We are all vulnerable to debt pitfalls. Regardless if you come from civilian or military families, you are not exempt from financial challenges. What makes this an even bigger challenge is the fact that there is no one-size-fits-all solution to debt. What works for one person might not be suitable for another.
Military families are no stranger to debt problems. And when one of both couples are deployed, these problems are usually left unresolved.
Your service in the military is an honor. The way you help civilians sleep peacefully at night makes you a hero. However, this sacrifice is not enough to keep financial problems from affecting you. No matter how tough you may be, debt can still leave you shaken up and devastated.
What you can do is to make sure that you understand the reasons why you could fall into a debt pit. This will help you identify the cause of the problem so you can create a strategy that will help you avoid the situations that could lead you to debt.
Common debt pitfalls among military families
Stable BUT small income.
If you base it on the compensation, nobody would join the military. Sure, it will offer a stable and steady income. After all, the military has one of the biggest budgets in the US government. However, that does not mean the bulk of the pay goes to the income of the military service members. The military pay is quite small. This is one of the reasons why a small or simple unexpected event can easily put a military family in debt.
What can you do?
Have a budget.
Debt happens to anyone – even those earning a 6-figure income. If you really want to avoid debt, you have to manage your finances well. The first step to financial management is a budget plan. Your household budget will define your income and expenses. This plan will help you ensure that all your household needs can be covered by your income. If not, then you need to cut back on your expenses or try to earn more.
Live a frugal life.
A frugal lifestyle is not about restricting your spending. It is actually spending only on what is necessary and important. For a family forced to live on a small military pay, this mindset can help them live below their means.
Moving a lot.
Another reason why military families can fall into a debt pit is constantly relocating to a new place. Moving can be costly. You need to hire movers and sometimes, you have to buy some furniture and appliances to fit your new home. Doing this several times over the course of a few years can take its toll on your finances. Instead of saving, you need to spend for every move.
What can you do?
Set up a moving fund.
It is always best to be proactive with your finances. One of the ways you can do this is to have a moving fund. You can set aside a budget each month which you can use to augment your finances when the time comes that you have to move again to a new place. Take note that this has to be separate from your emergency fund – but it can supplement each other just in case.
Track moving expenses carefully.
Once you are already in the process of moving again to a new location, you need to track your expenses very carefully. Set a budget for every move and make sure you stick to it. In case you are falling short, identify the expenses that can wait. For instance, if you can live without buying a new furniture for a couple of months, then you should probably make the sacrifice.
Overlooking bill payments.
When you are on active duty, it is very easy to forget about your payments – especially when you are in hostile territory. Financially speaking, this leaves most, if not all, of the financial burden on the person left behind at home. With the burden of taking care of the family on their shoulders, there are times when bill payments are missed.
What can you do?
Set up alerts or reminders.
If you know that payments can be missed, it would be a good idea to set up alerts or reminders using your phone or even computer. This can help you be on top of your payment schedule. Just be sure to date these alerts in advance to give you enough time to actually send the payment without being slapped with late charges.
Have an open line of communication.
This is meant to be between spouses. This is one of the best ways to keep your finances in check. You need to be open about your finances and talk about problem areas so you can both find a solution for it.
Being targeted by the credit industry.
For some reason, military families are often preyed upon by the credit industry. The appeal is in the stable military pay and fact that it usually falls short. Creditors know that some families will easily resort to using credit to compensate for the low income of military service members. This is why a lot of financial institutions create military-friendly financial products. With credit being very tempting to use, it is quite easy to fall into a lot of debt.
What can you do?
Stick to a few cards.
Carry only the credit cards that you need. It is easy to give in to the temptation of maxing out your credit cards. It is better to apply for the cards that you only need. Avoid applying for store credit cards that promise immediate discounts if you do not intend on using it often. The more cards you have, the higher temptation it is to spend on things you might not actually need. This is one of the reasons military families fall into debt pitfalls.
Use credit wisely
For the cards that you do have, you need to know how to use them wisely. Are you after the points and rebates that the card offers? Or are you maintaining it for the credit history it has on your report? You have to identify these reasons and use the cards accordingly. It also helps to set a monthly limit that is indicated in your budget. This will help you set aside the funds that will allow you to pay off your cards in full at the end of the month.
Managing security clearances.
A security clearance determines your eligibility to access important information about the military or country. There are three levels: confidential, secret, and top secret. As a member of the military, you were probably assigned a security clearance. This will be compromised if the military finds out that you have personal struggles – like debt. This is probably why some military families keep silent when it comes to their debt issues. This hinders their ability to seek help when it is needed.
What can you do?
Be proactive in dealing with debt
Do not be a bystander with your own finances. You need to learn how to identify debt pitfalls as soon as they manifest in your budget. Address issues immediately so they do not spiral into uncontrolled problems.
Build up your reserve funds
This is one of your best defense in times of need. Make a commitment to be consistent in order to build up the fund. Set aside an amount each month for your emergency fund. This is what you can use when you have a financial emergency.