What’s Your Financial IQ? Tackle Common Military Family Money Problems with These Tips!

As a military spouse and father, as well as a professional in the financial services industry, I often hear from young military families who are seeking financial advice. While discussion of money management basics, such as educating yourself on fundamental saving and investing principals is often well-received, I also encounter military families and couples who find themselves struggling with poor credit history and bad loan contracts, both of which can severely impact a family's financial health.

Financial woes are by no means limited to military families, of course — bad loans and bad credit decisions happen to everyone, civilian and military. Oftentimes, a few missteps can lead to numerous challenges and debt that can take years to recover from. Unique aspects of the military lifestyle often leave military families more prone to money challenges like:

  • An unforeseen PCS or deployment. Plans to pay off loans and credit balances can get interrupted by military orders; not only do families have to reset their finances during a major change like this, but unplanned expenses that aren't reimbursed by the government during a PCS can come up. When faced with these surprise costs, many families tend to run up credit card charges if their savings do not cover it.
  • Only one source of income. Most families rely on one income, and spouses tend to take on most of the household duties, particularly during deployments and following a PCS. In these instances, less money is available to alleviate the credit or loan problems once you've covered day-to-day expenses.
  • Fear of how to request financial assistance. Even if the servicemember and their family acknowledges they may need help managing debt, there is the overshadowing worry about how that request may impact their military career, promotion opportunities, and/or security clearances.
  • External factors. Predatory lending institutions are known to target military bases around the country and younger servicemembers are often seen as easy marks. And for young people, social media pressures can often inspire poor spending habits.

However, it's not all doom and gloom! Military families who might be struggling with debt should remember they are not alone. With the proper knowledge of resources and education on some key financial considerations, a military family can survive through these challenges and successfully navigate through military career and cross the finish line with higher net worth than they could've imagined. Here are some ideas to consider to help tackle any current debt and avoid future issues.

  • Cars: Lease or buy? Among the various financial problems I've seen military families endure, bad car loans cause some of the biggest headaches. They can come in many forms: outrageous monthly payments, sky-high interest rates, or upside-down loan-to-value ratios. This refers an instance where the lender finances more than the actual value of the vehicle, so the lessee ends up paying higher than the car's selling price when all is said and done.

To mitigate any issues with loans, consider a lease option. A provision within the Patriot Act which allows a military family to return a lease without question due to PCS/deployment orders. Having the ability to eliminate a monthly car payment due to an unforeseen assignment change can be a huge relief, especially in a household with a tight budget.

If your credit isn't good enough to get a lease, start your car buying purchase at a local or military-friendly credit union. As a rule of thumb, never get your auto loan financing from a “WE FINANCE” used car dealership. Local and military-friendly credit unions often have special loan programs that can not only help repair your credit, but also ensure the loan fits your overall household financial fitness, something that a car dealer is unlikely to consider. Even better, this is more likely a pre-approval process. This means, if approved, the financial institution can prepare a check that you can take to any dealership. You want great bargaining leverage on that car sales person? Nothing better than a prepared check ready for closing with all of the loan details already completed!


  • Homes: Rent or Buy? I often see young military families struggle with homes they have purchased at their previous military assignments once they've moved to a new location. Keeping up with two mortgages can be difficult, as can managing tenants in your former home. The overarching lesson here for young families is that not all real estate purchases are a profitable investment. Despite popular books and TV personalities that make it seem that real estate investing is a guaranteed profit and simple to maintain, owning a home and real estate investing have many considerations, hidden costs and liquidity issues that can add to any existing loan problems. 

The decision between renting and owning should be made after considering not only the market data, but overall time horizon, military career outlook and future family plans. Before purchasing that home, consider all of the possible risks. Look at the population growth and the employers that are in the area. Are there more employers moving in or are they moving out? What are the property tax trends? Any pending changes to the military base? What are the nearby schools? With any pending changes in population, are they planning a school re-zone? The possibility of questions here are endless and it might be worth consulting a military-friendly realtor when it comes to some of these outside factors. Sites like GoMillie are a great resource when searching for agents and realtors. The key takeaway, however, is that buying a home is a very intense decision that needs to be considered very carefully with your family objectives and real estate market data in mind.

  • Working from home and remote positions. There are many initiatives and resources available to help during the search, application and interview process for telecommuting, remote and home-based positions. These types of jobs are well-suited for military spouses who are seeking employment to help bolster the family's finances. Nowadays, a wide variety of remote positions can be found at local and national employers. Career search engines, like Flex Jobs, are highly-rated and specifically cater to those looking for flexible schedule positions. These services are very military family friendly, as well.
  • If you have debt, start by getting organized. No need to panic if you are already dealing with debt! The first step is to simply write down and organize your income and your fixed expenses to be sure you have a complete picture of your finances. Don't forget to include credit card payments and loan minimum payment information. If you have multiple loans, tackle them one at a time, starting with the smallest. Make use of any available money (no matter how small) to begin paying the lowest balance loan's minimum payment. Once that small loan is paid off, move to your next smallest balance. We like to call this “The Snowball Plan.” However, be mindful of specific interest rates of each loan. Some families start The Snowball Plan from the highest interest rate loan as opposed to starting with their smallest loan balance, which is also an effective strategy. There are also great personal budget apps out there to help you organize. Also make sure to sign up for automatic bill pay when applicable for accountability and convenience. You will be amazed at how quickly the loan balances decrease with organization and a focused strategy.
  • Know your military resources. Contacting your local military installation community service or family readiness offices can have its own challenges. Continue to use them as best as you can. However, there are countless other military-affiliated organizations and non-profits that have been vetted and also offer confidentiality. These organizations offer everything from credit counseling, military retirement/transition tips, VA benefits, career coaching and even helping with student loans and scholarships. There are also web-based resources that can offer help for those who might not be comfortable visiting a counselor in person. If you're unfamiliar, start with historically-known resources such as the USO, National Military Family Association, and Military OneSource. You can also explore not-for-profit military aid associations, such as AAFMAA, for additional resources and guidance.
  • Sign up for the Thrift Savings Plan (TSP). With a TSP set up, you always pay yourself first before any bills. If you are enrolled into the new Blended Retirement System, you are automatically enrolled in the TSP. This is a government-sponsored retirement program (similar to a 401(k)) where a certain percentage of your pay is deducted and saved into a retirement account separate from your pension. Your participation in the new Blended Retirement System also provides a partial government match of your contributions. Yes, free money! If you have been in the military under the old retirement system, you have the choice of opting into the new Blended Retirement System. Or you can simply choose to sign up for the TSP only.

There is an old saying, “When the student is ready, the teacher will appear.” No need to get discouraged if you and your family find yourself facing debt or even if you're simply overwhelmed by financial decisions.

The first step is recognizing your areas of concern and having an honest discussion with your spouse and family. This will enable you to seek out the resources and solutions that fit your family and start on the journey toward financial empowerment. You will find that once you do, your financial IQ and confidence will grow and you can build a strong net-worth foundation while also learning lessons that will be helpful no matter where life takes you.

Posted by Young Park, Relationship Manager at AAFMAA Wealth Management & Trust. In addition to having more than 15 years of experience in the financial services industry, Young is a military spouse and father.


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