Military
Managing Money in the Military
Financial problems can cause a lot stress. For members of the Armed Forces, however, they can be even more traumatic. Money problems can result in losing a security clearance, or even bring your career to a halt. Even if it doesn’t get that far, you can’t afford to be distracted by money troubles when you’re busy trying to protect our country!
This guide is designed to alert you to some of the potential pitfalls you may encounter as a servicemember, and alert you to resources that can help if you are having financial problems.
Some Words to the Wise
Make Your Paycheck Last: According to Meredith Leyva, author of Married to the Military and founder of CincHouse.com, your paycheck may not always stretch as far as you might think. Pay for those who are just entering the service is often low, and it can be difficult to try to budget while you’re living with the ups-and-downs of military life.
A budget will be an essential part of your financial success, whether you serve your country for a few years or for your entire career. Getting in the habit of carefully tracking your finances – even if you’ve never done so before – will give you the freedom of choosing how you want to spend your money, and free you from the stress that too much debt can cause. A free budgeting guide is from ConsolidatedCredit. org in the Learning Center. If you do have a family, make sure you and your spouse work on the budget together so you are both clear on expenses and priorities.
Military pay can also be confusing, but it is important to stay on top of it. CincHouse.com offers a Military Pay Estimator calculator you can use to estimate your military pay when it changes. You can also get a free booklet on military pay from the Navy Marine Corp. Relief Society at http://www.nmcrs.org/highlights.pdf
One of the most important things you can do to avoid being taken in by scams is to sock away money for emergencies, relocation, etc. The average family loses $800 each time a family member deploys, says Leyva. While you may receive hardship pay or other forms of additional pay, you are likely to have higher expenses as well. You need to prepare for higher expenses to support the family members you leave behind. There are many things that you would have taken care of if you were home, that your spouse now must cover, such as babysitting, lawn care, household repairs, car repairs, etc.
It’s the “Murphy’s Law of the Military”: The second your servicemember walks out of the door, your car is going to break down, the roof is going to leak and the plumbing will burst.” -- Meredith Leyva
It is also important to stay on top of your taxes. Visit the IRS website at www.IRS.gov and download IRS Publication 3, Armed Forces’ Tax Guide or order it by calling toll free 1-800-TAX-FORM (1-800-829- 3676). If you find yourself getting a refund, you may want to adjust your withholding and instead put the money you free up into savings.
Be Ready for Anything: Make sure you have an up-to-date will, a power of attorney for your spouse or other family member, and list designated beneficiaries on your insurance, retirement and bank accounts as needed. You may have little notice before you deploy, so you must attend to these details immediately. The less rushed you are, the more time you can take to make the best decisions for yourself and your family.
Check the List: Most bases have a “blacklist” of businesses that have harmed local servicemembers. Leyva recommends you check that list before you do business with local companies. You can typically find that list in the public affairs or base commander’s office.
Get On Board: There are a number of free classes that may be available to help educate yourself on financial issues. For example, the Navy Marine Corps. Relief Society (see below) presents a very popular “Budget for Baby,” workshop and offers other financial management programs to over 100,000 people a year. Just make sure, if you attend a seminar aimed at service people that the sponsor of the program is giving independent advice, and not a sales-pitch in disguise.
"Every family is going to experience a financial screw up. You’ll be
caught short. The question is whether you learn from it. Some of our
best volunteers are those whom are originally recipients of our help.
They have done the right thing by learning from it."
-- Meredith Leyva, Cinc House and Operation Homefront
Watch Out For…
Payday or Quick Cash Loans
Businesses offering quick cash to “tide you over until payday” are really selling high price, short-term loans. Military personnel are often targeted for these loans because of the steady paychecks you receive, and because the lenders believe you aren’t likely to complain publicly if you become a victim of one of these companies. Interest rates on these loans can be as high as 900%! They are extremely dangerous. Not only are the interest charges astronomical, if you cannot pay these loans off in full when due, interest will begin to add up very rapidly and you may find yourself unable to dig out.
Unfortunately, 91% of people who use payday lenders use them several times a year. While you may think using one of these lenders is a “one time deal,” the deck is stacked against you. The best piece of advice is never start using a payday service!
“We’ve seen situations where a servicemember has borrowed
$500 from one of these outfits, has paid back $5000 but hasn’t
touched the principal.”
--John Alexander, director of communications
Navy Marine Corp. Relief Society
If you need emergency financial help, check the resources section of this brochure for organizations that may be able to help. While we don’t advocate maxing out your credit cards, even a credit card cash advance is likely to be significantly cheaper (and safer) than one of these loans!
Title Loans
Short on cash but own a car? You may be tempted to take out a title loan – a short-term loan using your car as collateral. Like payday loans, the interest charges may be astronomical, and if you miss a single payment you may lose your vehicle and the equity in it! Don’t risk it. Again, there may be other alternatives to help you get through your crisis.
Auto Loans
Auto loans and auto expenses are one of the top financial problems for many servicemembers. “Auto (costs) are the #1 service for Operation Homefront (an organization that helps servicemembers and their families with short-term crises),” says Leyva.
Sometimes the problem is an older car that is inexpensive to purchase but breaks down frequently. Other times the problem is buying an expensive new car with a long-term loan. These loans can instantly put you “upside down” on your vehicle, meaning you owe more than it is worth.
It can be difficult to get out of a vehicle loan, especially a bad one. It is worthwhile to look into refinancing your auto if the original loan is too high (your credit union is a place to start). In the meantime, talk to the lender about a modified repayment plan if you are having trouble keeping up. Operation Homefront may provide auto repair assistance or vehicle donations to families in crisis. If you have leased a vehicle, you may be able to end the lease if you are called up for active duty (see The Servicemembers Civil Relief Act on page 6).
Furniture and Rent-to-Own Loans
When you are on a tight budget, the monthly payments offered by rent-to-own stores can seem very attractive. Low monthly payments, typically mean you will be renting the item long after it has become outdated and you will pay a small fortune for it. The Iowa State University Extension Office, for example, illustrates that a renting a 25-inch television could cost more than three times the amount than buying it outright! By the time you pay it off, it may be long out of date. Visit www.extension.iastate.edu/Publications/SP58.pdf for a free brochure that will help you understand Rent-to-Own contracts.
If you need furniture or appliances, you may be better off looking for good, used items by hunting through garage sales, flea markets, classified ads, etc. You can also visit www.freecycle.org to find a local “freecycle” organization. Members give away items they no longer need, and if you need a particular item, you can post it in the “items wanted” section.
