As you probably know, there are a handful of people who write almost exclusively about military families and their money. One of these writers, Rob Aeschbach, is also a Certified Financial Planner™ candidate. I wanted to see what nuggets of wisdom Rob could share, and learn more about how a financial planner can help military families.
Hi Rob! Your financial planning practice specializes in military families. How did this idea happen?Years ago, during my time on active duty, I had to spend a lot of time trying to teach young Marines how to balance their checkbooks and avoid the worst deals on car loans. Marines being Marines, I mostly failed, but I gained a lot of experience. Now, I’m a Navy family member and home-dad. I like reading and talking about personal finance. With some encouragement from my wife, I decided that I could create my own portable career, and took the steps to set up a business. It wasn’t actually obvious to me at first that I should focus on helping service members, but I realized that it is what I know best.
What kind of training and education do you need to be a Certified Financial Planner™?The CFP® certification is one of the most respected in the financial industry. There are 5 major parts for the CFP® training: investing, taxes, retirement, insurance, and estate planning. The required CFP® courses also include an introduction class which includes college planning, for example, and a capstone class which is supposed to put all of that knowledge together in various financial planning scenarios. It took me about 2 years to complete the coursework at the University of Virginia’s Falls Church campus, and another 6 months to prepare for and pass the CFP® exam.
The CFP® exam was 10 hours over 2 days, covering a wide range of financial planning situations. I still need more than 2 years of experience to be fully accredited as a CFP® practitioner, but passing that test is a pretty high hurdle that I’m proud of.
What makes you different from other financial advisers catering to the military?One of the most important things to know when working with a financial adviser is how they are getting paid and how much money they will make off of you. To some people, that seems like an odd thing to ask. Yet if you had a plumber, mechanic, property manager, or contractor do some work for you it would be unusual to NOT know how much you paid them for their services.
There is no single perfect way to pay for financial planning, but there a few different models. Some advisers will do your financial planning for “free”, but they will make money from commissions on the products they sell you, whether it’s insurance, annuities, stocks, or mutual funds. Other advisers will annually charge a percentage of the amount you have invested with their company, say 1% or even higher. Sometimes investors aren’t clear on how big those fees are, or what they are for. And the advisers might not want to help out people who don’t have a large amount to invest.
I am a fee-only financial planner, meaning that I only make money from the fees I charge clients, and those fees are clear, transparent, and agreed upon up front. I think being fee-only lets me be objective, flexible, and accessible to many more people.
What sort of special issues do military families struggle to handle?I think the biggest myth is that military pay is predictable and dependable. I’ve jokingly told clients, “I’ve had more pay problems than you’ve had pay checks.” Every time a military family moves, their allowances change. Every TAD/TDY is another chance to lose money or make money. I’ve seen new service members go 7 months with their paychecks bouncing up and down before finally settling on a dependable amount. Understanding the military pay system is important. That means reading your LES every month, knowing when your allowances start and stop, anticipating tax-free pay, and on and on.
What are three interesting things you've learned about military family finances, whether from your personal experiences or from helping others?Advance BAH is something I wasn’t aware of until pretty recently, even though it’s been available since 1999. Most service members know that they can request advance pay in conjunction with a PCS. Additionally, they can request advance BAH to help with security deposits and move-in expenses. It’s allowed if their housing situation is changing, with or without a PCS, such as moving off-base after getting married.
The Thrift Savings Plan currently doesn’t match contributions for service members, even though that’s pretty common for civilian 401(k) plans. Many enlisted members, however, are eligible for the Saver’s Credit (Retirement Savings Contributions Credit) on their taxes. That means the Federal Government will pay you to save money! It’s not just a tax deferral like with an IRA; it’s actual cash, in the form of tax credits, from Uncle Sam. It’s another reason for young service members, especially those without children, to save for retirement.
The meal deduction for married sailors assigned to ships can be a hassle and distort how much the family thinks they are spending on food. I met a young sailor with a family who was about to join his first submarine. He was pretty sharp and had his budget all planned out, but there’s not a lot of wiggle room in a seaman’s (E-3) budget. When I reviewed the budget with him I figured out that he would be about $300 behind every month. He would be in debt from the start, and it would only get worse. It turned out he wasn’t aware that he had to pay the monthly meal deduction while he was assigned to the boat. For 2015 it’s $10.45 per day, or $293-$324 per month. I always tell the sailors, “you’re paying for that food on the mess decks, so you might as well eat it.” The more they eat on the ship, the less they’ll pay for groceries at home.
If given the opportunity to send a message back in time, what would you tell your 20 year-old self about money?You need a budget philosophy or strategy to tell yourself that you are spending too much on ‘this’ and ‘this’, or not saving enough for ‘that’. Decide what the big picture ‘this’, ‘this’, and ‘that’ are. It doesn’t need to be too detailed, but it needs to include savings. If you can’t save for retirement, you are living beyond your means. I have tracked my spending religiously since I first put on the uniform in 1990, but it wasn’t until about 10 years ago that I finally came up with a budgeting strategy that worked. While tracking expenses is extremely important, it is not enough.
Thank you, Rob, for answering all my questions!