Adjusting your family’s financial life to a “garrison environment.”
If you’re a military family staring down reduced income challenges following your service member’s deployment, you’re not alone. The outgoing assistant director for service member affairs at the Consumer Financial Protection Bureau, Holly Petraeus warned that military communities may see more financial problems in military families as large-scale deployments come to an end this year and next.
“Military families who are used to the infusion of extra cash band benefits that go along with deployments, now will have to tailor their finances to a garrison environment,” Petraeus explains. “That may be a hard landing, especially since a lot of the money for family activities on post is going away.”
The challenge of transitioning to a garrison financial life after active-duty deployment doesn’t just start and end with the income difference. While Hostile Fire / Imminent Danger Pay (HFP/IDP) increase your income during deployment, the reduction in that income is not your only concern.
3 key actions to take as you transition
“Taking time to transition your finances for garrison life after a period of deployment is essential to quickly achieve and maintain financial stability,” explains Maria Gaitan, Military Outreach Coordinator for Consolidated Credit. “There are several steps you can take to ensure the transition is as easy as possible.”
- Reassess your budget. Compare your monthly spending to your new income level. If you have negative cash flow because you’ll be spending more than you earn, start identifying areas where you can make cuts now.
- Decide how to divide your SDP. If you were on extended active duty (EAD) and took advantage of the Savings Deposit Program, then you need to determine what to do with the money you saved and the interest you earned from the account. Make specific plans for this money, such as using it to pay off credit card debt or as a down payment on a new vehicle. You can also move it over to a savings account or a Money Market Account or CD, since those provide better growth. Just make sure not to squander the funds you’ve saved and earned.
- Know what will happen to your interest rates. Active duty service members returning to garrison service will still be protected under the Servicemembers Civil Relief Act (SCRA), so interest rates will continue to be capped at 6 percent. However, if you are a reservist or guard member returning from active duty, then your interest rates may be restored to the original rates. This may affect your payment schedules on some debts and will definitely mean that your debts will cost more. With that in mind, make aggressive plans to pay off debts like credit cards, since the rates could double or more.
“High interest credit card debt can be serious challenge when you’re working to achieve financial stability,” Gaitan explains. “If you’re having trouble balancing your budget or making all of your payments, call a credit counseling agency to see if you qualify for a debt management program. This can reduce your total monthly credit card payments by 30 to 50 percent, making it easier to budget and get ahead faster during your transition.”
For more information on how to reduce credit card debt and balance your budget, call Consolidated Credit today at 1-888-294-3130 to speak with a certified credit counselor at no charge.