You've got to hand it to our military personnel: Not only are they often put in harm's way, but they must contend with a host of issues that would be tough under the best of circumstances, including low pay scales and frequent moves to new assignments that trigger relocation costs.
It's no wonder then that when some military families struggle with finances and fall behind on payments, they fall prey to predatory lending schemes or even see their security clearances jeopardized.
Claudia Warszawski, manager of personal financial management for Navy Federal Credit Union, says, "What we tell our members who are over-extended and looking for an easy way to pay off their debts or make a quick buck is, 'If it sounds too good to be true, it is too good to be true.'"
That advice applies to civilians as well. According to Warszawski, when people patronize check-cashing outlets, payday lenders or pawn shops looking for quick loans to tide them over, they often don't realize how expensive that financing can be.
"When you calculate the true cost for these loans, the rates are staggering," she explains. "The Military Personnel Financial Services Protection Act of 2006 caps the rate these institutions can charge military families at 36 percent. But anyone else might pay an annual percentage rate of 400 percent or more."
Although on-base banks or credit unions are better options for transactions like cashing checks, Warszawski adds that wherever military families go offsite for financial assistance, they're responsible to make their military status known in order to be protected by the Act.
According to Warszawski, the underlying reason so many people experience financial difficulties – military and civilian alike – is that they live above their means and don't follow a budget. She says each military unit is responsible for ensuring its people maintain financial stability, so don't hesitate to consult your command if you're having financial difficulties.
"Each military base command offers free command financial specialists to talk with military personnel about their finances and help them set up a budget," notes Warszawski. "Many banks and credit unions also offer these services to their customers."
Warszawski offers a few additional suggestions and precautions for military families:
For help setting up a livable budget, you can also visit Visa Inc.'s free personal financial management site, Practical Money Skills for Life (www.practicalmoneyskills.com/budgeting) for tips and interactive budgeting tools.
Jason Alderman directs Visa's financial education programs. Sign up for his free monthly e-Newsletter at www.practicalmoneyskills.com/newsletter
This article is intended to provide general information and should not be considered tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how tax laws apply to your situation and about your individual financial situation.<< Back to Practical Money Matters