The Department of Veterans Affairs reports service members are twice as likely to have credit card balances of $10,000, or more, than civilians. The typical recruit is a young adult without much experience in managing money. It’s never too late to make changes, but it requires a new mindset.
Taking control of your finances is like the paradigm shift marking the first day of basic training. Using a similar “in it to win it” approach to financial choices means a more stable future.
Avoid Scams and Pitfalls
Payday loans and other short-term, high-interest lending offer a quick fix, but experts say it’s the worst decision you can make. Average interest rates on a two-week loan are 391 to 521 percent, according to the Center for Responsible Lending. Car title loans, which use your vehicle as collateral, also charge interest rates in the triple digits; plus, you could find yourself without a car if you don’t repay in full. Instead, hit the reset button:
- Create a practical action plan cut back on expenses, pay down high-interest debt and build an emergency savings fund.
- Take advantage of the Thrift Savings Plan, or use your bank’s automatic debiting feature to set aside a portion of your paycheck.
- Consider US Savings Bonds. Always shop around for the best bank rates.
Save Money Every Day
Nickels and dimes add up to dollars. A recent survey shows military families are cooking instead of eating out (58%), clipping and clicking coupons (43%), buying fewer clothes (49%), and bringing a packed lunch to work (49%). Think of saving as a game and build it into your everyday life.
- Good planning starts with a budget. Know what is coming in and going out. There are many good apps out there to help.
- Opt for paying cash instead of debit cards or credit cards.
- Create a cash envelope system – literally putting cash in envelopes marked Groceries, Shopping, Utilities, etc. – to make sure spending stays in check.
Plan for the Future
Do you want to send your children to college? Buy a house? That requires planning. Don’t live for the moment; think ahead to the 20-year mark. What will you do and how will you pay for it?
- Consult a professional. Every installation has a designated Personal Financial Manager available to help you, at no charge. If you want to take it to the next level, hire a certified financial planner.
- Volunteer members of the Financial Planning Association offer free, unbiased financial coaching across the country. They can help you create a budget, readjust after deployment, and learn about types of investments.
Aim for Financial Stability
Serving in the Armed Forces is a job that comes with sacrifices. Your financial well-being shouldn’t be one of them. There are many resources out there, from apps to trained professionals, who can help you get a handle on your finances, but it all starts with your decision to act.
Have you used any of these tips before? Did they work?
Posted by Marie Hickman, a former military spouse and blogger specializing in saving money, personal finance, and frugal living. She writes for Valpak.com and other websites.