5 Important Financial Moves to Make for Military Members
By David S. Chang, MAJ HIARNG
From personal experience, military service members have enough on their minds tasked with defending our country, so having to contend with financial problems can be a big distraction and morale killer. There is a lot at stake for our military personnel, so here are 5 very important moves to make to ensure financial peace of mind, both at home and work!
- Create a financial action plan. Just like planning for a military operation is crucial to its success, so is creating a financial plan for your financial success. When people think of a financial plan, many people assume it is setting up a budget, saving for retirement, and looking for good investment products. However a financial plan goes much deeper than that. If properly done and updated regularly, it could make the difference between financial independence and financial dependence. A good plan will take into account your goals, retirement needs, risk tolerance, investment portfolios, insurance requirements, personalized, and is easy to understand and implement. You can visit artofthinkingsmart.com under SMART FINANCE to download sample financial plans that deal with Retirement, College, Estate, Insurance, Lifetime Income, and Asset Allocation.
- Constant, Consistent, and Clear Communication. It is surprising to see how many families rarely communicate personal financial issues. After coming home from Iraq, one of my soldiers was shocked to find that his wife had spent all of the deployment money. He had assumed she was saving it all. Unfortunately assuming leads to problems, especially when there is no communication. It is vital to make sure your family knows what the current financial status is, what income and expenses are coming up, and what the financials goals are. This way there is no misunderstanding on what should be saved or spent. Another important thing to communicate is account numbers, usernames, passwords and the security questions. I have seen spouses given the responsibility to manage finances back home but have no access to their accounts. Constant communication helps military families be on the same sheet of music, and just like military communications, it should be redundant, instantaneous and secure.
- Automate when possible. Managing all of the bills, savings and investments can be intimidating, especially if a spouse has to do it for the first time. With today's online technology, it is easy to automate much of your finances. You can use monthly automatic bill payment so your bills are paid timely in order avoid any late charges or worse yet, credit score problems. You can get electronic statements and check your accounts online. This is extremely useful if you are traveling or moving quite a bit. You can use programs such as quicken or mint.com to download and monitor your financial balances and transactions. Identity theft is very common these days and when deployed, it can be difficult to fix if not monitored regularly. In addition, you can have an automatic investment plan where money is wired or transferred to your investment accounts on a systematic basis. You can set up an investment plan and make sure the investments are bought or sold according to your financial plan. You can visit artofthinkingsmart.com for more information on investments products and investment planning tips.
- Take advantage of military and combat zone benefits. Soldiers who are deployed have the option of investing in the Savings Deposit Program where you they can earn a guaranteed 10% annually on a maximum of $10,000. 10% guaranteed interest is unheard of in the civilian world and service members should take advantage of it. In addition you can invest in your Roth IRA or Roth TSP with pre-tax money and because it is in a Roth, withdrawals are never taxed! This is a triple bonus in saving for retirement, no tax upfront, no tax on the gains, and no tax on withdrawals. To protect active-duty service members including Reservists and National Guardsmen who are called to active-duty, the Servicemembers Civil Relief Act (SCRA) was passed. The SCRA prohibits lenders from charging more than 6% interest for debt you incurred before you went on active duty or activation. There are other protections such as right to terminate leases, safeguard from foreclosures, evictions, and certain life insurance benefits. You can visit artofthinkingsmart.com to see the other benefits associated with the SCRA.
- Review your wills, health directives, estate planning and life insurance policies. No matter how much you are worth, it is important to have an estate plan in place to protect yourself, your loved ones, and your assets. Keep your will, power of attorney, health care proxies, and beneficiaries for life insurance up to date. You want to make sure that your wishes are carried out if anything should happen. One soldier realized that his ex-wife was his Servicemembers Group Life Insurance (SGLI) Policy beneficiary instead of his current wife and newborn son. If anything happened to him the money would not have gone to who he wanted to have it and needed it the most. Review these estate planning documents frequently, especially with significant changes to your situation. You can click here for more information.
The nation is grateful for our service members that go in harm’s way to protect our way of life. The ability to properly manage finances is crucial to their success at home and abroad. It takes work and there is nothing wrong with asking for help, using support networks, hiring professionals, and/or getting educated on the topic. Service members owe it to themselves and their families!
David S. Chang is a West Point graduate, Iraq War Veteran, and currently a Major in the Hawaii Army National Guard. He is an award-winning entrepreneur and wealth manager. He is CEO of Chang Holding Company, and chief editor of The Art of Thinking Smart, a weekly article and blog.
==== Note from RallyPoint ====
We are excited to bring you this excellent advisory content from one of our own: MAJ David Chang, who still serves in the HI Army National Guard. MAJ Chang is passionate about helping military personnel and their families, and we hope to share more of his insights in the future!
View MAJ Chang's RallyPoint member profile here: MAJ Chang's military profile.