By Ms. Suzanne Ovel (Army Medicine)November 26, 2013
When Soldiers leave the military, their entire financial situations change. Future success starts with creating a financial plan well before separating from the service, according to Frederica Norman, financial advisor for the Soldier and Family Assistance Center at Joint Base Lewis-McChord, Wash.
She encourages Soldiers to outline a financial plan and a timeline, if possible, for when they will separate; Soldiers going through a medical evaluation board should see a financial advisor as soon as their boards start to begin planning for their potential post-Army finances.
"Your cost of living needs to match the income that you're going to be getting when you separate from the military," she said.
"A common mistake many Soldiers make is in projecting the amount of their future Veterans Affairs disability checks, which many new Veterans first start receiving about 90 days after separation from the Army," said Norman. These payments are a percentage of one's basic pay; they do not include basic allowance for housing nor do they include basic allowance for subsistence. Keeping in mind these more accurate projections of VA disability checks, separating Soldiers should also incorporate additional future incomes, projected living expenses, and their current debt to a financial plan.
Reducing current debt can help set up financial success later. Norman can assist Soldiers with credit card interest rate reductions, and Soldiers can look into hardship programs offered by credit card companies to possibly reduce their debts or temporarily defer them until receipt of their VA checks, for example. Norman recommends that Soldiers first pay off debt before attempting to establish a large savings account, although she recommends that everyone, regardless of debt level, create emergency savings funds which will cover three to six months' of essential living expenses.
Once separated from the Army, new Veterans can apply for unemployment benefits and food stamps, if eligible. In Washington State, residents can receive unemployment benefits for 52 weeks with extensions up to 99 weeks.
For those who are tempted to cash out of retirement accounts such as Thrift Savings Plan accounts upon separating from the Army, Norman advises against taking this route. "You lose a substantial amount of money, and assess a large penalty as well," she said.
Norman advises that Soldiers first avoid incurring a large amount of debt. Common sources of debt are large car loans and credit card bills. Another common culprit for servicemembers is high-interest personal loans, which can charge 30 to 40 percent interest but lure Soldiers in by offering immediate payments, she said.
Soldiers can schedule one-on-one appointments with Norman to help them with services such as creating budgets, debt repayment, reducing interest rates, accessing and improving credit scores, refinancing, home buying and more. They can also attend financial courses every second and fourth Wednesday of the month from 9 to 10:30 a.m. in the SFAC classroom. Topics include holiday spending, financial fitness, budgeting, investing, and Thrift Savings Plan.