I'm going to fly in one of those jets one of these days! My work with military money matters makes me concerned with recent bad news for military members and their families.
I was on ABC News this week talking about this survey. And here's the short version of what we discussed:
The Investor Education Foundation of the Financial Industry Regulatory Authority developed a military survey in consultation with the Treasury Department and the President’s Advisory Council on Financial Literacy. Their findings were alarming in that there is a significant increase in consumer debt among military members with more than one in four reporting a credit card debt load of more than $10,000.
Q. Ellie, you work extensively with military members in addressing their financial concerns, how bad is the problem?
A. The information that came out of this new survey is pretty sobering. The study focused on the financial capability of military personnel and found that while some in the armed forces are handling their finances fine, an alarming percentage aren’t doing so well. Debt is only one of the concerns that came out of the report, but it made it to the top of the list because the average military member has more consumer debt than the average American civilian.
Q. Why is debt more of an issue for service members than for civilians?
A. There are a number of reasons that account for this higher debt burden. For one thing, the survey found that military personnel and spouses are generally heavier users of credit cards than are civilians. And we all know that the more you use them, the more likely you are to be more heavily indebted to credit card issuers. In online polling of 700 current members of the U.S. armed services and 100 spouses of current members, more than one in four respondents reported having more than $10,000 in credit card debt. Ten percent of respondents said they were carrying $20,000 or more in such debt. The percentage of those who made minimum credit card payments, took out cash advances and paid fees was highest among families of enlisted personnel and junior noncommissioned officers.
Q. I can certainly appreciate the concern over this increased debt load, but what are some of the reasons that military families have more debt besides the fact that they use their cards more? After all, they do get a regular paycheck, military housing and health care.
A. Even though active duty troops can count on a regular paycheck from Uncle Sam, many military families face the same pressures affecting other Americans during this downturn: Spouses are having difficulty finding work, and mounting debts and foreclosures are forcing them out of rental homes. For those who are stationed overseas those factors are multiplied even more because in some countries spouses are not allowed to work on the economy. Also, when your loved one is deployed in harm’s way, there’s a greater tendency to overspend on comfort items for yourself and your children, for childcare and for eating out because you’re too tired or too depressed to cook. So military families are feeling the effects of our economy…and doubly hard in some cases.
Q. Most Americans I’ve talked to are concerned about their own finances in a post recession economy, but there seems to be a greater concern when military members have money problems. What are the long term implications regarding a lack of financial stability among service members?
A. Yes, you’re right, all of us are concerned about our money and how the economy is going, but our individual money problems usually don’t impact national security. But when you have those serving in the armed forces bogged down with the same issues, it is elevated to that disturbing level of impacting national security. It’s important that military personnel not be weighed down with money issues. Their financial stability is directly linked to their military readiness, according to studies by the Defense Department and the Government Accountability Office. Service members with severe financial problems can lose their security clearances, and bad money management also can result in sanctions, impair career advancement or lead to a discharge.
Q. We’ve talked about consumer debt, but what are some of the other problems that tend to plague military families that may not necessarily impact civilian families?
A. More than one-third of the military respondents said they had trouble keeping up with monthly expenses and bills. Many service members have gotten payday or auto title loans and these kinds of loans deteriorate their assets. Members of the military use payday loans three times as often as civilians, a separate Defense Department study found. With a payday loan, you borrow against a future paycheck. On an annualized basis, I’ve seen the interest rate on such loans range from 400 percent to more than 1,000 percent. Although there are many similarities in how they handle their money compared with the civilian population, military families have unique issues such as frequent deployments. Being in the military may be a secure job, but for many the paycheck is small. It’s not hard to end up with ‘more month than money,’ especially if you are young and have little experience of managing finances. And the military does have special challenges with frequent moves that always end up costing money.
Q. What is the Department of Defense doing in light of the recent financial crisis among military members?
A. The DOD has had financial counselors as part of each branch’s family support centers, but one or two people servicing the population of an entire base isn’t enough. Consequently, they have also created a financial readiness campaign because of the number of military personnel in debt and because so many were losing their security clearances. The Investor Education Foundation is also helping, conducting financial education forums here and abroad and awarding fellowships to military spouses to help them become accredited financial counselors so that they can help their peers. A soldier who is worried about finances is not a soldier who can focus 100 percent on his or her job. I think that when we put our national security in the hands of our fighting forces, then it’s in all our interests that they be able to do their jobs without being sidetracked by financial problems.
Lest you be discouraged by this recent survey--there is hope! Next blog, I'll answer questions from our men and women in the military (and their families), so stay tuned.
And to all those who serve in our armed forces, we thank you!
Ellie Kay
America's Family Financial Expert (R)
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