By Laura Royer.
Occasionally, military families may find themselves falling behind on bills. This could be due to poor planning before relocations or deployment, or it may be due to a lack of money management skills.
Regardless of the reasons, it is important for Personal Finance Managers (PFMs) to help military families to stay on top of their finances and catch up as quickly as possible when they fall behind. Continued poor financial management not only puts a strain on the family, but it could also impact a Service member’s chances of being promoted or given necessary security clearances. Luckily, there are many resources available to military families to help them learn how to manage their finances more effectively.
Make a List of Debts
The first step to take in getting caught up on bills is knowing what is owed. Have your client, along with a spouse or partner, make a list of all debts owed whether currently due, past due, or even deferred. It may also be helpful to pull a credit report to see if any outstanding accounts may have been forgotten. The list should include total amounts owed, monthly payment amounts and due dates, and any details about the lender. This list will help in formulating a budget.
Create a Budget
To stay on top of finances, it is necessary to have a sound financial plan which includes both income and expenses. After helping your client calculate how much is owed, help him or her create a budget with the specific goal of getting caught up on bills. There are many free budgeting worksheets available online; for example, the Federal Financial Literacy and Education Commission has a simple budgeting worksheet available for downloading.
Once the budget is created, discuss the timeline for how long it will take to get caught up and encourage your client to adhere to it as strictly as possible. Each month, the budget should be reevaluated and rewritten to accommodate any changes in expenses or income. Encourage your client to budget in one or two inexpensive rewards once a month that adds encouragement for staying on target.
Address Financial Shortfalls
Sometimes, upon evaluation of the budget, there may be financial shortfalls. In this case, what your client receives as income may not completely cover necessary expenses. If that is the case, he or she will need to find a way to increase income, decrease expenses, or a combination of both. If taking these actions will still not be enough, work with your client to identify appropriate financial assistance programs available to them to help them bounce back. For example, does the family qualify for Supplemental Nutrition Assistance benefits (SNAP), unemployment benefits, or debt forgiveness to alleviate available cash flow.
Seek Out Payment Arrangements
One way to alleviate the most immediate financial strain is having clients communicate with creditors or bill collectors to work out some sort of payment arrangements. Clients can explain the situation that caused them to fall behind on payments and ask for leniency. Clients should prioritize bills based on payment arrangements made with the available cash flow. Learn more about prioritizing debts.
Be Familiar with Specific Military Branch’s Assistance Programs
Seeking help from administrative services on the base is an easy first step in locating resources. Also, there are federal programs and protections for active-duty military families which places a cap on interest rates and protects them from housing debt associated with losses on selling their homes when being relocated.
The Servicemembers Civil Relief Act is one program that protects Service member’s finances, provides protection for Service members, including housing, auto loans, credit cards, and student loans. It’s also beneficial to know that utilizing this program will not impact the Service member’s credit score.