Top 10 Military Money Mistakes

By Carol Church

Service members have so much to think about in order to stay focused, keep their mood positive, and complete their service to our nation. With everything they have going on, it’s sometimes difficult to find the time to properly manage their finances and keep their financial lives on track. What’s more, many military members are young and inexperienced with money. They may not have had a lot of experience with managing bills or paychecks, and might not have ever had to think about things like life insurance or retirement savings before.

When you put all of these factors together, it’s no surprise that there are certain common mistakes that service members tend to make over and over again. Do you recognize any of these top 10 military money mistakes?

  1. Not Understanding the Power of Compound Interest Many service members get started in the career at a very young age—which means they have an amazing opportunity to take advantage of the incredible power of compound interest. But plenty simply don’t quite make the connection and figure they can “get around to it later” when they’re earning more money. A simple TSP calculator like this one can show how even contributing a modest percentage of a modest salary, if started early, yields really big results.
  2. Getting in Over Their Heads with Real Estate It can be really hard to resist the temptation to rent instead of buy in a temporary housing situation, especially when rental options are expensive, rental pickings are slim, or the housing market looks great. But all too many service members end up as reluctant landlords sitting on property they have to manage from afar, or even “upside down” on a now-distant house they really can’t afford to own. Unless property management is a skill or passion, it’s often best to wait.
  3. Overspending Their Bonuses There are plenty of enticing bonuses available to service members that can add up to a lot of money, all at once. Young people without much practice in budgeting may often be tempted to spend most or all of this money in one place rather than putting it away or using it pay down debt.
  4. Getting Sucked into Predatory Lending Schemes 
    Image via Pixabay.com/CC0

    Due to their youth, financial inexperience, and, for some sectors, relatively low pay, members of the military have a higher than average use of businesses often considered “predatory” lending markets, such as payday loan outlets, car title lenders, pawnshops, and rent-to-own businesses. The government is trying its best to protect service members from this problem by enacting legislation that protects them from certain situations, but these businesses often still manage to find ways around it. Service members need to steer clear of these businesses and find better ways to handle a temporary need for funds, such as loans from a credit union or help from some of the many special loan and financial assistance programs especially for them.

  5. Not Creating an Emergency Fund Everyone needs an emergency fund, and military members are no exception, even though their paychecks are fairly stable. Starting off with a manageable small amount such as $500 and building it through pocket change, skipped treats, or a “round up” app like Digit may be an easy way to get this established.
  6. Blowing Too Much Money On A Car New cars (and nice cars) seem to be a financial Achilles heel for many members of the military. Dealerships know that service members are a good credit risk and that they can track someone at the base down if there is an issue. Though it’s difficult, the smart choice is to purchase a reliable, less flashy used vehicle instead, preferably with cash.
  7. Not Checking Their Credit Regularly Because of how frequently they move and the many additional lists they are on, service members are at increased risk of having their credit compromised and their identities stolen, but due to their busy lifestyles, many don’t get around to checking their credit reports. This is a big mistake that can affect them for years to come. You’re entitled to one free credit report annually; find out how to get it here.
  8. Not Making a Budget One of the basic bedrock principles of financially sound living is to make and live by a budget. This can be really trick for military families where paychecks wax and wane, but the key is to figure out what makes sense in the bigger picture and to follow that budget year-round. If you’re in a good place to start out with, your budget should then be able to hold though richer and through poorer…regardless of what the numbers look like day to day.
  9. Assuming They’ll Get That Pension  A military pension is a very valuable thing, but it’s very important to remember that currently, only 17% of those who serve will actually make it 20 years and get this deal. For the majority, contributing to TSP (fortunately, now with matching funds for everyone after 60 days) is what will count in the long term. The pension is great if it happens, but it should never be assumed that it will.

No one is financially perfect, especially in their youth. Sometimes, we have to “learn by doing” and experience the consequences of our actions. But there are some mistakes that are definitely worth avoiding. By understanding more about common military money mistakes, we can help others succeed financially.

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