 rule as your overall framework, but build your actual monthly plan as a zero-based budget. Needs, wants, and savings are all in the plan—but savings and debt reduction get top billing, not whatever is left at the end.
Put Savings and Debt Reduction at the Top
Many standard budgets list savings last, as if it’s optional. That is backwards. If you want progress, especially in a career where pay moves in defined steps and COLAs, savings and debt reduction must be among the first lines written down. That might mean:
- Setting an automatic transfer for part of the new pay into a high-yield savings account or money market fund the same day your LES hits.
- Increasing your TSP or IRA contribution by 1–2 percentage points when the raise takes effect, so your contribution grows without any extra effort.
- Targeting the highest-interest debt—often credit cards or certain car loans—with an extra fixed amount each month from the new money until your debt is gone.
If you commit even $150–$200 of a $300 monthly increase to these priorities, you can pay down thousands in debt or build a serious emergency fund within a couple of years. That kind of progress makes transitions smoother, reduces stress, and opens the door to bigger goals like buying a home, starting a business, funding education, or retiring earlier.
Turn Raises Into Long-Term Strength
Pay raises, COLAs, and BAH increases aren’t just rewards for service and necessary to combat the effects of inflation; they’re opportunities to strengthen your financial position. Each time your income steps up, you can simply live a little larger, or you can capture some of that momentum and redirect it to the goals you have been putting off—clearing debt, building savings, or investing for the future.
The discipline you used in uniform—planning, prioritizing, executing—translates directly to how you handle money. By understanding where the new dollars come from, assigning them missions through 50/30/20 and zero-based budgeting, and putting savings and debt reduction high on the list, you can turn a series of small annual increases into long-term financial security.
