In my last column, I highlighted the new Military Financial Wellbeing Index, which offered insights into how service members and their families coped financially, from before the pandemic through the end of 2023. Now I’m shifting gears to a set of actionable ideas derived specifically from my take on the index.1. Earmark Your Emergency SavingsAccording to the index, published by USAA, this is a strength of military households. Across the board, the data showed an increase in both their savings and checking balances. The importance of having a robust emergency fund cannot be overstated. An emergency fund provides a cushion and flexibility in the event that something bad happens. For example, over the past couple of years, I’ve talked with a lot of folks who have increased their property insurance deductibles as a means to cope with industry-wide rising premiums. That could make sense, but in my mind, only if you have the money set aside to pay those deductibles.My point is simply that having savings is good, but having savings specifically for emergencies or the unexpected is critical. So while we have seen increasing balances, make sure that yours, or part of it, is earmarked specifically “for use in case of emergency.” I’ve always found that having a separate account, perhaps even at a separate institution, works well to make this happen.2. Conquer Debt StrategicallyFor me, a big takeaway from the index was that military families were, on a relative basis, managing their debt well. However, a big chunk of military members — 37% — still regularly carry credit-card balances from month to month. With the average credit-card balance carrying an interest rate well over 20%, it’s important to tackle your debt with a focused plan. The debt snowball method — paying off the smallest balances first — can provide quick wins, while the avalanche method — targeting the highest interest rates — saves money paid on interest over time. If you have pre-service debt that is eligible, take advantage of the Servicemembers Civil Relief Act (SCRA), which can lower interest rates on certain pre-service debts. An on-installation accredited financial counselor or one associated with the National Foundation for Credit Counseling can help you get strategic with your plan to pay off high-interest debt.3. Boost Retirement SavingsAt this time of year, I like to highlight the importance of compound returns. The old saying, “Little by little, a little becomes a lot” is spot-on. I’m at the back end of my career, and never have I been more aware of how all those little steps, decisions and commitments can have a huge impact. I say that because the magic of compounding really becomes apparent in the later years of your savings journey. My point? Take 1%-3% of that January pay raise and use it to boost your contribution to the Thrift Savings Plan, and that could translate to thousands of dollars of flexibility and options in your future. To illustrate the point, let’s say a
Sab. Feb 1st, 2025
