Is Living On or Off the Installation Better for Your Budget?
By Danielle Keech for MilitaryByOwner
Budgeting (oof). This subject warrants an eye roll, but it’s unavoidable, and that’s why we’re talking about it. Your monthly budget determines the future of your finances, right? It’s important!
So, let’s talk about one of the major budgeting categories (spoiler alert)...housing. While military families often focus on the evergreen debate as to whether we should buy or rent a home, there’s another big decision to make when moving to a new duty station: whether or not to live on the installation.
The answer comes down to your location and your priorities.
Why?
Because the location of your duty station will dictate how far your money stretches—yes, even though your Basic Allowance for Housing (BAH) flexes with where you live. Your wants and needs in a home cost money, and while a three-bedroom home with a small yard, an OK commute to the installation, and no bells and whistles fits nicely in your planned monthly budget, one close to the installation with a pool, gourmet kitchen, and beautiful finishes may not.
First things first: Determine your budget.
Your BAH isn’t your budget. Sure, it’s what the government allotted you for housing, but that doesn’t make it your personal budget. You first need to figure out what you want.
- How close do you want to be to the installation?
- How many bedrooms do you need/want?
- How many bathrooms?
- Which amenities are important to you? (access to a pool, golf course, beach, etc.)
- What in-home features do you need/want?
Now, take a look at your gross monthly income and BAH. What’s the total? Some budgeting tools suggest using a percentage calculator to determine 30% of your gross income on rent. While that’s not a bad thing to aim for, the 50/30/20 rule might be better applied depending on where you live. In our article, How Much Rent Can I Afford?, writer Dawn M. Smith notes that:
“The 50/30/20 rule offers more flexibility for a military family to rank priorities. Your after-tax pay is divided into three categories:
- 50% of the total is for need based spending (rent, utilities, food)
- 30% is for wants (entertainment, travel)
- 20% is for savings and debts (school loans, TSP).”
Living on the installation might be a good idea if:
1. You live in a high cost-of-living area.
Chances are, if you’re moving to a major metropolitan area like San Diego, Hawaii, or the National Capital Region, you’ll find a larger house and more amenities for less money on the installation than you will out in town.
In Kailua, Hawaii, near Marine Corps Base Hawaii, the average rent is $2,225 a month while the BAH for an E-6 with dependents is $2,967. But, the numbers don’t communicate everything. What you may not know is that most rental homes in Kailua don’t offer central air conditioning, yards are small, and electric bills land between $200 and $300 each month. Even with a small buffer from COLA, the budget and adjustment to a new standard of living can cause some strain.
It’s times like these that living on the installation where your BAH covers rent plus utilities and buys you more square footage and an ocean view each month make it worth it in most people’s perspective.
2. You want community and convenience to work.
There’s one thing that installations offer that is much harder to come by when living off the installation: a strong military community. Yes, military families often convene in specific neighborhoods outside the gates, but there’s nothing that quite replaces the comfort and feel of living in military housing among a community that understands you. And having kids for your kids to play with, lots of playgrounds nearby, and similar people to call your neighbors is one of the biggest draws to living on an installation.
You might not be able to find the same community, quick commute, and easy access to the Commissary, Exchange, and health clinic out in town that you’ll find on an installation for less than your BAH. And if these things are important to you, then your money will go further toward your priorities in military housing.
Military housing works by taking your entire BAH each month. Though there are some exceptions, like a less-than-desirable housing area, it’s common enough that you can expect it. In some cases, like the ones stated above, the cost is worth it. However, that’s not always the case.
Living on the installation could kill your budget if:
1. If you want to save.
In lower cost-of-living areas, you might find an equivalent home for the same or less than your BAH. This might mean an opportunity to save some money.
Part of this depends greatly on your house hunting priorities—your desired location, size of yard, how many bedrooms, add-ons like a pool, and the community. If having the nicest home money can buy isn’t your goal, then you’ll likely find living off the installation easier on your pockets.
2. If you want to buy a home.
In some areas, the cost of homeownership is less than rent. Plus, it allows you to invest your money, and hopefully, one day see equity or create passive income by renting it out when you move on. But living on an installation doesn’t allow you to buy property. If you intend to invest in a home, you automatically have your answer to the question, “Is living on or off the installation better for my budget?”
The biggest favor that you can do for your money is to stick to your budget. Decide how much of your BAH you’re willing to spend (it’s OK if you spend more, as long as you account for it) and how much you want to save or put toward debt or other investments. Then, stick to your budget plan. If you can’t find anything off the installation that meets your requirements, then your best bet might be living on the installation.
