Pay & Benefits

This Army captain is taking a huge pay cut to go warrant officer

Army Capt. Jennifer Dowler will voluntarily take a 35 percent pay cut as she becomes a warrant officer next year, so she wanted to find out if she's on track financially to weather that storm.

Dowler acknowledged her move is unusual, especially for someone outside the aviation community. She's switching from logistics to Army Criminal Investigation Command, commonly referred to as CID, to become a special agent warrant officer.

She's making the move because the CID career appeals to her. So far, her expectations have been realized.

"I'm going through classes now, and I really enjoy it," said Dowler, who has been in the Army for 5½ years.

Dowler is one of four service members who volunteered for this year's special report on Troops And Their Money. Military Times put out a call for troops to have their finances reviewed by financial professionals. A variety of service members of different ranks, and in different financial circumstances, responded.

The 27-year-old single captain has socked away nearly $84,000 in checking, savings and investments, and puts 13 percent of her base pay into her Thrift Savings Plan. Dowler bought a house in 2015 in Tennessee, near Fort Campbell, before she'd considered her "drastic career change." She's in school at Fort Leonard Wood, Missouri, and has rented her Tennessee house to a friend.

She has no debt beyond a mortgage and pays all credit cards off each month. She's tried unsuccessfully to establish a strict spending budget, but she doesn't spend frivolously. She's not exactly sure how she managed to save nearly $50,000 beyond her retirement savings.

One early advantage: A ROTC scholarship, which meant no student loans. She also took advantage of the Savings Deposit Program when she was deployed to Afghanistan in 2014. Those serving in SDP-eligible combat zones can deposit up to $10,000 in these accounts, which earn 10 percent annual interest.

Her financial snapshot:

Total income: $84,418, plus $13,381 in rental income. 
Consumer debt: $0 
Emergency fund: $42,585
Mortgage on rental house: $173,783
Value of house: $190,800
Other assets: $6,000 in certificates of deposit
Retirement assets: $4,414 in Roth IRAs, $30,560 in TSP
House equity, plus savings, plus retirement: $100,576

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"You've clearly done a fantastic job of prudently managing your day-to-day finances," JJ Montanaro, a certified financial planner for USAA, told Dowler. "The fact that your only debt is the mortgage on your rental property, along with your ability to consistently save for retirement and build your cash reserves, are testament to the quality of your efforts."

Normally, $40,000 would be too much in cash, he said, but given Dowler's circumstances as a landlord and a soon to-be warrant officer with a pay cut, he recommends maintaining that amount. Dowler should keep $30,000 of that in an emergency fund to cover any needs she has after the decrease in pay. Her paycheck will drop by about $2,000 a month, and to give her a cushion, Montanaro multiplied that amount by 15 months. Once she's settled into a new routine with the new income, she can consider shifting some cash into longer-term investments.

He recommends a rental house fund of $10,000, separate from her everyday accounts, to cover expensive repairs on the house or a lapse in renters. Her Thrift Savings Plan money is mostly invested in the G Fund, which is a stable, guaranteed option, but she should consider putting 100 percent of future contributions to the L2050 fund, Montanaro said.

While Dowler has done a good job with short-term cash accounts and long-term savings for retirement, she should consider adding a "third bucket" which he calls medium-term savings. This money could be set aside to be invested a little more aggressively than savings or certificates
of deposit. Some examples are balanced mutual funds and the government's I-savings bonds.

Dowler should immediately contact her insurance company to let them know her house is now a rental property, because landlords should have a different policy. It may be a little more expensive, "but making sure your coverage is the right type will protect you in the event something goes wrong," Montanaro said.

She also should consider adding a $1 million umbrella liability policy, which would provide backup coverage to her auto, homeowners and renters coverage, and is relatively inexpensive – about $200 to $300 a year. He also recommended paying the minimal additional cost for increasing the property damage coverage on her auto insurance policy from $50,000 to $100,000, given the increasing price of cars and repairs.

This future pay cut is no small financial matter, said Montanaro, but "the good news is that since you've consistently spent less than you earned and saved, you're in much better position to do it than most…. including me!"


Dowler said she is taking steps that Montanaro recommended, such as getting landlord insurance, which she didn't know existed. She also liked his advice about medium-term savings, and the review "made me a lot more confident about my current financial situation."

"Even though I'll be taking a 35 percent cut in pay, what I've done in the past will set me up for financial success."

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