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Military Finances 2024: Understanding and Maximizing Your BAH

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What You Need To Know About Basic Allowance for Housing (BAH)

Serving in the U.S. Military requires dedication and a commitment to something greater than oneself. While financial gain isn’t the primary motivation for most service members, the military offers substantial financial benefits that can significantly enhance financial well-being.

Guaranteed Paychecks

The U.S. Government ensures consistent bi-monthly paychecks and exceptional benefits for military personnel, providing financial stability. Among these benefits, the Basic Allowance for Housing (BAH) is a crucial component, helping service members manage their housing costs effectively.

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1Based on the average savings from enrolled clients in July 2024. Savings vary based on circumstances.

What is the Basic Allowance for Housing (BAH)?

BAH is a non-taxable, monthly stipend provided to military members to cover housing costs such as rent or mortgage payments. The amount varies based on location, rank, and dependency status, reflecting local cost-of-living differences. For example, BAH in Montgomery, AL, is lower than in high-cost areas like the District of Columbia or the San Francisco Bay Area.

Key Points to Remember

  • BAH Rates Vary by Location and Rank: High-cost areas provide higher BAH to offset living expenses.
  • Non-taxable Allowance: BAH is non-taxable, maximizing its benefit to service members.
  • Eligibility: BAH is available to all active-duty personnel living off-base.
  • Annual Adjustments: BAH rates are updated annually to reflect changes in the housing market.

House Hack your BAH – Pocket More

If you have a frugal mindset, BAH can be a financial game-changer. Your BAH is for you to use at your discretion, and any unused portion is yours to keep tax-free. Saving as much as possible is highly encouraged.

For example, three junior officers in Norfolk share a 3-bedroom house, paying $1,800 in total rent. Each receives $1,512 in BAH, allowing them to save $912 each month by splitting the rent. This substantial savings can be redirected towards their financial goals, such as building an emergency fund, investing for the future, or paying down debt, thereby enhancing their overall financial stability and security.

Additional Monthly Savings:

  • Rent per person: $1,800 / 3 = $600
  • Extra savings: $1,512 – $600 = $912

As you can see, these savings can significantly enhance your financial situation.

Why Save?

  • Investment Opportunities: Use extra funds for investments to grow your wealth.
  • Emergency Fund: Build a financial cushion for unexpected expenses.
  • Debt Reduction: Pay down any existing debts faster. Note: Money Fit offers completely free debt management services to all active duty servicemembers. See: Free Debt Relief for Active Duty Military Members

2024 Updates on BAH

The 2024 Basic Allowance for Housing (BAH) rates for service members increased by an average of 5.4% on January 1, 2024. Monthly rates range from $85 to $194, depending on the service member’s pay grade and dependency status. BAH rates are based on local housing costs, including rent and utilities, and vary by location to reflect market trends. For instance:

  • Maui, Hawaii: Temporary increases of about 11% due to the housing market effects of the Maui wildfires.
  • JB Lewis-McChord, Washington: BAH rates increased by 1.2% from 2023, with soldiers with dependents receiving 24.6% more than those without dependents​ (Defense Gov)​​​.

Did You Know?

Basic Allowance for Housing (BAH) was implemented in January 1998 under the administration of President Bill Clinton. It replaced the Variable Housing Allowance (VHA) and the Basic Allowance for Quarters (BAQ) to better match the cost of housing in different locations.

Additional Insights

  1. Individual Rate Protection: Service members whose BAH rates decrease will have their previous rate protected as long as their status remains unchanged.
  2. Exclusion of Renter’s Insurance: Since 2019, BAH no longer includes renter’s insurance, requiring service members to cover this expense out-of-pocket​ (Vet Benefits & Jobs).
  3. BAH and the GI Bill: The GI Bill Monthly Housing Allowance (MHA) generally mirrors the BAH for an E-5 with dependents, based on the ZIP code of the school attended. MHA rates change on August 1, unlike BAH rates which change on January 1​ (Vet Benefits & Jobs)​.

Financial Planning with BAH

Effective financial planning with BAH involves more than just saving on rent. Service members can use the extra funds from BAH for various financial goals:

  • Homeownership: Many service members use their BAH to qualify for VA home loans, which require no down payment. BAH can cover most or all of the monthly mortgage payment, making homeownership more accessible​ (The Military Wallet)​.
  • Retirement Planning: Investing BAH savings in retirement accounts like TSP (Thrift Savings Plan) can provide long-term growth and security.
  • Education: Utilizing BAH while pursuing further education under the GI Bill can alleviate financial burdens, allowing service members to focus on their studies.

Practical Tips for Maximizing BAH

BAH is a valuable benefit that can significantly enhance a military member’s financial stability, serving as a critical tool in navigating the often challenging financial landscape of military life. Many service members face unique financial challenges, such as frequent relocations, deployments, and the high cost of living in certain duty stations. These challenges can strain even the most carefully planned budgets.

BAH helps mitigate these challenges by providing a reliable, non-taxable housing allowance that reflects the local cost of living. This allowance can cover a substantial portion of housing expenses, allowing service members to focus on their duties without the added stress of housing costs.

Moreover, the flexibility of BAH empowers service members to make strategic financial decisions. By house hacking, sharing housing, or opting for more affordable living arrangements, service members can save significant amounts of money each month. These savings can be redirected towards building an emergency fund, investing for the future, or paying down debt, thereby enhancing long-term financial security.

  • Stay Informed: Keep up with annual BAH updates and understand how changes may affect your finances.
  • Budget Wisely: Create a budget that accounts for all housing-related expenses and ensures you’re maximizing the benefit of your BAH.
  • Leverage Benefits: Explore other military benefits that can complement your housing allowance, such as moving allowances and family separation allowances during deployments.

Effective financial planning with BAH is not just about covering immediate housing costs; it’s about leveraging this benefit to achieve broader financial goals. For instance, using BAH savings to qualify for VA home loans can make homeownership more accessible, offering a stable and potentially appreciating asset. Similarly, investing BAH savings in retirement accounts like the Thrift Savings Plan (TSP) can provide substantial growth over time, ensuring financial stability well beyond military service.

In conclusion, BAH is more than just a housing stipend—it’s a versatile financial tool that, when used wisely, can help service members overcome financial challenges, build wealth, and secure a stable financial future. By understanding and maximizing the benefits of BAH, service members can turn this allowance into a cornerstone of their financial strategy, ultimately enhancing their quality of life and financial well-being.

About the Author

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Rick Munster

Rick Munster is a personal finance expert and author with over 21 years of experience in the credit counseling industry. He currently serves on the board of directors for the Financial Counseling Association of America and has written over 200 articles on personal finance. Rick's expertise has been recognized by several prominent online organizations, which have quoted him on issues related to credit counseling, debt management, and financial education. With more than 20 years of experience at Money Fit, a non-profit credit counseling organization, Rick has established himself as a trusted authority in the field of personal finance.
Visit Rick Munster's Page
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  1. Services: DRS provides the following housing-related services: counseling that includes Homeless Assistance, Rental Topics, Pre-purchase/Homebuying, and Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase); Education courses that include Financial literacy (including home affordability, budgeting, and understanding use of credit), Predatory lending, loan scam or other fraud prevention, Fair housing, Rental topics, Pre-purchase homebuyer education, Non-delinquency post-purchase workshop (including home maintenance and/or financial management for homeowners), and other workshops not listed above.

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Disclosure to Client for HUD Housing Counseling Services

Debt Reduction Services, Inc. and its financial education arm, Money Fit by DRS, offer the following housing counseling and educational services related to housing, personal finance, and bankruptcy certificates to consumers:
  • Housing Education Courses: DRS offers many online self-guided education programs classified as Financial, Budgeting, and Credit Workshops (FBC), Fair Housing Pre-Purchase Education Workshops (FHW), Homelessness Prevention Workshops (HMW), Non-Delinquency Post Purchase Workshops (NDW), Predatory Lending Education Workshops (PLW), Pre-purchase Homebuyer Education Workshops (PPW), and Rental Housing Workshops (RHW). These courses help participants increase their knowledge of and skills in personal finance, including home affordability, budgeting, and understanding the use of credit, as well as predatory lending, loan scams, and other fraud prevention topics, fair housing, rental topics, pre-purchase homebuyer education, non-delinquency post-purchase topics including home maintenance and/or financial management for homeowners, homeless prevention workshop, and other workshops not listed above relating to personal finance and housing. Course details are found below under “Housing Workshops.”
  • Home Equity Conversation Mortgage (HECM) Counseling (RMC): Via telephone and virtual platforms, we offer the required HECM counseling nationwide in addition to in-person counseling in Boise, Idaho. We also offer in-home counseling options in thirty counties across southern Idaho for an additional fee to cover our travel and additional staff time costs.
  • Home Maintenance and Financial Management for Homeowners (Non-Delinquency Post-Purchase) (FBC): Clients receive counseling and materials on the proper maintenance of their home and mortgage refinancing. Clients can find help and resources by phone, in our Boise office, or virtually on all topics related to stabilizing their long-term homeownership.
  • Services for Homeless Counseling (HMC): Clients receive phone, virtual, or in-person (Boise) counseling to evaluate their current housing needs, identify barriers to and goals for housing stability, establish a path to self-sufficiency, and connect with emergency shelters, income-appropriate housing, and/or other community resources (e.g. mental healthcare, job training, transportation, etc.).
  • Pre-Purchase Counseling (PPC): Clients receive counseling through the entire homebuying process. Assistance may involve creating a sustainable household budget, understanding mortgage options, building their credit rating, and putting together a realistic action plan to set and achieve homeownership goals.  Additionally, clients will receive materials and resources about home inspections and other homeownership topics relevant to successfully maintaining a home.
  • Rental Housing Counseling (RHC): Via phone, in-person appointments (Boise, ID), or virtual platforms, clients receive housing counseling relevant to renting, including rent subsidies from HUD or other government and assistance programs. Topics can also address issues and concerns having to do with fair housing, landlord and tenant laws, lease terms, rent delinquency, household budgeting, and finding alternate housing.
DRS also offers the following services:
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  • The Budget Briefing and Debtor Education Certificates that are required during the Bankruptcy filing process;
  • A Student Loan Repayment Plan Counseling and application service.

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Through such services, DRS has established financial relationships with hundreds of banks, credit unions, and creditors such as American Express, Bank of America, Barclays, Capital One, Chase, Citibank, Credit One, Discover, Synchrony, US Bank, USAA, Wells Fargo, and others.

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The client is not obligated to receive, purchase or utilize any other services offered by DRS or its exclusive partners to receive financial education or housing counseling services. Alternatives: As a condition of our counseling services, in alignment with meeting our client services goals, and in compliance with HUD’s Housing Counseling Program requirements, we may provide information on alternative services, programs, and products available to you, if applicable and known by our staff. Alternative DMP services include negotiating better repayment terms directly with your individual creditors, paying your debts as agreed, or, in extreme cases, filing for personal bankruptcy. Alternative credit and education services can be found through MyMoney.gov or the Jump$tart Clearinghouse of online financial education resources. Housing counseling alternatives can be found through HUD at www.hud.gov/findacounselor.
Finally, you understand that you may revoke consent to these disclosures by notifying DRS in writing.
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Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

Rental, Fair Housing, Predatory Lending / HOEPA, Post-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. credit, budgeting, homeless prevention, debt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).

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Housing Counseling and Education Fee Schedule

 

Online Education Program Fees*

Homebuyer Education Course: $59 per participant

  • Self-paced course available here, our online housing counseling and education center. Certificates will be automatically generated upon completion of the course (approximately 6-8 hours)

Rental, Fair Housing, Predatory Lending / HOEPA, Post-Purchase (Non-delinquency post-purchase workshop, including home maintenance and/or financial management for homeowners) Online Workshops: $49 per participant

  • Approximately 1 hour each

Other Self-Guided Financial Literacy Webinars (e.g. credit, budgeting, homeless prevention, debt prevention): $0

One-on-one Counseling Fees*

Pre-purchase Homebuying Counseling, Rental Counseling, Post-purchase Ownership Maintenance and Financial Management: $75

  • Session by the hour

Reverse Mortgage/HECM Counseling with Required Certificate:

  • $200†

Credit Report Fee: Paid Directly by Client

*Fees for all but our online education courses and workshops can be paid online by debit card, credit card, or PayPal or in person by cash, check or money order to: “Debt Reduction Services, Inc.” Registration fees are non-refundable 24 hours or less before the start of an in-person course or workshop. Certificates are non-transferable

*Fees may be waived for households with income of 150% or less of that identified on the US Department of Health and Human Services Poverty Guidelines Page

†Home visit counseling is available in 30 southern Idaho counties for potential HECM borrowers at additional costs to cover our travel (IRS reimbursement rates apply) and staff time ($50 per hour or fraction there).