There is all sorts of advice and resources on how to budget for a military family. However, sometimes, you need to know what NOT to do, in order to do things correctly. Finances can be a touchy subject with military families. Even though the military provides a lot in terms of benefits, actual take-home dollars can be a problem. Young military families tend to get overwhelmed or even neglect their finances. Here are 10 major mistakes for military families to fix their finances now.
1. Not Tracking Expenses
You get excited about the 1st and 15th when the income comes in, but if you’re not keeping track of how it goes out, it could spell financial disaster. Create a budget sheet, and you would be amazed on where you can find places to cut back. One tried and true trip is that “play money” is always AFTER you set aside money for savings and debt reduction (assuming that’s there’s any left).
2. Keeping Up with Jones’s
You get an invite to another military family’s home, and you come up on a huge home, filled with multiple cars, flat screens, and the latest in expensive electronics. You figure they’re the same rate, same amount of people in the home… if they can afford it, you can afford it. Before you hit up Best Buy, realize that ANYONE can have a credit card. If you don’t have the cash for it, and it’s not an immediate need, don’t bother.
3. Too Fast, Too Furious, Too Much Car
You see it all of the time. A parking lot outside the command filled with bright shiny new cars. Or perhaps you’re driving along and see the huge car dealership banner advertising “Military Discount!”. Some young military members can get sucked into buying a new car they can’t afford or aren’t aware of the huge interest rate. Not to mention, a new car is always and will always be a depreciating asset. As long as the car is safe, has the room you need, and can get you to point A to point B, be cautious of how much you invest in your vehicles. You also have to factor in insurance, registration, and maintenance costs.
4. Bye, Bye Bonuses
When service members deploy, they may notice an increase in pay due to certain entitlements or tax breaks. Once the service member comes back, military families tend to go all out and spend all those bonuses due to the joyous occasion. Before you blow the bonuses, be sure to set aside some money to either pay off debt or add to your savings.
5. Thinking Short-Term
“No Interest for 2 years”, “Zero Down payment”, yada yada yada. When you make a large purchase, your final cost needs to include the payments for when you pay it off. Initial low costs at the start entices you to make purchases you may still be paying off years down the line. Think about the bottom line. If you have to have credit, get it from a reputable company like USAA. If you have to have a credit card, get a card with cashback rewards so you can get a little of your money back.
6. Not Getting Covered
No matter if you live in military housing or not, always invest into insurance, especially if you are renting. We live in a different time now, and even military housing is not as safe as it used to be. Get covered just in case the worst happens. As I mentioned before, use a reputable company. I think just about all the military families I know have USAA as their insurance: for home/renters, auto, personal property, and more.
7. Putting Off Retirement
Many young military families don’t consider retirement plans as a priority, especially when the service member first enlists. Even if they plan to be a career family, they tend to rely entirely too much on a military pension. Meanwhile, there are a number of plans that they could be contributing to in order to help pad their nest egg even more. Consider looking into a Thrift Savings Plan, USAA IRA, or other type of 401K. Congress has cut items for military members before. It would be sad if they cut retirement pay but it is possible. Be sure to keep your future finances safe. Don’t know where to start? Learn the basics of IRAs here
8. Ignoring Credit Reports
Every year, be sure to pull up you free credit report from annualcreditreport.com to see where your at. Correcting any errors can save you money by getting you approved for affordable housing and getting lower interest rates on loans. Your credit history is the difference between renting until the day you die or owning a home by the time you retire.
9. No rainy-day plan
No one can know when disaster strikes, be it natural or manmade. It can be anything from a medical emergency, to a car repair, to natural disasters. We’re talking thousands upon thousands of dollars. Some of these costs require payment by credit card, and that kind of setback could be detrimental to a military family’s finances. Trying to live modestly, while building up a rainy day fund, can provide some cushion if these catastrophes ever occur.
10. Recognize your resources
I get it. There’s a certain stigma when military families have to go to the Finance department of the Base Family Support Center. “You need help with your finances? what’s wrong with you?” . Swallow your pride. That’s what they are there for. Ignore any possible judgment and know the resources that are available to help you? Did you know they may be able to help you with debt counseling and possibly emergency funding? These programs exist to help military families, and best yet, they’re free!
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