By Jennifer Berlin, Senior Vice President, Chief of Staff Advisor Operations at First Command Financial Services
Military life comes with unique challenges. Given frequent PCSs, deployments, and that military pay hasn’t kept pace with civilian pay, getting ahead financially can be difficult. As a former active duty soldier, military spouse and mother of two, I know this struggle firsthand.
According to a recent survey by the Military Family Advisory Network (MFAN), more than three-quarters of military and veteran respondents indicated they carry debt. The survey also found that 80.7% of respondents said their finances caused them at least some stress over the past year[1]. Combining these statistics with the impacts from inflation, it’s clear military families face significant financial stress. This strain could have a broader impact, affecting things like the high military divorce rate and serious mental health issues, including suicide.
In spite of the obstacles, with careful planning and the right strategies, time and again military families prove that they can achieve financial stability and build wealth. Let’s explore some key financial strategies that can help military families get ahead — and stay there.
Determine your financial goal(s)
It’s easy to feel overwhelmed if your finances aren’t where you want them to be. Start by defining your top one or two priorities. Maybe you need to make sure your life and disability insurances are sufficient. Or maybe you need to pay down debt. If your debt is under control, do you have an emergency fund? Many experts recommend having an emergency fund that covers at least 3-6 months of living expenses. If your debt and savings are OK, maybe you would like to help fund your kids’ college. Or maybe you’re ready to focus on your retirement savings. This hierarchy will be different for everyone but assessing your top priorities will help to set your path forward.
Know what’s coming in and what’s going out
While meticulous budgeting may work for some military families, it’s not the only way to manage your finances — especially if you’ve fallen behind. That said, if you’re just starting to get on track, you will need to know your income — including base pay, allowances, and any additional income sources. You’ll also need to know your typical expenses, which should include housing costs, utilities, groceries, transportation, and any debt payments. By understanding where your money goes, you can make informed decisions about how to better allocate your resources.
You don’t have to do this by yourself. Consider partnering with a financial advisor who’s familiar with the military lifestyle.
A good advisor can also help you better understand your assets, align on financial goals and make plans to pursue them. It’s great to have financial awareness and goals but laying out specific behaviors to help achieve those goals is perhaps most important. Through coaching, advisors inspire and motivate clients to take the first or next step on a path to pursue financial security.
The one non-negotiable to ‘catch up’
Saving money is as easy as spending less than you make. While this is the one non-negotiable to catch up, the reality is that, for many, this solution isn’t simple at all. It requires clear goals, a focused effort and several decisions day after day.
If you’re getting started on your journey to trim spending, start by looking at your credit/debit card statements and see if there’s anything that might be easier to cut. Look at memberships and subscriptions and streaming services. With the home internet and mobile phone industry being so competitive, they might also be areas you can trim. Consider calling your providers to see if they’re offering current promotions.
Also, military families often pay for unused subscriptions and services after a PCS, so review them every six months and cancel any you don’t need. Eating out and impulse spending are also areas where most families can trim spending. Start small by eating at home for one meal that you would normally eat out.
Maintaining savings is another area where career military families who work with a financial advisor seem to have an advantage. According to recent Financial Behaviors Index data, career military families who work with a financial advisor report average monthly contributions to savings and retirement accounts totaling $3,177 per month versus $1,756 for those without an advisor.
Make the most of your military benefits
No matter your financial goals, knowledgeable advisors can help you pursue them by making the most of key benefits like the Thrift Savings Plan (TSP), Servicemembers’ Group Life Insurance (SGLI), or the Survivor Benefit Plan (SBP). Take the TSP for instance.
TSP is a defined contribution retirement savings and investment plan that offers Federal employees the same type of savings and tax benefits that many private companies offer employees through 401(k) plans. By participating in the TSP, federal employees and uniformed service members can save part of their income for retirement, receive matching agency contributions, and reduce their current taxes. Ask your Advisor about whether you’re making the most of your eligible benefits.
Military life may present unique financial challenges, but with careful planning and disciplined financial strategies, military families can thrive financially. By setting financial goals, knowing what’s coming in and out each month and by spending less than you make, you can work toward securing your financial future. Remember, getting ahead financially is a gradual process, and every step you take brings you closer to your goals.
About the First Command Financial Behaviors Index®
Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index® assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 530 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 4.3 percent with a 95 percent level of confidence. www.firstcommand.com/research
About Sentient Decision Science, Inc.
Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. SDS is a behavioral science and consumer psychology consulting firm with special vertical expertise within the financial services industry. SDS specializes in advanced research methods and statistical analysis of behavioral and attitudinal data.
©2023 First Command Financial Services, Inc. parent of First Command Brokerage Services, Inc (Member SIPC, FINRA), First Command Advisory Services, Inc., First Command Insurance Services, Inc. and First Command Bank. Securities products and brokerage services are provided by First Command Brokerage Services, Inc., a broker-dealer. Financial planning and investment advisory services are provided by First Command Advisory Services, Inc., an investment adviser. Insurance products and services are provided by First Command Insurance Services, Inc. Banking products and services are provided by First Command Bank (Member FDIC, Equal Housing Lender). Securities are not FDIC insured, have no bank guarantee and may lose value. A financial plan, by itself, cannot assure that retirement or other financial goals will be met.
First Command Financial Services, Inc. and its related entities are not affiliated with, authorized to sell or represent on behalf of or otherwise endorsed by any federal employee benefits programs referenced, by the U.S. government, or the U.S. Armed Forces.
TSP funds have very low administrative and investment expenses, and low expenses can have a positive effect on the rate of return of your investment.
First Command does not provide legal or tax advice, and this report does not contain any legal or tax advice. Should you require legal or tax advice specific to your situation, you should consult with an attorney or qualified tax advisor. The information provided to you herein is provided for informational purposes only, is not intended to be tax or legal advice, and should not be used for the purpose of avoiding tax-related penalties under the Internal Revenue Code.