15th SB Soldiers learn how to get out of debt and make money
January 15, 2009
FORT HOOD, Texas - 15th Sustainment Brigade Soldiers learned how to take control of their personal finances in a class at the Phantom Warrior Center here, Jan. 8.
Ron Taylor, senior vice president, Fort Hood National Bank, taught the class on understanding and controlling debt, credit scores, savings, various investments, car buying and reducing spending.
Taylor's first subject was credit scores, the number that lenders use to determine how risky a potential borrower is and what interest rate to charge them.
According to Taylor, everyone needs to know their score and regularly check their credit reports, which can be done for free once yearly by visiting the website annualcreditreport.com.
Although anyone can view their score for free annually, Taylor suggested that more often is better.
"Me knowing my credit score is worth me spending $5," he said.
Taylor also encouraged the Soldiers to dispute delinquencies on their reports, which could result in a higher credit score.
Delinquencies and loan defaults, such as having one's car repossessed, mar a person's credit for seven years, he explained.
The bank vice president also discussed measures Soldiers can take to reduce and eliminate debt, encouraging them to pay debt off as quickly as possible.
"Credit cards are the ruin of many people's lives," Taylor said.
"If you have credit cards, do yourself a favor - cut them up!"
According to a chart presented to the class a couch costing $2,500 bought on a credit card with an 18 percent annual percentage rating would cost $8,781 if the Soldier paid only the card's minimum monthly payment.
That's $6,281 in interest alone!
Taylor also discouraged Soldiers from using credit cards to consolidate debt, as they may raise a lower APR of 9 percent to 33.99 percent for life if the Soldier misses one payment to any creditor.
Instead, he instructed the class to make a few extra payments a year toward principal only, the amount originally borrowed. By law, most creditors are required to allow additional payments which go toward principal only, he said, which could significantly reduce one's total debt.
"Principal is your best friend. Interest is your enemy," Taylor explained.
Taylor continued by discussing savings and investments, illustrating his points with yet another chart.
If a Soldier saves $1 a day for 30 years, with 5 percent daily compounding interest, they would save $127,077.
If one were to save $100 a month for 40 years, with 12 percent interest, they would have more than $1 million.
Taylor informed the Soldiers about some ways they could make their money grow like this.
He suggested certificates of deposit for the short term and savings bonds or individual retirement accounts for the long term.
The Army Savings Deposit Program allows Soldiers to make money while deployed with an interest rate of 10 percent Taylor informed the class.
"Those little kids get to be big kids quick, and they all want to go to college," Taylor said.
He encouraged the Soldiers to think about college tuition rates in the future and not base savings and investment plans on today's rates.
Taylor also discussed ways to reduce spending.
He said Soldiers should shop at the Commissary, pay no more than $150 a month for life insurance, avoid door-to-door sales people and cash advance stores, and take advantage of the Postal Exchange's price challenge with other companies' similar policies.
Taylor warned the audience about the dangers of taking financial advice from the "barracks lawyers," Soldiers who believe they are experts on nearly every subject.
"If you want a Ph.D. without a high school diploma, a barracks lawyer can do that!" Taylor joked.
Instead, he said Soldiers should use the many resources available to them, starting by talking to their noncommissioned and commissioned officers before making large purchases such as cars.
Other resources available include units' command financial specialist, Army Community Service and Consumer Affairs in building 9001. He even offered himself as a resource to Soldiers who need help.
"Just use the resources available to you."