“My experience working with hundreds of soldiers over the years in career and transition counseling verified this problem. Top the financial issues with a bad credit rating – it can and will impact the service member’s security clearance and could possibly cost them their job.”
For service members, regardless of branch, mission first is the mandate. All have the same commitment – be ready and be focused. However, when financial strife happens to a military family, mission first becomes cloudy. Maintaining financial security is part of the job, the mission if you will.
Some forms of debt haunt most Americans. Many members of the US armed forces pay a financial price for their service to the country, often carrying higher credit card debt and owning fewer assets than civilians.
A survey done for the National Foundation for Credit Counseling (NFCC) found that veterans and active duty personnel and their families often face unique circumstances, such as frequent relocation and deployment, which can put a significant strain on their finances. The study revealed that members of the military accrue debt at alarming rates when compared to civilians. This debt can endanger service members’ financial lives (and jobs) if left untouched.
People strapped for cash often make questionable financial decisions. Research done by the NFCC found that 60 percent of the nation’s service members have used alternative, non-traditional lenders, such as payday lenders, to make ends meet. This makes them more vulnerable to fraud or high-interest predatory lending.
This is a serious problem,” said Susan Keating, NFCC president, and CEO. “The issue of financial stability for those who serve our country is a real concern.”
The NFCC survey looked at people who took part in the foundation’s Sharpen Your Financial Focus program to deal with debt. They found that when compared to all the participants in the program, the average military family had:
- 7 percent higher unsecured debt balances, or $400-$500 more than the average
- 16 percent fewer tangible assets ($11,000 less)
- 15 percent higher monthly debt-related expenses ($200 more)
- Military lifestyle makes staying out of debt quite difficult
- Military members in debt tend to have an average debt-to-income ratio of 46.5 percent, about 10 percent higher than normal
During the last eight years of military drawdowns and continued reduction in forces, the situation got worse as more service members tried to find civilian jobs. I think this higher-than-average burden of debt leads to some significant financial constraints on these military households.
My experience working with hundreds of soldiers over the years in career and transition counseling verified this problem. Top the financial issues with a bad credit rating – it can and will impact the service member’s security clearance and could possibly cost them their job. It is a circular spiral that must be broken.
Another problem: New inductees to the military are young. Many times they do not have the financial skills to manage their money properly. All of a sudden, this young adult has a bunch of money coming in. They have a place to live, medical care, food, clothing, and cash. Few know how to handle this new found wealth, so they spend it all. Putting a spending plan in place is the last thing on their minds. Learning how to make a budget is not something they know and frankly, has not traditionally been the military’s focus.
When military members are forced to squeeze every last dollar out of their paychecks, they might not be able to save a significant amount for emergencies at home.
Below are some reasons members of the military tend to accrue debt.
Pay is steady but small
Service members may find themselves in debt for a number of reasons. The pay may be steady, but it’s not large, and that means they have to stretch their paychecks quite a bit – especially if they are supporting a family. When military members are forced to squeeze every last dollar out of their paychecks, they might not be able to save a significant amount for emergencies at home. If there is a family emergency, they may have to go into debt. This can quickly become a downward spiral if it’s not carefully monitored — the predatory lenders right outside the gate of the base count on it.
Deployment makes it difficult to stay out of debt as well. If a service member leaves a spouse at home, he or she will automatically inherit all the financial responsibilities while the service member is deployed.
Frequent moves add expenses
Families with only one spouse in the military often have to live on a single income. Frequent relocations make it difficult for the other spouse to find a good-paying job. Many employers — I experienced this personally — don’t want to commit to hiring a spouse of a military member as they know the job will be temporary. Once PCS comes around, the employee they have hired and trained will leave.
Many service members find it easier to buy a home than rent, but the ebb and flow of the housing market can make it harder for service members to sell their homes on short notice. As a result, they have to pay mortgages on both their old and new homes to maintain good credit, which places an added burden on their financial lives.
Missed payments
Deployment makes it difficult to stay out of debt as well. If a service member leaves a spouse at home, he or she will automatically inherit all the financial responsibilities while the service member is deployed. If communication fails for some reason, the spouse at home may be overwhelmed and miss a seemingly innocuous bill, but that missed payment can create larger problems. Because most of the financial pressure is put on the spouse at home, missed payments can lead to more debt, legal action and problems for the service member. The issues cascade.
The average military member who contacts a credit counselor has accumulated about $10,000 in consumer debt.
More susceptible to the credit industry
Because of their steady, guaranteed paychecks, military members can get credit more easily and are more likely to be targeted by creditors. Carrying debt, however, limits a service member’s ability to maximize other military benefits, like the Thrift savings program. Another reason people in the military are more susceptible to the credit industry is that service members can’t have a debt settlement like civilians can, according to Tom Breazeale, Founder of Military Debt Management Agency.
Help is Available
The average military member who contacts a credit counselor has accumulated about $10,000 in consumer debt. In many cases, they are required to seek help from their commanding officer to maintain their security clearance.
Nonprofit companies such as VeteransPlus and Military Debt Management Agency work to make it possible for military members to put their debt behind them. A successful military career can lead to a lifetime of financial security if the military member exercises the discipline gained from basic training and apply it to personal finances. According to the Military Debt Management Agency, approximately 36,000 active members of the military have recently requested financial help due to large debt.
Bob Fixott works with military families at the nonprofit Consumer Credit Counseling Service in North Little Rock, Ark. He says the military families he sees are “pretty stressed out.” “We encourage service members to get out of debt and stay out of debt, with the help of nonprofit credit counseling.”
To help service members be their best both financially and professionally, Military OneSource offers free financial counseling to service members and their families on issues such as budgeting, money management, and debt reduction. The message to service members is: You don’t need to tackle issues like mounting debt, saving for college, or retirement alone. Military OneSource financial counselors are available in-person, over the phone and video.
To help service members be their best both financially and professionally, Military OneSource offers free financial counseling to service members and their families on issues such as budgeting, money management, and debt reduction.
Financial counseling gives service members an opportunity to talk to a trained professional – one who is familiar with the issues that affect service members. They answer questions and provide referrals to services and programs that meet the service member’s specific needs. All active-duty service members, National Guard, reserve members and their families and survivors are eligible to receive this free service. Rest assured, Military OneSource financial counselors will not push products or plans.
How to Connect
Financial needs are likely to change over the years, so financial counseling services are available as often as needed, and for as long as the service member is eligible. The number of sessions is unlimited. The overriding emphasis for service members is to get started on the road to financial security today with this free, personalized service.
Here’s how to take advantage of this service:
- Set up a time to meet with a financial counselor by calling Military OneSource at 800-342-9647
- Receive financial counseling assistance by phone or video chat, if you prefer
- Get financial counseling by phone or video chat, even if you are stationed overseas
Financial security…It can help the service member become a true guardian for the home front – it allows a military member to stay focused and mission ready.
