How Military Personnel, Spouses Can Avoid Financial Failure

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American Soldier in his office
Mie Ahmt
Do you feel a financial collapse coming? Take cover and make a plan.

As an Iraqi combat veteran, I've learned that to avoid danger, it's not enough to merely step out of harm's way –- you must proactively plan how you'll stay safe going forward. Following my time in Iraq, I obtained my certified financial planner certification and got to work helping military personnel and spouses build a better financial future, specifically in my book, "Soldier of Finance."

If you're struggling financially, don't panic. Panicking is one of the worst things you can do and will probably lead to a financial collapse sooner rather than later. So take a few deep breaths and learn four crucial techniques to win on the battlefield of life.

1. Create a Battle Plan

Every mission must have its objectives –- and the same is true for a financial plan. So, what are your financial objectives? Here are a few foundational goals you might want to accomplish:
  • Build an emergency fund.
  • Get out of debt.
  • Start saving for retirement.
To accomplish these goals, you need to talk with your spouse. My wife and I regularly discuss our financial goals. One of the quickest ways to fail a mission is to have your teammate follow an entirely different objective. Once you know and agree on your current objectives, look at your available resources –- a soldier might call these their "sensitive items." Such sensitive items include your:
  • Income.
  • Expenses.
  • Potential additional income.
  • Potential ways to save money.
Thinking through these factors with your spouse is one of the best ways to avoid a financial collapse –- it starts you off on a better path.

2. Dodge This All-Too-Common Mistake

It's a mistake many military personnel make once they earn some money -– and I almost made it myself. The mistake is buying stuff you don't really need.

Did anyone say, "new car?" Vehicles are probably one of the most tempting expenses –- and one of the most damaging. I remember when my "Nanny" passed away, I inherited her 1998 champagne-colored Chevy Lumina. Sweet ride, huh? Ha, not so much. But still, instead of selling it and buying the BMW of my dreams, I decided to drive this car and use the payments I would have been making to fund my 401(k) and Roth IRA.

Many soldiers don't realize how easily they would accumulate hundreds of thousands of dollars by the time they are ready for retirement -– just by contributing $200 a month into an investment like their Thrift Savings Plan or Roth IRA. Imagine the smile on your face when you reach retirement age and actually have a retirement to enjoy.

3. Get Professional Advice

Would you hire a plumber to fix your car? Would you hire a football player to fly your private jet? Would you hire a general contractor to milk your farm cows? You need to hire the right person for the job. And the same is true when you're looking for financial advice. Military personnel and their spouses should seek financial advice from financial professionals.

There are a number of financial credentials out there. You could hire someone like me, a certified financial planner, or even certified public accountant. You could also hire someone a little less formal, like a financial coach -- there are some good ones. Don't take the advice of someone who hardly knows anything about personal finance. I like to call these people "blue falcons."

In basic training, a blue falcon was the soldier who didn't care about what happened to everyone else. Bad behaviors could include talking in formation, falling asleep during guard duty or not properly securing a weapon. Such breaches in protocol usually required an uncomfortable number of pushups (to say the least). Blue falcons include those who say stupid things like:
  • "Why not spend some money on a brand new car?"
  • "Why not blow some money on a new set of rims -- you deserve it!"
  • "Making a financial plan doesn't allow for spontaneity -- you have enough self-control to make decisions in the moment!"
You get the idea. These people frustrate me. To avoid a financial collapse, avoid these people and their advice – which can lead to thousands of dollars in debt vs. the accumulation of thousands of dollars of wealth.

4. Take Advantage of Military-Specific Financial Benefits

Military personnel can take advantage of a number of financial benefits to help them avoid financial collapse. One such benefit is the Thrift Savings Plan. For active duty personnel, the Thrift Savings Plan is great because you can have money directly pulled out of your paycheck for retirement. Contributions are made with pre-tax dollars, which reduces the amount of taxable income in the year contributions are made. Remember though, because contributions are made with pre-tax dollars, the distributions from the Thrift Savings Plan will be taxed. A Roth TSP option is great for younger service members who want tax-free money at retirement.

Having money automatically deducted from your paycheck to fund your retirement account is a fantastic idea. Out of sight, out of mind -– that typically leads to more money being invested and a larger portfolio at retirement.

Another great benefit is Servicemembers Group Life Insurance, which provides low-cost term life insurance coverage to:
  • Active duty members of the Army, Navy, Air Force, Marines or Coast Guard.
  • Commissioned members of the National Oceanic and Atmospheric Administration or the U.S. Public Health Service.
  • Cadets or midshipmen of the U.S. military academies.
  • Members, cadets or midshipmen of the Reserve Officers Training Corps engaged in authorized training and practice cruises.
  • Members of the Ready Reserve or National Guard scheduled to preform at least 12 periods of inactive training per year.
  • Service members who volunteers for a mobilization category in the Individual Ready Reserve.
Having such affordable life insurance that will take care of your spouse if something happens to you whether in training or on a mission will help your family avoid financial collapse.

I'd like to leave you with two words: awareness and action. To avoid financial collapse, you need to have awareness of your financial situation, your objectives and your resources. Second, you need to take action to accomplish your mission.

You can do it.
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