Budgeting for COLA Payment Fluctuations

Service members��� overseas Cost of Living Allowance (COLA) is routinely affected by the economy, and can fluctuate from pay period to pay period. Changes in spendable income (the amount Service members typically spend on COLA-type goods and services), shopping patterns, prices of goods and services, and currency fluctuations can all cause COLA to increase or decrease. Due to latest changes to these factors ��� Service members at some income levels stationed overseas will see a change in their monthly COLA payment. The extent of the change depends on a Service member���s rank, years of service, number of dependents and location.

During the most recent period data was collected, members at the lower and higher income levels bought more COLA-type goods and services(such as, clothing, food, auto insurance, etc.), resulting in an increase to spendable income for those groups. Members in the mid-range income levels spent less income on COLA types of goods and services, resulting in a decrease to spendable income for that income range. As a result, Service members at the lower and higher income levels stationed overseas will see an increase in their monthly COLA payment. Some mid-income levels of compensation will see a decrease in their monthly COLA payment. The amount of decrease/increase varies by rank, years of service and number of dependents.

Overseas Cost of Living Allowance (COLA) is a non-taxable supplemental pay allowance, designed to offset overseas prices of non-housing goods and services. Approximately 240,000 members at 600 locations overseas, including Alaska and Hawaii receive COLA payments.

Overseas COLA is not a fixed amount and can fluctuate from pay period to pay period. It is important to remember that because of the fluctuation, fixed expenses, such as rent and car payments, should be based on what Service members can afford without COLA.

COLA payments can be calculated by using the COLA calculator located at: http://www.defensetravel.dod.mil/site/colaCalc.cfm. The calculation tool is updated with the current COLA amount each pay period. The calculator will be updated on October 1st for the changes that will be reflected in the mid-October paycheck.