Military debt is a serious problem for a lot of our servicemen. It is a sad situation because they have sacrificed a lot in the service of their country while their families have all the signs of heading towards a financial catastrophe. While they put their lives in danger to make sure that the rest of the country is safe, their families are left defenseless against debt and other financial obligations.
We are not saying that their deployment is the cause of their financial troubles. We acknowledge that it is mostly because of wrong financial choices that they have made. But just like everyone else, they are susceptible to the same financial troubles that the rest of the American consumers are facing.
An article from CNN.com revealed a rise in the use of food stamps that are redeemed by military families. That means more and more military families are using food stamps in military groceries. At least , this is true since the recession in 2008. As of the last fiscal year that ended in September 30 2013, almost $104 million food stamps were redeemed. In 2012, the food stamps amounted to $98.8 million. Now it is at $103.6 million.
Military financial management statistics
It is hard to say if military debt is to blame for the rise in the use of food stamps. However, we can safely assume that this is part of why their budget on food falls short. It is also a good assumption to say that they have been making a lot of mistakes when it comes to their financial decisions.
The FINRA Investor Education Foundation conducted a military survey that revealed the financial behavior of military families. According to the results published on the FINRAFoundation.org, 36% of the participants in the survey admitted to having problems when it comes to keeping up with their financial obligations. The report revealed that this is still higher compared to the civilian population – with ⅔ of them having similar problem. But still, ⅓ is still a high percentage.
Among the other findings in this statistic are as follows:
25% of respondents with checking accounts have overdrawn their accounts.
64% of military families who have overdrawn their account find it difficult to meet their monthly expenses.
10% of families with a mortgage loan have been late on at least one payment in the past two years.
3% of military families has foreclosed on their homes.
3% of military families have declared themselves bankrupt in the past 2 years.
9% of those contributing to their retirement funds have taken a loan in the past 12 months.
6% have done a permanent hardship withdrawal from their retirement plan.
Around half of respondents claim to have an emergency fund.
More than 50% plan for life events
More than ¼ of credit card holders owe $10,000 or more on their account.
In terms of the personal finances, 19% are dissatisfied with their current financial condition. Only 26% are satisfied and 55% are neutral about it.
The survey was conducted last 2010 and we can only hope that things have gotten a lot better financially. With the declaration of President Obama that the federal minimum wage will now be higher, we hope that things will get better for these families.
7 steps to get rid of military credit problems
In most cases, military debt plays an important role in the lives of these households. Among the debts that they owe include credit card debt, mortgage loans, auto loans and student debt. If your family is going through the same problem, you may want to follow these 7 simple steps to get out of debt.
Step 1: Organize your personal finances.
The first step is to know how much you owe. To do this, you have to organize your personal finances. You need to categorize your income, expenses and your debts. While your military debt is a part of your expenses, it pays to separate it from your monthly household expenses.
Step 2: Create a debt payment plan.
The next step is to do something about your current debt. You have to choose a debt relief program that you can follow to help you make better progress when it comes to your credit obligations. Sometimes, what we need is a structured debt payment plan that will help us commit to our payments.
Step 3: Negotiate your debts. Get debt help if necessary.
If the total military debt that you owe is way beyond what you can really afford, you should call your creditors and ask them to give you a discount. You are negotiate for a lower interest rate or even a debt reduction. You can opt to hire a debt expert to help you with this. In exchange for a reasonable service charge, you can have the peace of mind that comes with having an expert deal with your debt problems.
Step 4: Appoint a financial manager in the family.
Choose who will manage your money. Having one person manage the finances in the household is a great way to organize and simplify the decision making process. While this financial manager should still consult the rest of the family, it is ideal to have one person responsible. They will take care of the monetary matters in behalf of the family.
Step 5: Refrain from adding more debt.
The next step is to keep yourself from adding more debt. You have to stop acquiring them – at least until you have successfully paid off what you currently owe. If not, you may have trouble keeping up with your payments. Put yourself under a cash only policy while you are still getting out of debt.
Step 6: Earn more money.
Although the member of the family that is deployed in military service is already earning, the spouse or partner left at home should try to earn more. At least, they should sacrifice until their military debt is paid off. This will help ease the burden for the one currently working.
Step 7: Educate yourself.
It is important for everyone to realize that financial management is a debt solution. Regardless of how you plan on getting out of debt, this is an important aspect in your debt relief program. You need to learn how to manage your finances. That is how you will learn to use a budget, save and make smarter choices about your money. Fortunately, there are many websites that will help educate you about your personal finances. Specifically, you can go to MilitarySource.mil for specific help about your military debt.
Here is a video from the Bank of America that has tips to help you pay off your debt.
4 options to get military financial aid
It may be a scary situation to watch your military debt grow. But your fear will do nothing to help you. It is important to start acting on it now to prevent it from further harming your personal finances. There are debt relief options that will help you with your financial struggles. Not only that, the government have put into place various programs and laws that will help military families deal with their respective debts. Here are 4 of them that can help you out.
Servicemembers Civil Relief Act. Also referred to as the SCRA, it aims to help families deal with military debt. This is mostly in effect for those who are on active duty. The provisions include an extension for lease contracts, cancellation or termination of any auto rentals and limits the interest that will be collected from them.
Joint Federal Travel Regulations. This is intended for military personnel whose landlords are about to face foreclosure. They are provided with cash allowances that will help with their military travels and transfers associated with the foreclosure of their landlord.
Military Lending Act. The next program is initiated by the Department of Defense to limit the interest and fees that are being imposed on military servicemen. These are imposed on payday loans, tax refund anticipation loans and vehicle title loans. The regulation limits its at 36% only.
Homeowner’s Assistance Program. This is to help military families who are having problems with their homes. This will provide them with financial aid in case they have to sell their homes at a loss – or even if they are unable to sell it. This is extended to both active and former members of the military to aid them in any military debt that is related to their home. Not only that, civilian employees of the Department of Defense, and the surviving spouses are covered by this.
You can say that these are among the perks of being part of a military family. But still, you should know that it still boils down to financial management. Make sure that you understand how to manage your money well so you can avoid the unnecessary burden of military debt.