WASHINGTON - Preparation and a detailed spending plan can help servicemembers and their families dodge the financial pitfalls that can spring up during and after a deployment, the Pentagon's personal finance director said.
"A deployment is a very demanding and intense time, and the servicemember and family need to be focused on their specific missions," Dave Julian said today in an interview with American Forces Press Service. "It's hard to do that if there's a big financial situation lurking."
The most important step military families can take prior to a deployment is to sit down together and develop a spending plan, Julian said. The plan should include what the existing bills are, who will pay them, how they'll be paid and where the money needs to be sent. Installation personal financial managers and Military OneSource consultants can offer help with developing a plan, he added.
To facilitate financial transactions, Julian recommended both spouses be listed on all accounts with equal access and suggested they share usernames and passwords prior to a deployment. For single servicemembers, powers of attorney can give a family member permission to handle some types of financial transactions. The legal office is the best place to go for help with these documents, he noted.
In any case, servicemembers and their families should notify their financial institutions and creditors of an upcoming deployment. They may be able to get a break on car insurance or on interest rates, Julian said.
Another avenue for financial relief is the Servicemembers Civil Relief Act. This act has provisions that can, for instance, cap interest rates for some debts incurred prior to being activated for duty at 6 percent or prevent court actions from taking place during a deployment. Certain provisions, such as the 6 percent cap, apply only to reserve component members, Julian noted, so it's important to be aware of the guidelines.
The pre-deployment discussion also should include how pay will change in conjunction with a deployment, Julian said, noting that in many cases servicemembers will receive a "sizeable increase" due to imminent danger pay and combat zone tax exclusion, which makes pay in theater tax-free.
"The plan should address what should be done with the extra money," he advised.
An increase in pay, while fortunate, can turn into a liability if families change their spending habits during a deployment without taking a post-deployment drop in pay into account, Julian noted.
"There's a temptation to adjust spending behaviors to accommodate the increase," he said. "People may make purchases that have monthly payments that are based on the increased deployment pay. That can present a problem later on."
To avoid overspending, Julian suggested people maintain their pre-deployment standard of living during the deployment and earmark extra money to pay down debt or stockpile money for the future in programs such as the Thrift Savings Plan or the Savings Deposit Plan. Deployed servicemembers in a tax-free combat zone are able to contribute up to $49,000 to the TSP, which includes an annual limit of $16,500 in tax-deferred contributions.
"Most servicemembers are young, which is the best time to invest," Julian said. "There's no better investment/savings vehicle than the Thrift Savings Plan, a 401K-style plan. I strongly encourage families to invest in that. Make the money you make while deployed work for you."
The Savings Deposit Plan enables deployed servicemembers to earn a guaranteed 10 percent annual return on up to $10,000 invested.
"It's a great deal," Julian said. "You can't find a guaranteed 10 percent return anywhere."
Pre-deployment servicemembers also should broach the difficult topic of what to do in the event of an injury or death, Julian advised. Families could be the recipients of sizeable lump-sum amounts - $100,000 to $400,000 or even greater - in the event of traumatic injury or worse to the servicemember. It's important to understand what those benefits are and what the expectations are in regards to the money, he said.
And to ensure money ends up in the right hands, servicemembers should check with their personnel office to ensure beneficiaries are up to date, Julian stressed, particularly if there's a new spouse or family member in the household.
Julian also emphasized the need to establish an emergency fund with a minimum of $500. "You can have the best plan in the world, but some contingencies may happen on deployment that you didn't anticipate," he said, noting that unexpected incidents, such as a car breaking down or a basement flooding, can arise during a deployment.
This contingency money should help eliminate the need for high-interest, short term loans such as pay day loans. Instead, if needed, Julian suggested servicemembers and their families seek assistance from a service relief society, such as Air Force Aid, Army Emergency Relief, or the Navy and Marine Corps Relief Society. On-base banks and credit unions are trusted agents as well.
"There are places to go for help that are inside the gate," he said.
Julian said the best advice he can give deploying servicemembers is to attend any and all pre-deployment briefings.
"They're the best one-stop shopping to get connected with the right resources and people," he said.