Making Changes

Richard Battles adjusts his finances after retiring from the military

Richard Battles created a lifetime of memories during his 20-year Naval career. He lived in Japan for nearly three years while assigned aboard the USS Midway aircraft carrier. Over the years his travels took him to such far-off places as Hong Kong, South Korea, and Thailand. But Battles retired from his military career in 2002. “I miss the friends I made over the years, and traveling overseas,” says Battles.

Along with the friendships and sense of adventure, Battles, now 45, misses the military’s financial perks—like the tax-free cost of living allowance. While in the Navy, Battles, who is single, received an annual base salary of $29,000, plus $16,000 in tax-free cost of living allowances.

Battles had a rude awakening when he retired and began working in the private sector. “I was making the same amount of money,” he says, “but I was being taxed more.” He bought a three-bedroom, two-bath home in Virginia Beach, Virginia, in 1996 for $86,700. Retiring from the military was a turning point for Battles. The change in his finances prompted him to take out a home equity line of credit so he could pay off his four credit cards, which had a total balance of $11,000.

“I wasn’t bringing home as much as I was used to,” says Battles, who now earns $56,200 as a senior investigator, conducting background investigations for a government contractor. Battles’ primary complaint is taxes. “I’m single, with no children, so I get hit hard.” For the last couple of years he has paid $2,000 after filing his federal and state taxes. “I’m being taxed on my take-home pay and my retirement check. When I was in the military, I owed maybe $20 or $30.”

Battles refinanced his home earlier this year, going from a 6% fixed interest to a 5/1 adjustable rate mortgage at 5.125%. When he refinanced, he separated the payments for homeowners insurance and property taxes, so that he pays them directly himself, rather than paying via an escrow account set up by the mortgage servicer. Battles says he got rid of the escrow so the money could sit in his account, earning interest.

Battles is looking for a way for Uncle Sam to take less of a bite. He is making $480 in extra payments monthly on his mortgage and hopes to pay off the 30-year loan in the next three to five years.

Helping him reach this goal faster is the fact that he recently took in a roommate, a friend whose rent pays half of his $430 monthly mortgage. Battles has no auto insurance or auto loan because he drives a company car.

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