Veterans making the transition to civilian life will learn how:
Glass served her country honorably as a U.S. Army intelligence analyst in Turkey during the Persian Gulf War in the early 1990s. Now she speaks regularly with service members and veterans at military bases, VA hospitals, and elsewhere, providing them with guidance and counseling on a variety of financial matters.
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About the Author
Credit Counseling Solutions, a national nonprofit financial counseling agency. Glass served in the United States Army from 1988 to 1992. After earning her bachelor's degree in international affairs, she worked as a certified project management professional and educator for IBM
Corporation and started her own company called Beat Debt, Inc. She writes a monthly blog about personal finance for Equifax. She lives in Atlanta, Georgia.
Scott Scredon is a former public relations director for a national credit counseling organization and now runs his own public relations firm. He previously worked for 19 years as a senior vice president for corporate communications for Bank of America Corporation. He also worked for five years as a bureau chief and correspondent for BusinessWeek magazine. He lives in metro Atlanta.
Read an Excerpt
After Military Pay Goes Away, Now What?
As a chaplain for the 278th Armored Combat Regiment stationed at Forward Operating Base Bernstein, in Iraq, Major David Clark held a wide range of duties. To help avoid any international incidents, he advised his military commander about the Islamic religion and culture. He also served as a counselor to other service members, listening to their most personal concerns and providing careful, thoughtful advice. On late nights far away from home, living in a desolate and dangerous land, Clark listened as some men told him they were considering suicide. Others discussed troubling, but less important matters, such as how a spouse back home was spending their hard-earned pay.
Chaplains don't carry weapons, but because the military base was near the Iranian border, the Army considered this location risky and paid Major Clark accordingly. In addition to his basic pay, he qualified for hazardous duty and family separation pay, as well as housing allowances and other bonuses. As a result, he made good money: his pay and benefits totaled $98,000 annually, plus full medical and dental benefits, and 30 days paid vacation.
Eventually, Clark was transferred to the 188th Infantry Brigade at Fort Stewart, Georgia, as its mobilized brigade chaplain. But in June 2011, as the U.S. Army began to cut its forces, Clark lost his full-time position. Within a short period, his military income, including all of the bonuses and special pay, was gone. After moving back to his home in Tennessee, he was unable to find full-time work — even though he held two master's degrees.
Since his return home, Clark has worked nonstop, but makes far less than he did when he was stationed in Iraq. "I literally work every day of the week," he says. During 2012, he worked as a part-time music minister and also held part-time jobs as a painter, landscaper, and pressure washer that earned him approximately $27,000 a year. In 2013, he found a part-time job at Lowe's, the home improvement chain, which bumped his total annual income to approximately $38,000 a year.
To pay his bills, Clark needs to withdraw $500 each month from his savings. He lives a lean lifestyle, spending little on clothing and entertainment, but the drain on savings will continue until he begins to draw his military retirement pay in December 2014.
Clark's personal story illustrates the difficult financial issues service members face when they make the transition from the military to the civilian world. Service members who leave military service soon realize they are entering a new phase of their lives where jobs and pay are no longer guaranteed. The regular paycheck, the bonuses for combat pay, and the allowances for housing, all go away, as well as many of the medical benefits and other forms of insurance.
Fortunately, Clark managed his money well during his time overseas and while stationed at Fort Stewart, saving $4,000 a month and paying off his house and car. "Perhaps the most important financial lesson I've learned in my life is to pay-as-yougo," he says. "With the exception of my house and a couple of my past cars, I have saved for what I needed or wanted and then laid out the cash before taking possession. This way, I rarely find myself a 'slave to the lender.' Too many of my soldiers saw, desired, and acquired stuff. They repeated this cycle over and over and ended up living a fake lifestyle they couldn't afford."
Making the Transition
A service member needs to make several important decisions once he or she leaves military life. You likely will need to learn some new skills to start and grow in a new career; readjust to family and friends, and learn how to manage money and build wealth.
The skills needed to accomplish these goals will likely be different than the ones you learned in the military, especially when it comes to money. Many service members never had to manage their money and building wealth never crossed their minds. But outside of establishing your career and reestablishing ties to family and friends, it is one of the most important skills you will need.
It's not uncommon for veterans to face uncertainty when they return to civilian life. A survey released in August 2012 by Prudential Financial and the Iraq and Afghanistan Veterans of America (IAVA) found that 64 percent of service members say they experienced a difficult transition to civilian life. The survey also found that close to half of the veterans did not feel ready to make the transition largely due to employment and health challenges, but also the need to take time to decompress after service and "figure out what's next."
That's the $64,000 question — what is next? Of course, that's up to you. But when it comes to your financial life, I can get you started.
New veterans, particularly those post-9/11 vets, will need a financial plan in place to pay for living expenses and finance any major purchases once discharged. Think for a moment about this scenario and if it reflects your situation as you get set to re-enter civilian life:
* Do you know where you will live?
* Do you know where you will find work?
* Do you know your monthly living costs, including all utilities and the costs of owning and operating a car or other transportation?
* Do you have any outstanding debts?
* Do you have any money saved from your time in the service? And, like the major from Iraq, do you know if you would need to dip into your savings for any short- or long-term needs?
If you know the answers to the first three questions, have no debt, and plenty of savings, I want to congratulate you; you are in very good shape. However, if this doesn't reflect your situation and if you are uncertain that your transition will be a smooth one, you are not alone.
Knowing the Pitfalls Ahead
I realize that you've given considerable thought to where you will live, whether you plan to go back to school, and what kind of money you will have available to make a major purchase — possibly a new car or even a new home. But I want to prepare you for a few possible pitfalls that may turn out to be obstacles to even the best-laid plans.
A lot of changes have occurred in the U.S. economy in recent years, and if you entered military service before 2007, most of the changes haven't been good. The unemployment rate is high, with several million people unable to find full-time work. More than four million individuals and families have lost their homes to foreclosure; more than five million have needed to work with their banks to modify their mortgage loans just to stay in their homes. Millions of others have seen their houses depreciate in value.
Veterans planning to save money by living at home with parents, relatives, or friends, may find that these loved ones have lost good jobs, experienced a reduction in income, or have lost their homes. If this is the case, it could significantly sidetrack your transition.
Bronze Star Winner Struggles With Finances
Nick Colgin is one of America's heroes. As I mentioned earlier, he served for 15 months as a combat medic for Bravo Company in the 82nd Airborne in Afghanistan. In one of his most memorable missions, after a French soldier was shot in the head, Colgin jumped out of a helicopter and ran to his side under heavy fire to save him. He and the Frenchman were pinned down for three hours, forcing Colgin to pick up a weapon and return fire until help came. Eventually they were rescued and, as a result of his efforts, Colgin received the Bronze Star for meritorious service.
Colgin joined the U.S. Army as soon as he finished high school and was discharged in August 2008. But this hero readily admits that, at least for a period, he was better suited for military life than many of the everyday financial challenges he faces as a civilian.
"I went into the military right out of high school. I'm not paying rent, I have insurance and any time I need to go to the doctor, I go," he says. "When I got out, I had never experienced buying groceries, paying rent or utilities." After four years of service where he regularly dodged gunfire, and during a period when his best friend from high school died in combat, he admits that many financial issues seem relatively trivial.
"You have a different value system," Colgin says. "I was in Afghanistan saving lives. In that world, as a medic, if I packed too many items and it weighed me down, I couldn't do my job and people would die. Now, it's still hard to realizethat paying rent on time may have some long-term impact on my life. I'm wired to make decisions a little differently."
Colgin says he received no financial education during his military service, but wishes he had: "Out of everything, financial education and a resume would have been the top two things that would have made my transition easier." Even at age 28, Nick has only been paying rent for four years. "It's still kind of weird to get in the habit of doing that," he says.
Planning for New Expenses
Colgin did his best to plan for his transition with the information he had, but it wasn't enough. So one of the first pieces of information I want to provide you with is a list of expenses formerly covered by the Armed Forces that will become your responsibility. Knowing about these expenses will help you put together an initial spending and financial plan. These expenses include:
* Transportation. If you lived on a military post, the places you visited most frequently were likely within walking distance. Upon separation from the service, you'll quickly discover that grocery and convenience stores, restaurants, and baseball stadiums are miles, not blocks, away.
* Home Security. Large fences, military police, and other security measures protected the base where you lived during your days in the service. Although the enemy wasn't far away, you were safe inside the post. Now, at home, there is always the danger of a break-in and you may need to pay for the installation of security devices and a monthly fee to maintain security.
* Clothing, utilities, meals, and recreation. In the military, clothing, utilities, and meals are all provided by Uncle Sam. For exercise, you work out regularly with other service men and women, so there isn't a need for a gym membership or a personal trainer. But these personal expenses aren't covered upon separation.
* Television and more. If you were stationed overseas, you never paid for cable television and most long-distance communication. If you want those items now, you'll need to pay for them.
Begin at the Beginning: Decide on Your New Personal Goals
Any overall financial plan begins by developing a monthly budget, and you'll need to include all of the items I just listed. But before we do that, I want you to write down your personal and financial goals. This is an important exercise because it will help us build a personal financial action plan to meet those goals.
Write down your goals in a document that you can look at from time to time, either on a computer, mobile phone, or notebook. At the end of this chapter, I've developed a work-sheet where you can list your short- and long-term goals and begin to develop your budget. Most veterans have their own ideas about starting a new life, but few actually write them down and have a game plan to achieve them. That's where my plan can help you.
Let's start by looking at your goals. It's likely that your goals fall into one of these categories:
* Going to school (or back to college) to get a degree to help start a new career.
* Buying a home.
* Teaming up with one of your military buddies to start a business.
* Returning home to a spouse and stable job, starting a family, and saving for the future.
* Investing for a long-term goal, such as retirement.
We all know of military buddies who came back to the States and fulfilled a goal — as well as those who didn't. After returning from Iraq in 2008, my colleague Daniel Buffington eventually decided to use his savings from his military service to complete his college degree.
Back in 2007, as a member of the U.S. Army Reserves, Daniel was one of 30,000 troops called to serve in Iraq to rid the country of Al Qaeda and other insurgents. He and his wife only had 30 days to get their affairs in order before he was deployed. They spent several nights going over their bills and each due date. All of this happened just two months after the birth of their son, Andrew. But Daniel says that his financial planning has paid off.
"During my eight months of service in Iraq, I saved nearly $10,000," Daniel says. "When I returned home, I had some student loan and credit card debt, but I decided to use my savings to pay for my final two semesters of college and complete my degree in international business. The degree helped me get a new job in management. The job has worked out well; I was promoted within my first three years in the organization."
Although Daniel was surprised to get his orders to deploy overseas, he decided during his time in Iraq that he would spend his earnings wisely once he left the service. After having some difficulty finding a good job when he returned, he developed a specific goal — completing his college degree. It was also a goal that was realistic and had a specific time frame.
Setting SMART Goals
For the past several years, I've used a five-step method of goal-setting that has helped me accomplish many things. First used by George Doran, it's called the SMART process, with each letter representing one part of the process. As you begin to map out how you will achieve your personal goals, and pay for them, I would like you to use this process. Here are the five steps that you need to take:
S = Be Specific. Make sure that your goals are specific and not too broad in their scope. For example, if you want to become a teacher within your community, you need to set deadlines and complete some research. Here are some actions you need to take:
* Find out exactly how long it will take to complete your degree and set a deadline to graduate.
* Decide if you want to teach elementary school, or if you want to specialize in a particular subject, such as art or math.
* Know what certificates are required.
* Find out if there are jobs available where you want to teach. Talk to other teachers and school administrators now; don't wait until you graduate, only to find out that there are no jobs available and that there likely won't be any in the near future.
M = Measureable. You must have a way to measure progress and success toward each of your goals. It's easy to measure progress toward achieving a college degree. However, if you want to measure progress toward saving to buy a home or starting a business, you must put specific steps in place. And if you want to advance to the next level in your career in two years, you need to determine specific steps to help you achieve that goal.
A = Attainable. The goal you set must be one that you can reach by taking certain actions. For example, if you want to start a business, but you have no funds available, it will be difficult.
R = Realistic. Winning the lottery is not a realistic goal, but saving $5,000 over 12 or 24 months to buy a home is a realistic goal.
T = Timely. It is reasonable to have short- and long-term goals. The short-term goals should have a time frame of less than one year.
Once you have written down your goals, along with a timetable to implement them, you can develop a financial plan. Let me give you an example from my life.
Shortly after leaving military service, I decided on two short-term goals: to get out of debt and to buy my first home. Getting out of debt was my immediate, short-term goal, and I was very aggressive about meeting it.
I saved money by reducing my expenses and by using those savings to pay down my debt. For example, I moved to a residence closer to my job to save on gas, and lived with a roommate to save on housing costs.
Every extra penny went to pay off my credit cards, including my federal and state tax refunds. I worked overtime whenever possible and also worked the second shift, which increased my salary by 15 percent. By the end of the first year, I was debt free and had money for a down payment on my first home.
Assessing Your Current and Future Financial Situation
Now that you've written down your goals, you need to figure out a way to pay for them. And doing so will be the first part of the personal action plan that I will help you create. Let's start by assessing your current financial situation. Any assessment begins with basic needs, so you need to be able to answer the following questions:
* Determine your housing costs, including utilities. If you can live with parents or a relative, you will significantly cut your overall living expenses. If not, you and a friend may be able to split the cost of an apartment.
* Determine your military benefits and incorporate any future benefits into your financial planning and monthly budget. As you know, veterans qualify for reduced interest rates on home loans; education, housing, and training benefits under the GI Bill; disability and medical benefits and pension benefits.(Continues…)
Excerpted from "The Veteran's Money Book"
Copyright © 2014 Mechel Lashawn Glass with Scott Scredon.
Excerpted by permission of Red Wheel/Weiser, LLC.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.
Table of Contents
1 After Military Pay Goes Away, Now What? 17
2 While You Were Deployed, the World Changed 39
3 Dealing With Debt 55
4 What If I Can't Pay My Mortgage? 71
5 How Veteran's Benefits Fit Into Your Financial Plan 83
6 Spending and Savings Habits That Will Last a Lifetime 95
7 Where Do You Want to Be in 5 Years? 111
8 How to Reshape Damaged Credit 125
9 How to Avoid Financial Scams 147
10 Protecting Your Investments: Understanding Insurance 165
About the Authors 191