When deployment orders come in, there’s a whole lot to think about and plan, from very practical matters to deeply emotional concerns. There are items to buy, papers to handle, and a great deal of logistics to get in order. At times, the process can feel overwhelming.
But one area that cannot be overlooked is getting one’s financial “house” in order before departing. Dealing with financial paperwork, phone calls, or money problems can be difficult or even impossible while deployed. What’s more, bad debts and other financial problems can sabotage a service member’s military career, even resulting in revocation of security clearance.
If a service member’s family and financial situation is fairly stable and has not changed since the last deployment, preparation may be relatively simple. But for many servicemembers, things will be more complicated. For instance, members may need to pay special attention to financial preparation if any of the following apply:
- This is their first deployment
- They have recently married or moved in with someone
- They have recently bought a home
- They have recently divorced or split up
- Their financial situation has changed in important ways
Even for those who feel things are pretty simple, planning ahead is key. Read on for reminders about what financial tasks need to be completed before a deployment.
Designating a financial manager
For almost all servicemembers, it will be helpful to select someone to act as a financial manager in their absence. Those who are married will choose their spouse in most circumstances, but single people may designate a parent or other responsible person. This should be someone you trust completely. Check in with your financial representative regularly while deployed, and check regularly on your bank account and other financial accounts when possible.
Setting up a power of attorney
It is wise to legally grant your financial representative power of attorney. This allows him or her to legally act on your behalf to execute contracts, sign documents and handle financial affairs and can cover all kinds of needs, from medical and mortgages to banking and legal and beyond. For help with designating a power of attorney, service members can use the U.S. Armed Forces Legal Assistance locator.
Other legal concerns
Service members should update or create a will before deploying. While this may be difficult to think about, it’s a responsible and caring action in case the worst should happen.
Along the same lines, be sure to update the record of emergency data and the Servicemembers Group Life Insurance Form, especially if there have been changes in family status.
Finally, consider placing an active duty alert on the service member’s credit report. This is helpful in preventing possible fraudulent activity that might otherwise be missed.
Setting up bill payments
It can be easy to forget about all the financial obligations one holds when leaving for a deployment. Here is a (very likely incomplete) list of bills to put on autopay or to instruct a spouse or other responsible person in how to pay:
- Credit card bills
- Student loans
- Car insurance
- Home insurance
- Cell phone bill
- Car loan
- Child support
It is important to note that some of these obligations may be affected by the terms of the Servicemembers’ Civil Relief Act, which limits financial obligations for deployed military. For instance, deploying members have the right to reduce the interest on their mortgage loans and any outstanding credit card loans to 6% under the SCRA. Typically, the credit card debt must have been incurred or the mortgage initiated before entering service for this to work. Deploying members may also be able to get out of cell phone contracts and apartment and vehicle leases. To learn more, visit SCRA Questions and Answers.
If taxes will be due while the servicemember is deployed, decide how this will be handled. Either the spouse or other empowered person can file and “sign” for the service member using power of attorney, or it is also possible to simply file for an extension. Refer to the Armed Forces Tax Guide for more.
Setting up an allotment
Some service members may want to consider setting up an allotment—a special automatic payment taken out of one’s paycheck that can be sent to a spouse, a dependent, or an obligation such as a loan. For instance, allotments could be used to pay a mortgage or child support. Allotment options have changed in recent years, so it’s important to read more about them.
Servicemembers who are single or who own a vehicle that does not need to be used during a deployment should talk to their insurance agents about options to reduce premiums. It may be possible to suspend coverage or to switch to a weather-damage-only policy.
Planning for savings (or reduced income)
For many servicemembers, deployment provides an excellent opportunity to put away money into savings. The increased income and decreased expenses that may accompany this otherwise stressful time can be a much-needed financial boost.
An incredible benefit available to deployed servicemembers is the Savings Deposit Program. Service members deployed to eligible designated combat zones can put up to $10,000 per deployment in this account, tax-free, and it will earn 10% interest annually as long as they are in combat zone. Funds will be returned to the service member after he or she returns (or before in cases of emergency). This opportunity is one to take advantage of.
Also consider increasing rate of savings in the TSP during deployment. In fact, USAA recommends that servicemembers put two-thirds of their additional deployment pay into savings.
However, this situation may be turned on its head for Reserve members, whose military pay may be substantially less than what they earn at their civilian jobs. These members will need to budget in quite a different way, making advance plans for the reduced income during this time.
Pulling it all together
There is so much to plan for when anticipating a deployment, but financial preparation is one of the most important steps. Service members who are distracted by worries or concerns about money cannot perform at their peak. Getting these affairs in order early will make all the difference.