What to Do with Your Junior Enlisted Pay Raise

Starting in 2025, many junior enlisted servicemembers received the largest pay raise seen in decades. These pay increases of up to 14.5% for ranks E-1 to E-4 translate into an additional $3,000 to $6,000 annually, providing a meaningful boost to take-home pay.  

Having this kind of additional income provides a great opportunity to strengthen your financial security. AAFMAA President Mike Meese shares practical advice on how you can make the most of this increased pay, from reducing your debt to creating a savings plan and preparing for your future financial needs. 

Reduce or Eliminate High-Interest Debt 

“Paying off debt should be the first priority,” says AAFMAA President Mike Meese. “If you spent heavily during the holidays, start by paying that down so you’re not stuck paying interest over the next several months.” 

For servicemembers carrying high-interest credit card debt or payday loans, the new pay raise can help ease those financial burdens. By setting aside a portion of each paycheck to pay off your loans, you can reduce your debt, save money interest payments, and improve your credit. 

Create a Savings Plan 

Once high-interest debt is under control, you can start building up your savings. Meese suggests aiming to save 10% of your pay, but any amount you can contribute to savings is an important step toward financial independence. 

Your savings plan should start with a realistic picture of your finances. Today’s technology makes it easier than ever to track spending, set savings goals, and shop for the best financial products. Budgeting apps like Credit Karma or YNAB allow you to manage all your accounts in one place, giving you a complete view of your financial situation.  

Prepare for Future Financial Needs 

To start preparing for future financial needs, prioritize creating and/or adding to your emergency fund. Then review your short- and long-term goals.

• Build an Emergency Fund: Emergency funds act as a buffer against unexpected expenses. “Junior enlisted troops should have a goal of , having $5,000 to $10,000 in their emergency savings accounts,” recommends Meese. These funds can cover unplanned costs such as car repairs or family emergencies, and will help prevent you from incurring more debt. 
• Plan for Short-Term Expenses: Set money aside to pay for planned upcoming costs such as next year’s holiday spending, a summer vacation, or an anticipated move. Allocating funds in advance ensures you won’t need to rely on loans or credit cards. 
• Save for Long-Term Goals: Once your short-term savings are secure, you can turn your focus long-term goals such as your child’s college education or buying a home. Planning ahead for these big-ticket items helps you avoid debt and builds financial stability. 

You can help boost your savings in various ways: 

• Maximize Your Retirement Contributions: The Blended Retirement System (BRS) allows servicemembers to receive a government match of up to 5% of their pay for retirement savings. If you’re not already contributing the full 5%, you’re leaving free money on the table. 
• Find High-Yield Accounts: By placing your emergency fund or other savings in a high-yield account, you can earn interest on the money you set aside. “Let your money work for you,” Meese advises, rather than leaving it idle in a checking account. 
• Automate Your Savings: Set up an automatic, periodic transfer from your paycheck to your savings account. This way, your money goes into your savings without having the chance to spend it. 

A Path Toward Financial Security 

This year’s pay raise presents a rare opportunity to improve your financial situation. By using it to reduce debt, prioritize savings, and prepare for future expenses, you can create a more secure financial foundation for yourself and your family.  

Need help figuring out how to allocate your income effectively? Check out AAFMAA’s guide to building budgets for actionable tips to stay on track. 

The appearance of U.S. Department of Defense (DoD) visual information does not imply or constitute DoD endorsement.  Photo by Sgt. Joshua Taeckens. Airman 1st Class Aaron Wilkerson, contracting specialist with 502nd Contracting Squadron, executes a contract modification during a joint validation exercise (VALEX) at Fort Sam Houston, Texas, Feb. 13, 2025.