All-Too-Common Money Mistakes of the Military Family
Common Money Mistakes of the Military Family
According to the 2019 Military Financial Readiness Survey, more than one-third of enlisted military members do not pay their bills on time and almost half say they had to find additional ways to supplement their income. Worries surrounding meeting personal finance goals are further heightened when taking into account the number of potential mistakes that can set you back. We’ve compiled a list of common money mishaps in an effort to help you avoid them on your path to fiscal satisfaction.
Not Making a Budget
No matter the current state of your finances, the first step towards achieving financial stability is to develop a budget. A lot of military families find themselves living paycheck-to-paycheck and may think that there’s no place in their finances for a budget. But in fact, by choosing a customizable financial plan, it can be a great way to avoid other common money mistakes. Check out this helpful article on the best personal budget plans to get you on your way.
Not Thinking Toward the Future
On the theme of budgets, you should make sure to include saving and other forward-thinking moves in your plan. A common mistake that plagues military families is overlooking places where you can put your money away for the future: avoiding the creation of an emergency fund, neglecting to contribute to retirement accounts, or not fully understanding the power of compound interest (have you heard the phrase, “Make your money make you money”?).
You should also be checking your credit regularly – with constant moves, military members are at more risk of compromised credit than the average American. Another mistake that is more focused on now instead of when is with choosing to spend all the extra pay made during deployment. While it can be nice to find yourself with extra income, it can prove beneficial to save or invest all or a portion of your excess. Otherwise, you may be left figuring out how to readjust to life back at your normal compensation rate.
And lastly, don’t ever assume a full pension awaits you at the end your service. You never know what can happen in twenty years’ time; it’s estimated that only 17% of those who serve actually make that far and are able to collect that coveted retirement!
Underestimating Becoming a Homeowner
In addition to a home purchase being a financial risk, it also carries with it an emotional risk. With the nomadic lifestyle that a lot of military families live, it can sometimes be enticing to jump at the chance to become a home owner. Rentals can take every ounce of your BHA or be extremely limited in desirable options. One common money mistake of buying real estate can be getting in over your head/upside down on the payments; savings can help mitigate this type of issue. Another mistake is not fully having an exit strategy. Simply thinking you can sell or rent when you head to your next location isn’t a well thought-out plan. Consider all the possible avenues before jumping into a 15 or 30-year mortgage.
Poor Spending Habits
Poor spending can be a problem for anyone, but being a military family brings with it a few unique problems. One common mistake is overspending bonuses. While having extra compensation for committing more years of your life to service can be a blessing, if a purpose for those excess funds isn’t well-defined and executed, you can be left wondering where exactly it went to. Another common money mistake, especially for the younger generation of service members, is draining your bank account to pay for a fancy new car. That erroneous purchase can cause even more problems if you find yourself opting to roll that negative equity over into another vehicle purchase. One last common spending mistake is choosing to lease things – like appliances or furniture. While it may seem appealing, given the average military family’s constant movement of possessions, it is more fiscally responsible to own things outright; the cost of leasing probably means you could have bought that item two or three times over.
Getting Pulled Into Predatory Lending Situations
Due to the dependent nature of the average military family on every dollar earned, tough times may come where you need money quickly or you need to purchase something before the next direct deposit hits. In those situations, a common mistake that military families make is depending on predatory lending options, like payday loans, pawnshops, or car title loans. It’s best to avoid these types of schemes at all costs so you don’t get trapped in a revolving cycle of debt. There are considerably more risks than rewards with these practices.
Even though this is not a comprehensive list of potential money mistakes, it can hopefully provide a good foundation to build upon. Staying diligent is key to avoiding these common pitfalls. Aim for building your family a sound, financially stable future by making well-informed choices.
- 3 Basics of Budgeting for Military Families
- Financial Steps to Take Early In Your Military Career
- Best Budget Apps for the Military
- Best Practices For the VA Loan Process
- How to Avoid Scams Targeting Veterans and Military
- Take Ownership of Deployments