It’s the time of year when military households take stock of their life, whether that’s because of an impending PCS move or simply the change of season. Financial readiness is a key part of that process since it not only has a direct effect on a servicemember’s career but also the overall quality of life for a military family.
Unfortunately, it’s a part of the process that many servicemembers neglect. In fact, eighty percent of military and Veteran family members indicated finances caused them stress in the last 12 months, according to research by Military Family Advisory Network (MFAN), with more than three-quarters stating they carry debt.
But it doesn’t have to be this way. Financial readiness isn’t a huge mountain to climb. It’s a few small easily manageable steps. And if tackling your finances is a new journey for you, don’t worry, there’s plenty of help out there for you and your family.
That’s why, as part of our budget spring cleaning, we’re going to discuss the four key steps in getting your budget financially ready for an impending PCS, to start saving for your kids’ college funds, to save for retirement, or to be prepared for anything life throws at you.
And we’ll start with one of the most important steps in the process…
1. Cut Your Debt
Servicemembers tend to make the biggest financial mistake in one area: overspending. Unfortunately, because of many factors, data reveals military families carry higher rates of credit card debt when compared to civilians, according to American Consumer Credit Counseling. Therefore, credit cards are one of the first places to look when planning to cut your debt.
So, how do you cut your credit card debt?
Several options exist for decreasing credit card debt, from paying off the smallest balances first (known as the snowball method) to paying off those with the highest interest rates (known as the avalanche method). By listing out all your current credit cards and their balances, you and your partner can strategize which option gets you closer to your financial goals.
2. Establish Savings
It can be challenging to establish savings when it feels like there is no money left to put aside, especially for military couples living paycheck to paycheck. That’s why, when establishing a savings plan, it’s crucial to be realistic about what you can save and keep in mind that anything helps!
Let’s say you only have $50 left over at the end of the month. It’s such a small amount that it might not seem worth it to save. But, thanks to the interest available in certain savings accounts and the fact that your interest compounds every year, that small amount can result in big returns in the future.
Eventually, you’ll get in the habit of saving that $50, even acting like that money doesn’t exist, and putting it right into your savings account. And to help you with that, many financial institutions offer automatic savings plans, which allow you to transfer a predetermined amount into a separate account before you can touch it. The best way to save money is to not even know it’s there in the first place.
3. Get on the Same Page
Another important aspect of spring cleaning a budget involves buy-in from everyone who has access to household finances. A great financial readiness plan can only be put into effect if everyone is on the same page.
Studies show that families that have an open communication about their finances tend to make better financial decisions. Experts advise scheduling a time during the week when you’ll put everything else aside and get up to speed about your family’s finances.
Financial readiness plans only work when everybody has all the same information and the same game plan.
4. Take Advantage of Resources
There are so many great financial resources geared specifically toward servicemembers, veterans, and their families that are uniquely positioned to help you get on track financially.
From wealth management, to mortgages, to life insurance, to advice and support, AAFMAA has been helping servicemembers and veterans throughout their financial journeys for over a century. And you can get help right away by subscribing to AAFMAA’s premium content. It’s completely free and offers tools for the many stages of yourmilitary life, from active duty to military transition to retirement.
AAFMAA has a wealth of knowledge about the unique journey you’re on as a military family, and they’re an incredible resource for ensuring that you are financially secure along the way.