Finances are tricky enough by themselves, but they can become even more complicated if you're military personnel and you're stationed abroad. If you're serving in a combat zone, then it's even tougher. You don't want to be distracted by financial problems while you're serving abroad.
In this article, we'll look at what you can do to make it simpler for you, and what kind of benefits you can get as a member of the military. We have tips for understanding your tax situation, making payments, protecting your credit score, and how you can reduce your interest rates to a more manageable 6% while you're deployed.
Understand Your Tax Situation
The first thing you need to do is understand your tax situation. The United States is just one of two countries where your entire worldwide income is taxed. Military personnel still need to file income taxes and report their earnings every year, especially since your income is not considered foreign income. However, just like overseas civilians, you are allowed an automatic two-month extension on filing your taxes.
Military members also have certain exemptions. For instance, if you are serving in a combat zone, your pay will be reported as combat pay and not counted towards your income. Combat pay is not subject to taxes.
Depending on your situation, you may need to consult with an expert. Some U.S. embassies and consulates provide tax assistance between January and June. Check to see if the one closest to you does.
Because taxation laws often change, go straight to the source to stay on top of what's happening. The IRS has a page specifically for members of the military with news and updates on the law.
In the meantime, you may still need to make payments on your mortgage, student loans, car loans, or credit card.
The easiest way to do this while you are stationed abroad is to automate the payments. Set it up with online banking before you go. That way, you won't have to worry about paying your bills, and you can track your progress anywhere.
If you don't already have a bank account, consider opening one up with USAA. This bank was founded by military service members, for the military, and is widely considered the most military-friendly bank available.
You may also consider giving a spouse, family member, or trusted friend power of attorney so that they can help with your finances while you are gone. This is particularly useful if you face financial challenges more complicated than simply making payments.
Protecting Your Credit Score
While you're abroad, ensure your credit score doesn't get damaged. Make sure you stay on top of this by making regular payments, as we discussed above.
You can also check over your credit score to make sure everything is going well. In fact, keeping updated on changes in your credit score will also alert you to any identity or credit card fraud, since they will have an impact on your score.
You can stay updated with your credit score in several ways. Not only are you legally entitled to a free annual credit report from the three major credit reporting agencies, you can check on your credit score for free using various online tools.
Reduce Interest Rates Through the SCRA
One thing you can do before you are deployed overseas is to understand the benefits you have under the SCRA (Servicemembers Civil Relief Act). The SCRA provides protection for military personnel on matters such as mortgages/rent payments, life insurance, and interest rates. For instance, one of the most well-known SCRA protections is that it gives military personnel the right to terminate a lease when they are deployed or receive permanent change of station (PCS) orders.
You can also try to reduce your interest rates to 6% under the SCRA. This is a benefit that will have a real impact on your finances, so take advantage. This article outlines some of the most important points::
Service members may be able to reduce their interest rate for liabilities incurred before they entered active duty to six percent under the SCRA. This applies to mortgage debt, credit card debt, car loans, business obligations and other debts, as well as fees, service charges and renewal fees. The balance of your obligations may not have interest charged at a rate greater than six percent after the effective date of your orders and the difference in interest as a result of the reduction must be forgiven, not just merely postponed.
This is not an automatic reduction, so you need to alert your creditors in writing, with a copy of your military orders. You must do this no later than 180 days after you are released from active military service.