The military can teach you many things, but it doesn't always teach you how to stay financially healthy while serving your country. Staying financially fit is a marathon, not a sprint. It requires ongoing vigilance and conscious decision-making, especially in the context of military service.
The numbers show the extent of the issue – a recent study found that three-quarters of middle-class military families report that at least one member has experienced a health issue related to financial difficulties. The very nature of military life can sometimes make servicemembers targets for unscrupulous financial practices. To help you avoid a similar scenario, let's take a closer look at common money mistakes to avoid and some smart strategies to pursue instead.
Common Financial Traps
For many younger people, a new military career might significantly increase income and financial stability. While the armed forces don't pay extravagantly, the guaranteed salary and comprehensive benefits are often more generous than what can be earned elsewhere.
This improved financial situation – and the promise of a regular paycheck – can sometimes lead military members to assume a greater debt load than experts recommend. Overextending yourself financially is one of the most common errors servicemembers make.
Another pitfall that servicemembers can encounter is predatory lending. These are unfair, deceptive, or fraudulent practices in lending, often involving high fees and interest rates. Payday loans, car title loans, and certain types of credit cards can fall into this category. Predatory lenders often prey on servicemembers, lured by their steady government paycheck. To avoid this trap, always read the fine print and understand the terms of any loan before accepting. Consider other options like low-interest personal loans from a reputable bank or credit union or an advance from your pay via the military's emergency relief funds.
It's also important to realize that military careers are mobile. Purchasing a home – then being forced to sell it before it's had sufficient time to appreciate (at least enough to cover closing costs and other expenses) – is another common mistake servicemembers may make.
What To Do Instead
The armed forces offer impressive benefits, covering everything from loans and housing to education and retirement planning. For most servicemembers, these benefits are absolutely essential for making life comfortable on a military salary. Failure to maximize these benefits will make it vastly more difficult to maintain good financial health.
In addition to being familiar with all of the unique benefits available to servicemembers, you can take a few other steps to remain financially healthy. These include:
- Create a rainy day savings fund to cover emergencies.
- Start a transition fund to help meet your expenses when you switch to a civilian career.
- Stay vigilant against scams that target servicemembers and veterans.
- Take advantage of career training, skill development, and job placement services.
- Work on your credit score to lower the money spent on fees and interest each month.
- Use your military discounts wherever applicable.
- Prepare for your spouse's income to be inconsistent (military spouses are unemployed or underemployed at a higher rate).
- Attempt to live on your active duty income and use additional income to save.
By following these steps, you can help ensure that you remain as financially healthy as possible during and after your military career.
The Takeaway
Military members must deal with financial risks and constraints that don't apply to the general public, which is one reason why they struggle with higher-than-normal levels of debt. Yet by employing smart budgeting and saving strategies and tapping into benefits reserved for military personnel, servicemembers can ensure they maintain their financial health for as long as they plan to serve.
