Today’s military families are being repeatedly hit in the pocketbook by the unexpected. For the second year in a row, service members and their spouses are dealing with a significant financial challenge arising from an unforeseen national event. In early 2019, a government shutdown impacted the pay of Coast Guardsmen as well as military spouses who worked as federal employees or for federal contractors. This year, military families have been experiencing the economic effects of the coronavirus pandemic. Sixty-two percent of military respondents say they expect to be extremely or very financially affected by the impacts of the pandemic, compared to just 33 percent of the general population.
One of the biggest financial hardships facing young families has been caring for children during the pandemic. Many classrooms have closed their doors, compelling parents to oversee schooling from home. That change has impacted the careers of many spouses. Twenty-nine percent of military spouses say they have lost employment because of the virus. Some spouses who have lost jobs have been unable find new work.
While stress levels are elevated during the pandemic, military families continue to experience a variety of common, day-to-day financial surprises. Car repairs, home maintenance, and other emergency expenses create significant financial hardships for many families. Thirty percent of Americans say they would struggle to come up with $400 to pay an unexpected bill. And, of course, deployment issues are always a potential source of anxiety in military households.
Financial issues can be hard on relationships. Thirty-six percent of active duty service members list financial issues as one of the biggest family stressors related to their time in the military. Service members experiencing money-related problems face a notable career challenge as financial mismanagement is one of the most common reasons for denying new applications for security clearances and revoking current clearances.
When it comes to money matters, military families should expect the unexpected and plan accordingly. Family financial readiness is critical to preparing for unforeseen events. Here are several smart actions service members and spouses can take right now to get their families financially squared away:
• Boost emergency savings. Saving for unexpected expenses should be part of your long-term plan, and most experts agree that setting aside three to six months of income is ideal. If you haven’t done this, now isn’t the time to beat yourself up. But you can take positive steps to build or increase your emergency savings, such as aggressively looking for ways to cut expenses. This could even be a silver lining of sheltering at home, since there is an opportunity to save the money you would have spent going out.
• Take advantage of low interest rates. If you’re short on cash, you may find yourself charging more on your credit card than you typically would. And if you have multiple credit cards, this could be a good time to take advantage of a debt consolidation loan. This type of loan combines all your debt into a single loan with one monthly payment. With interest rates at historic lows, you may be able to lower the interest rate you are currently paying on your credit card(s). You may also be able to extend your repayment schedule to free up your cash on hand. If you’re not cash-strapped, this could be an opportunity to pay off your debt faster. Homeowners may also benefit from low interest rates by refinancing their mortgage. If you’ve been considering a big purchase such as a home or car—and you’re financially stable enough to take that on right now—this could be the time to do it.
• Make sure you are adequately insured. Nobody likes to consider their own mortality, but the pandemic is a not-so-gentle reminder of it. News coverage of widespread illness and fatalities has been a punch in the gut as it spreads through our local communities. You can feel more financially confident by ensuring your life insurance coverage is up to date. Service members are automatically enrolled in low-cost term life insurance coverage under the Servicemembers’ Group Life Insurance, which provides $400,000 of coverage for less than $30 per month. Reducing or declining this coverage is a short-sighted move as it can leave a family underinsured. In fact, some families may need more than $400,000 in coverage to meet their needs. Take positive, proactive steps now to make sure those you love are cared for now and long into the future.
• Ask for help. During the pandemic many financial institutions have been offering relief packages for their clients. Talk to your command financial management specialist for advice. They are trained to help service members deal with financial shortfalls, and they can put you in touch with military mutual aid societies, like the Navy Marine Corps Relief Society, that can provide emergency loans and grants to service members and their families. Special loan programs, payment deferrals and fee waivers are just some of the available offers to help clients bridge the financial gap during this time. If you’re in danger of getting behind on payments with a financial provider, ask for help now. It’s in everyone’s best interest to work together to find a solution, and you want to avoid a negative hit on your credit score that could last for years.
Perhaps most important, military couples must communicate on money matters. Military spouses play a key role as the keepers of family financial readiness. They often bear primary responsibility for household budgeting, savings and investments, and retirement planning. This is particularly true during extended deployments. Service members should share information on pay and benefits so their spouses can integrate that information into family financial planning. Unit commanders can help strengthen families to better deal with money matters by empowering spouses with key training content. They should look for opportunities to include spouses when all hands training focuses on financial issues.
Unforeseen financial events can leave families feeling overwhelmed. The key is to prepare now so you don’t panic or overreact later. Preparing for the unexpected ensures you will be ready to deal with financial challenges as they come, and more confidently address your goals for tomorrow.