Military to Civilian Life: Overcoming Financial Challenges - Quicken Loans Zing Blog

You’ve served your country in the U.S. Armed Forces. Now you’re leaving the military to re-enter civilian life. This transition comes with plenty of challenges, and some of the most important are financial.

A 2015 survey by the National Foundation for Credit Counseling looked at military members participating in the group’s Sharpen Your Financial Focus program, which is designed to help consumers deal with debt. The foundation found that when compared to all other participants, the average military family had 7% higher average balances when it came to unsecured debt such as credit cards.

These families also had average assets that were 16%, or $11,000, less than other program participants and monthly debt-related expenses that were 15% higher.

It’s clear, then, that military families face significant financial challenges when a family member retires from duty and rejoins the civilian world.

“Most military members are not prepared financially,” said Jessica Allen, a certified financial planner in McMinnville, Tenn., who specializes in working with military families. “The military does offer transition assistance programming. The goal is to get you street-ready for when you fall off the military assembly line and you have left the service. They are hoping they can get you ready, but most of my clients are not.”

Allen knows how difficult finances can be for former military families. Her husband was serving in the military when he stepped on a bomb in Afghanistan in 2011. Today, Allen serves as a caregiver for her husband, a double amputee.

“It is a big change,” Allen said. “And military members aren’t just facing financial challenges. Many of them are facing emotional struggles, too, as they make this transition.”

Fortunately, there are steps that members of the military can take to ease their financial stress, boost their retirement savings and reduce their debts.

Forging an Easier Transition

Not surprisingly, the most important step is one familiar to most consumers, military and non-military alike: Financial experts say that setting and following a budget is the most important financial move that former military members can make when they return to civilian life.

Military members should also plan what kind of retirement they want. They’ll have to save less money, for instance, if they plan to spend most of their retirement time at home with their grandkids. They’ll have to save more if they want to travel the world after they leave the working world. How much they have to save each month will make a big difference in their budgets.

And financial pros say that military members should set their budgets and plan their retirement before they leave the Armed Forces.

That’s what Scott Vance, founder of Trisuli Financial Advising in the Raleigh-Durham area of North Carolina, did. He retired from the military in January and has since been running his financial-planning business. But he began planning for this transition long before his days in the military ended. Vance says that while the branches of the Armed Forces do provide classes and training to members who are nearing the end of their military careers, those about to make the transition to civilian life shouldn’t rely solely on these classes to prepare.

“While still on active duty, have a plan for your retirement,” Vance said. “For my own retirement planning, I did not use the classes provided to me by the Army. I already knew what I wanted to do and how I was going to do it. I was in the process of laying the groundwork to get me where I am today.”

Steps You Can Take Now

Before you leave the military, create a household budget. This budget should list how much money you expect to be coming into your household each month and how much will leave in the form of expenses. If you don’t have a job lined up yet, take this into account. If you do, include the monthly salary you’ll be making.

Once you create your budget, you’ll know how much money you can spend on the extras, like eating out and entertainment. This gives you the financial structure you’ll need when you first leave the military.

Next, consider the type of retirement you’d like to lead. You might want to take a cruise every year, or maybe you’re content to spend your retirement years fishing and playing board games with your grandchildren. The latter retirement plan will require a smaller nest egg after you leave the workforce. Meet with a financial planner who can help you determine how much money you need to save in retirement-savings vehicles each month to meet your retirement goals.

Your next step? Do what you can to reduce your credit card debt. Steve Anzuoni, a retirement income specialist and founder of Fairway Financial in Yarmouth, Mass., said that military members should prioritize their credit card payments. They should first put extra money on whatever card has the lowest balance. Once they’ve paid off that card, they should tackle the card with the next-highest balance, doing this until they’ve paid off all their cards.

“Carrying credit card debt can be a huge burden,” Anzuoni said. “Many cards have interest rates of 19% to 25%. It’s hard to get ahead when you’re struggling to make the minimum payment.”

Saul Simon of Simon Financial Group in Edison, New Jersey, says that it’s important for former members of the military to take a look at their insurance policies, both personal, such as health and life, and policies that protect their belongings, such as homeowners or renters insurance.

“Not having enough insurance can be a costly mistake,” Simon said. “Accidents and illness can be financially devastating.”

Rob Aeschbach, founder of the Military Financial Planner in Norfolk, Virginia, said, “The key to a successful financial life is much the same for former members of the military as it is for everyone else: You need to form good financial habits, such as tracking your spending, saving money each month and paying off your credit card bills in full on each due date.”

Have you made the transition from military to civilian life, or will you in the future? Share your tips in the comments!

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