Some money advice is good for everyone -- civilian and military alike. But sometimes the demands of a military lifestyle mean that good money advice goes bad on us. Why is that?
At our Military.com Spouse Experience events, military spouses tell us about some of the good money advice that has turned into bad money advice on them. We talked to J.J. Montanaro, a certified financial planner at USAA, about how money advice is never one size fits all for military families.
Renting is a waste of money. Buy now!Watching that big chunk of change disappear from your bank account every month makes renting seem a big waste of money. Civilian parents often advise their grown children serving in the military to get into the housing market now.
That isn’t always the best way to go. In fact, it is bad money advice. Real estate mistakes are the most common money mistake listed by our SpouseX attendees. Buying your dream house might be no dream at all.
“It could be a nightmare, instead, especially if you get orders after you make the purchase,” said Montanaro. He points out that buying and selling costs could roll in at 15% of the original purchase price, depending on the local market. “Will you have enough time and a market that will cooperate to make up that and more?”
A military discount makes it affordable.We military spouses love military discounts. They can make such a difference when buying everything from cars to clothes to restaurant meals. (I personally just got a military discount when our HVAC system had to be replaced. Whew!)
“A military discount is a great idea if you are buying something that you need,” said Montanaro. “But something you don’t need that’s on sale is not money saved!”
Uncle Sam is pretty reliable -- you don’t need an emergency fund.Most financial books advise readers to have an emergency fund in the bank that could pay six months of expenses in case you or your partner gets laid off. Since service members don’t get laid off overnight, many military folks don’t think that they need an emergency fund.
“While job loss and income stability is certainly a reason to have an emergency fund, it’s not the only one,” said Montanaro. Live the military life for a little while and you find that cars break down. Air conditioning gives up. Extended family members need you to travel home in a hurry. That’s where an emergency fund kicks in.
Also, remember that frequent PCS moves are a part of military life civilians don’t cope with very often. A spouse’s job hunt after a PCS move can take more time than you think.
Knock out all your debt before saving for retirement.Your post-holiday credit card statement might be staring you in the face right now making your blood run cold. Retirement seems like a long, long, looooooong way off. Besides, if you are in the military you can coast right along until you pick up retirement pay, right?
Not really. Only about 15% of the people who serve in the military ever make it to retirement, which is a real factor in the post 9/11 military.
While paying off high interest credit card debt may seem like the only way to go, there’s never a “right” time to start saving for your future, especially for military members.
“Instead of waiting for the perfect time, get started in a small way,” said Montanaro. “Yes, you can afford a one percent contribution to the Thrift Savings Plan (TSP)---and then ramp it up with pay raises, promotions and extra income freed up when you do get rid of debt,” said Montanaro. “Get the ball rolling.”
The GI Bill means you don’t have to save for college.The Post 9/11 GI Bill (the one that can be transferred to your spouse or children) may be one of the greatest benefits in the history of military families. Yay for that.
But it isn’t a blank check. You may actually need that benefit for yourself when you leave the military in order to retool for today’s economy. Your spouse may need the GI Bill benefits to get an education that leads to the kind of portable career that boosts your family’s income.
And if you have more than one child, you definitely need to start saving for all of them now.
There are some real financial benefits to serving in the military, but you have to pay attention. Look ahead to see where financial advice may lead you and always have a little put by to deal with the next adventure in your military life.
U.S. Air Force photo by Airman 1st Class Arecat Wilson.