Educate yourself on personal finances
WASHINGTON, Sept. 3, 2013 – Financial readiness in service members’ lives has a direct effect on mission readiness, the director of the Defense Department’s office of family policy, children and youth said in a recent interview.
Noting that financial instability can affect many aspects of service members’ lives, from relationships to concentration on the job, Barbara Thompson told American Forces Press Service and the Pentagon Channel that DOD provides education and tools people can use to build their financial flexibility.
“It’s really important for our service members and their families to live within their means,” she said, “and to do that, they have to have a budget, be disciplined and understand that having a debt load hurts their credit scores [and] their ability to afford [purchases].” Financial difficulties also can affect security clearances, she added.
Several resources are available to help service members and their families establish and maintain household budgets, in addition to learning how to save money, she said.
“We want to make sure people know [their finances] are under their control with support,” Thompson said. Available resources include financial counselors at installation family centers who can help with reducing debt, managing credit card, and avoiding paying high interest rates, she added.
Another option is the Military OneSource website, which offers financial advice, and where users can set up 12 sessions with a financial counselor per financial issue on topics such as establishing a budget and reducing debt. Counselors are available face-to-face or online, Thompson said. Credit unions and banks on installations also offer financial education through workshops and can help families work out budgets, she said.
Thompson also warned that service members should be aware of fraudulent practices such as predatory lending.
“People would get into them with very high interest rates, spending [significant amounts] of money just to pay off a predatory loan,” she said. “So that’s where our on-installation banks and credit unions came up with some short-term, low-interest loans.”
Thompson also recommended the SaveAndInvest.org website as a resource for self-initiators. It offers tools and calculators to get started on establishing and maintaining a household budget, she said.
Handling credit wisely and keep spending under control are important aspects of personal financial readiness, Thompson said. “If we’re living within our means, we’re not running credit limit up on that credit card to purchase things that are may be ‘wants’ but not ‘needs,’” she said. Paying off credit card debt every month avoids paying large amounts of interest, she noted.
Having at least $500 in savings is another important aspect of budgeting, Thompson said, as emergency money that might be needed during a household move, or if a washing machine or car transmission fails.
“It’s not … all about debt reduction,” Thompson said. “The idea is that you come up with a spending plan of what’s important to you, and [put away money] for savings.”