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4 tips for evaluating financial health

Routinely check your finances.
U.S. Army Brig. Gen. Jason Fryman takes a family photo after being promoted by his wife and daughter during the promotion ceremony at Clay National Guard Center, Marietta, Georgia, May 3, 2024. Fryman assumed command of the Georgia Army National Guard from Maj. Gen. Dwayne Wilson. (U.S. Army National Guard photo by Pfc. Alexandria Higgins)

For as many unknowns as exist with a military career, one thing is certain: there will always be stages of transition. PCS moves, military training or deployment, spousal unemployment, and childcare needs are just a few factors that impact a bottom line. By routinely evaluating your financial health, or the state of your money, servicemembers and families can plan for the (un)expected and adjust as needed.

Here are four tips for evaluating financial health — a practice that should be done several times a year. 

1. Household budget

Kate Horrell, a Navy veteran spouse who has worked as a financial expert for 16 years, says a common mistake military families make is building a budget based on their situation at the current duty station, leading to issues when PCS season comes around.

“Maybe the spouse decides not to work, or housing is a lot more expensive, or childcare is impossible to find. Try your hardest to keep fixed expenses low so that you have flexibility when things change. This typically means avoiding debt and the associated monthly payments,” she said.

Horrell adds that in the case of two-income families, couples should try to live off one income and use the other for debt repayment, savings, or leisure. 

“This will put you in a good position if the second income goes away,” she said.

2. Current debt

The standard rule for evaluating debt is no more than 36% of your income should go to debt. Step one for figuring this out is to know your numbers.

“First, find out where your money is going. Whether you use an app, a spreadsheet, or paper and pencil, track every cent for a few months,” Horrell said.

Horrell then suggests looking at two of the expenses she sees people waste the most on — car-related expenses and eating out. For example, before purchasing a new vehicle, a financial counselor can assist with determining the holistic costs, which include the loan or lease itself, insurance, registration, and maintenance.

Jerry Quinn, Chief Operating Officer and Secretary at the American Armed Forces Mutual Aid Association (AAFMAA), recommends creating space in a budget by evaluating necessary expenses versus nice-to-have expenses.

“When you’re paying your electric bill on a credit card and hoping you will get caught up next month, without any change in spending behavior, that’s a very dangerous hole to find yourself in,” he said.

Quinn explained that when people find themselves without enough money at the end of each month, they are caught in a cycle that warrants an honest look at financial health. Living within your means, he adds, can only happen if you understand your spending habits.

3. Emergency fund

General advice surrounding an emergency fund is to save three to six months’ worth of expenses. But what exactly constitutes an emergency? Horrell says this is an area where a mindset shift is needed.

“A lot of people will tell me, ‘I had an emergency this month.’ Then it is something like new brakes, glasses for their kids, or a vet bill. None of these things are true emergencies — they’re all expenses that can reasonably be expected to happen. So plan for them,” she said.

Horrell recommends including things like car maintenance or veterinary expenses in your spending plan so that emergency funds can be saved for costs that can’t be anticipated — like when a hot water tank breaks or the refrigerator leaks.

Quinn, a colonel in the Army Reserve, remembers life as a junior enlisted soldier, when money is tight. He said by starting small but thinking big, military members can begin establishing a financial cushion that provides relief when unplanned emergencies arise. 

And “do it automatically,” he says of establishing a savings, which allows funds to be transferred before any other expenses are paid. This can be easily setup through any bank.

4. Insurance coverage (property, life, auto)

Military benefits are an attractive part of service, but it shouldn’t automatically be assumed that they cover all your insurance needs. Whether you are still in or have transitioned to veteran status, proactively examining your coverage can prevent your family from economic hardship in the future.

AAFMAA, the longest-standing, non-profit financial solutions provider for the military, offers an online calculator to help you evaluate the life insurance needs of your family.

It is also recommended that service members and military spouses review all their policies when evaluating financial health. Property insurance, for example, will need to be updated during a PCS move or if certain upgrades are done to a residence. 

The important thing to remember is it’s never too late to make changes to your financial health, and there are programs and resources to help you get started. Military installations offer no-cost access to personal financial management counselors that can be found online. Military OneSource also offers confidential, short-term support for topics like budgeting and money management. Its financial consultants can even assist with strategies to negotiate payment plans and late fees with creditors. Visit AAFMAA for more military financial readiness resources.