Be Financially On Guard

For most people, that's challenging enough. But for members of the military, the question marks loom higher.

You can be sent to a new posting or ordered into a combat zone at a moment's notice, complicating your ability to manage your finances. With the conflicts in Iraq and Afghanistan, some troops' deployments have been longer than they had expected.

"The relative uncertainty is the key thing that does make it critical to plan," said Joseph Montanaro, a certified financial planner at USAA Financial Planning Services and a lieutenant colonel in the Army Reserve. "In the military, we say, 'Let's get our house in order before the order comes.' "

Worse, the career of a soldier, airman or Marine can end in injury or death.

"You've got to go into a mobilization with that mind-set -- just in case, how do I take care of my family to the best of my ability in case I don't come back or in case I don't come back whole?" said Jeff Pugh, an Arlington police officer and a major in the Army Reserve.

Here are some things members of the armed forces should keep in mind at various stages of their careers:

Before enlisting

Even if you're just considering a military career, it's important to take good care of your finances. Many people see the military as a way to make a fresh start, but that may not be the case if debt is a big problem. The armed forces will run a credit check on you, and too much debt can keep you out.

"We don't want to take in someone who has too many financial problems to begin with," said Lt. Col. Michael J. Stephens, commander of the 344th Air Force Recruiting Squadron in Arlington. "We're inheriting a problem that's not solvable, because they're not going to make enough money."

The military doesn't want you distracted by financial problems once you put on that uniform. So you'd better clean up your credit before applying.

"We don't want you to bring significant debt that, once you join the Air Force and become an airman, then you're going to keep spiraling further and further into debt," said Lt. Col. Stephens. "When you put on that blue suit and join the Air Force, we want you to be responsible in all aspects of your life."

As a practical matter, financial problems may affect a soldier's security clearance.

"In the military, many people lose their security clearance if they have credit situations," said Al Duarte, executive editor of Military Money magazine. "They're more likely to be desperate for money and perhaps do some things they shouldn't do."

To comply with the rules, Staff Sgt. John Bowerman made sure he patched any financial holes on his record.

"I ran a credit report," said Staff Sgt. Bowerman, an Air Force recruiter who's in Lt. Col. Stephens' squadron. "I fixed whatever I needed to get fixed."

Get used to making electronic transactions with your bank.

"Direct deposit is mandatory," said David Hollands, a colonel in the Army Reserve and a certified financial planner in Plano who specializes in military clients. "Automate bill payments, as you won't have much time to worry about such things."

And if you haven't already done so, open a savings account.

"Don't blow all your money on beer," Mr. Hollands said.

Before deployment

Families need to have a financial plan well ahead of the time of any deployment.

"Avoid a crisis later by sitting down now with your partner to create a deployment action plan for your finances," said Carl Surran, managing editor of Military Money. "It all starts with understanding your family's financial situation, including monthly bills, how much debt you owe and how much you have for emergencies."

When he was deployed, Staff Sgt. Bowerman, a single dad with a 5-year-old son, had money automatically deposited in an account for his sister-in-law, who cared for his son.

"I sent her money for day care, for food," he said.

Jeff Pugh is an Arlington police officer and a major in the Army Reserve. He and his wife, Connie, have two teenage sons.

Communication helped them navigate the uncertainties of military life.

"It was going through the process and making sure we had everything we're supposed to have and making sure we were keeping up with things we were supposed to keep track of," he said.

It's a matter of respect for your partner, Sgt. Pugh said.

"If something goes wrong, that's not a good way for that spouse to find out that there's another account out there that they didn't know about that they're responsible for," he said.

Here are some particulars:

-- Make sure your bank and credit accounts are joint accounts.

"When the service member is away on a deployment, the spouse -- the wife about 93 percent of the time -- must maintain control of the household and must have access to the deployed spouse's financial accounts, assets and belongings," Mr. Surran said.

-- Draw up important documents, such as your will, durable power of attorney, medical power of attorney and living will.

Staff Sgt. Bowerman gave his friend power of attorney over his financial affairs and his sister-in-law medical and legal power of attorney for his son.

-- Review your insurance policies. Life insurance is essential if you have a family.

"Especially when you have a wife and kids -- money's a big thing when you're taking care of a young baby," Staff Sgt. Bowerman said.

The military offers low-cost Servicemembers Group Life Insurance for a mere 7 cents per $10,000 of coverage, or $29 per month for the maximum coverage of $400,000.

"Any family that's not taking advantage of the maximum coverage at such a low rate should do so," Mr. Surran said.

If you need additional life insurance from private carriers, make sure the plan covers a combat-related death, since many policies don't.

-- Take advantage of special benefits. The Servicemembers Civil Relief Act provides several safeguards for deployed military members, including mobilized National Guard and Reserves.

"Among these benefits are a 6 percent cap on consumer and mortgage interest rate debt if military duty has reduced the family's income, payment deferral for federal taxes, protection from foreclosure and eviction, and a stay on civil proceedings such as divorce and bankruptcy," Mr. Surran said.

"Some private entities are unaware of this federal law, so military families need to understand it."

To invoke your rights in the private sector, you must send a letter asking for relief under the act along with a copy of current military orders.

-- Keep saving consistently.

"Set up automatic withdrawals from each paycheck to make saving easier," Mr. Surran said. "The military's Savings Deposit Program allows service members in a combat zone to contribute all or part of their pay, up to $10,000, in a special savings account that earns a guaranteed 10 percent annual interest rate."

The Thrift Savings Plan is a retirement savings and investment plan for federal employees. It's a defined-contribution plan, so the retirement income that you receive will depend on how much you've contributed and the earnings on those contributions.

"Like any other retirement plan, the sooner you plan, the better prepared you will be for retirement," said Martin P. Mesecke, a certified financial planner at Self Worth Financial Planning in Plano.

Coming home

Have a financial plan for where you want to be financially when you come home for good.

Sgt. Pugh's wife paid down their debt while he was away.

"She planned that, so I was able to buy my 16-year-old a car when I got back," he said.

Know how long you'll remain covered by Tricare, the government's health insurance for active-duty and retired service members and their families. Know when you need to have employer or private coverage kick in.

The military provides good benefits and takes care of its members, and some people miss that when they move into civilian life.

"You're essentially leaving all those things that are nice and going into a world that's not so structured, and some of those things you have to fight for instead of their being there," said Joseph Montanaro, a certified financial planner at USAA Financial Planning Services.



Copyright (c) 2006, The Dallas Morning News

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