Hindsight is 20/20. Looking back on your life, there will always be areas you wish you had handled differently.
By joining the US Air Force, I had many opportunities to start my financial future off right. Unfortunately, I didn’t take the time to understand or find out about some of those opportunities.
These are the six things I wish I’d known about money and the military from day one.
1. Allotments for Saving
I’d wish I’d known to start making my savings automatic by using allotments.
An allotment is a distribution of a set amount of your pay to the person or account you determine through MyPay. A great advantage of using allotments is that you can set up a certain amount to be automatically sent to your savings account each month. By doing this, you can adjust to not having that money to spend each month while you build your savings.
2. Thrift Savings Plan and Blended Retirement System
I wish I’d known there was a way to start saving for retirement the day I joined.
The Thrift Savings Plan (TSP) is the government version of a 401(k). It allows you to save money for retirement within a tax-advantaged account. If I had started my retirement savings at 18 or even 20 years old, I would have had a great head start. The Department of Defense (DoD) is doing something else to help qualified new recruits save for their future as well. It’s called the Blended Retirement System (BRS), and it does just what it sounds like—it blends the old retirement system with the TSP. There will still be a pension after 20 years of service, but it will be a reduced amount. To adjust for this, the DoD will now match member contributions to their TSP up to 5%.
3. Extra Pay
I wish I’d known to make a plan for what to do when I received extra money.
When you’re serving, you may have to go on a temporary duty (TDY) assignment or a deployment that will increase your pay. Promotions will also increase your income. When you receive increases in income, you should make a plan for what to do with that extra cash. For example, you might take half the money you receive from a promotion to increase your savings and the other half to increase your quality of life. By having a plan for increases in income, you’ll reach your financial goals faster and easier.
4. Frivolous Spending
I wish I’d known that I would have nothing to show for all my frivolous spending.
When you’re 19, you have no idea how unimportant some of your spending can be. All the clothes, club cover charges, and gas money add up quick. When you look back, you’ll wish you put a larger portion of your money in savings instead of spending it on things that won’t last or be relevant 20 years from now. Spending money on experiences can be a rewarding part of life, but you’ll want to think critically about which experiences you decide to spend your money on when it could impact your quality of life later on.
5. Free Credit Reports
I wish I’d known what the heck a credit report was and why it was important to my financial future.
Your credit report is your good name. Having negative information on it will lead to lenders charging you more to borrow money or, even worse, not loaning you money at all. Many servicemembers don’t realize the significance of on-time payments and not taking on too much debt until they’re already in the thick of it. And an issue with your credit report can be an even bigger problem when you are a servicemember. An excessive amount of debt can result in the loss of your security clearance—or never being able to obtain one in the first place. Take the time to gain basic knowledge of your credit report and get a copy every four to six months to make sure everything is accurate. You can check your credit report for free on Credit.com.
6. Leave and Earnings Statements
I wish I’d known to check my LES for errors every month.
We all know mistakes happen. So it shouldn’t come as a surprise that mistakes happen on servicemembers’ leave and earning statements (LES) too. Whatever the mistake, it’s compounded when it isn’t caught in a timely manner. If you don’t pay attention and you’re paid more than you’re due, the Defense Finance and Accounting Services (DFAS) will take that money back in the next pay period. If you’ve spent the money, you’ll still be expected to pay it back even though it was a mistake. If your leave balance is higher than what you’ve actually earned, you may find out you don’t have enough leave when you try to take a vacation. Check your LES every month to ensure all the information is accurate.
These are six things I wish I would have known about since my first day in the military. Hopefully, you can learn from my experience and use them to achieve your financial goals. For even more tips and tricks, visit Credit.com’s Personal Finance Learning Center.
Veteran-owned businesses make up just under 10 percent of all businesses in the U.S., according to a 2017 report by the Small Business Administration. Despite veterans’ propensity toward entrepreneurship, funding options for veteran-owned business can be difficult to find. According to the same report, nearly 60 percent of veterans’ startup or acquisition capital comes from personal or family savings, while less than 10 percent comes from loans from federal, state, or local government, government-backed business loans from banks, or business loans from banks or other financial institutions.
Obtaining startup financing is always a challenge, but veterans may have an especially difficult time. Because their housing, transportation, and many other daily necessities are handled by the military, they may not have built credit while actively serving.
Fortunately, many organizations, including the U.S. Department of Veterans Affairs (VA) and the U.S. Small Business Administration (SBA) have stepped up to provide resources for veteran entrepreneurs. In this guide, we’ll take a look at the options available for current veteran business owners and veterans looking to start their own business.
Traditional bank loans
Borrowers who bank with a financial institution that caters to military members should talk to a loan officer at their bank first.
Navy Federal Credit Union provides small business financing of up to $50,000 through a combination of term loans, business credit cards, vehicle loans, and business checking lines of credit. A four-page application is available on their website and can be submitted online.
Fort Knox Federal Credit Union, which is available to active duty military, reserve, National Guard, and civil service employees and retired military or civil service members, provides SBA-backed commercial real estate loans. You can request more information by filling out a Commercial Loan Request Form online.
Tammy Everts, a certified business adviser with the Spokane Small Business Development Center, says borrowers with a good credit score seeking a loan of less than $150,000 may be able to qualify for a loan based on their credit score alone. “Talk to your commercial banker where you already have a relationship,” Everts says. “If you’re denied there, then you can expand your search.”
Neither the VA nor the SBA loan money directly to veteran entrepreneurs, but the SBA does guarantee small business loans for veterans. This means that should the business default on the loan, the government will pay a portion of the remaining balance back to the lender. This guarantee encourages banks to lend to applicants that might otherwise be considered too great a risk.
Everts says veterans, unfortunately, have fewer options than they did a few years ago. Prior to 2013, the SBA offered the Patriot Express Loan targeted at helping veterans and active duty military with loans up to $500,000. That program ended, but Everts says it was rolled into the SBA Express Program under the name SBA Veterans Advantage
To qualify, the business must be owned and controlled (51 percent or greater) by a veteran.
The SBA defines a veteran as:
Veterans (not those dishonorably discharged)
Active-duty military participating in the Transition Assistance Program (TAP)
Reservists and National Guard members
Current spouses of any veterans, active duty service members, reservists, or National Guard members and widowed spouses of any service members who die while in service or of a service-connected disability.
To document eligibility, the borrower must provide a copy of Form DD 214 or other documentation as outlined in SBA Information Notice 5000-1390. Eligible veterans have four options under the Veterans Advantage Program:
SBA Express loans of $150,001 to $350,000
No upfront fees
Two-page application and response within 36 hours
The SBA guarantees 50 percent of the amount borrowed
SBA 7(a) loans $150,000 and under
No upfront fees through 9/30/17 (typically 1.5 percent of the guaranteed portion)
Terms up to 10 years for equipment and up to 25 years for real estate
The SBA guarantees 85 percent of the amount borrowed
Non-SBA Express loans $150,001 to $500,000
The upfront fee is 50 percent less than the fee charged to non-veteran owned small businesses as follows:
Loans with terms greater than 12 months: fee is 1.5 percent of the guaranteed portion
Loans with terms of 12 months or less: fee is 0.125 percent of the guaranteed portion
Loans of $500,001 to $5 million
For loans of $500,001 to $700,000, upfront fee is 3 percent of the guaranteed portion
For loans of $700,001 to $5 million, upfront fee is 3.5 percent of the guaranteed portion up to $1 million, plus 3.75 percent of the guaranteed portion over $1 million
Note that for all but the Express Loan, the reduced fees are applicable only for loans made until September 30, 2017. The fee waiver has been extended in the past, but there is no guarantee it will be extended again.
Interest rates on all SBA loans are negotiated between the lender and the borrower.
How to apply
To apply for an SBA-backed loan, borrowers can use the Lender Match tool available on the SBA’s website. Everts says qualifying for an SBA Veterans Advantage loan isn’t really different from other bank loans. “The bank will expect a 15 percent cash contribution from the business owner and a good credit score,” Everts says. “With a credit score over 700, the borrower may be able to get a loan with very little paperwork.
Nonprofit lenders can often provide small business funding when traditional banks won’t.
CDC Small Business Financing VetLoan Advantage
CDC Small Business Financing’s VetLoan Advantage Program is available to veterans looking to purchase commercial or industrial buildings and equipment.
The VetLoan Advantage loans are backed by the SBA, but they offer lower down payments (typically 10 percent). Mike Owen, Chief Credit Officer and Director of Business Development for CDC Small Business Finance, says CDC provides a cash rebate of up to $3,000 to help veterans offset loan expenses. Borrowers can prequalify for a loan online.
The Jonas Project
The Jonas Project provides startup funding, training, and mentorship for veteran women. To qualify, applicants must be a U.S. military veteran with honorable discharge verification, demonstrate knowledge or skill in their desired field of business, and pass an extensive interview and qualification process. Applications are available online.
Veterans Business Fund
Veterans Business Fund (VBF) was established to assist veterans by providing them with the supplemental capital required to satisfy the equity requirements for a small business loan. VBF loans are non-interest bearing.
Currently, the VBF is not accepting applications until their necessary fundraising is complete, but borrowers should check back in the future to find out more about the application process and requirements.
If your borrowing needs are modest, a microloan may be the way to go. Microloans typically range from $500 to $100,000, although the definition of a microloan varies by lender.
Kabbage, a microlender that has provided over $3 billion in funding to more than 100,000 businesses, has a microloan program designed specifically for veteran-owned businesses. Borrowers can apply online or through the Kabbage mobile app for a line of credit up to $150,000.
Angel investment groups
Angel investors are affluent individuals who provide capital for a business startup, usually in exchange for ownership equity in the business. Some angel investors organize themselves into angel investment groups to share research, pool their investment capital, and provide advice to their portfolio companies.
Hivers and Strivers is a Great Falls, Va.-based angel investment group that focuses on investing and supporting startups founded and run by graduates of U.S. military academies. The group concentrates on investing $250,000 to $1 million in a single round, although they can work with other investment groups when larger financing rounds are needed.
Their investors, most of whom have also served in the military and have a broad range of experience in different industries and business models, will also serve as board members and advisers to the businesses they finance. Borrowers can submit their idea for consideration online.
Online lending platforms (sometimes referred to as peer-to-peer lending) are online services that match lenders with borrowers. Because they typically run with lower overhead, they often provide loans with better terms than traditional financial institutions.
StreetShares is an online lending platform that focuses on connecting veteran-owned and -run businesses with investors. They offer three different funding solutions:
Loan amounts from $2,000 to $100,000
Terms of three to 36 months
Patriot Express line of credit
Lines of credit from $5,000 to $100,000
Terms of three to 36 months
Based on future earnings
No limit on contract amount
StreetShares only loans to borrowers who have been in business for at least one year and have “reasonable” credit. Borrowers can get pre-approved in minutes, and there is no application fee.
Grants are attractive to entrepreneurs without a lot of cash available to start or grow a business because, unlike a loan, the funds do not have to be repaid.
The StreetShares Foundation awards $10,000 in business grants to veterans and military spouses each month. Applicants must be a veteran, reserve, or active duty member of the U.S. armed forces or a spouse of a military member or veteran. Selection criteria are based on the business idea, use of funds and potential impact, product-market fit, team and company history, and influence of the business on the military and veterans community.
Applicants must qualify for the award by downloading or viewing educational materials, then complete an online application that includes writing a 300-word summary of the business and submitting a short video about the project or company.
USDA Outreach and Assistance for Socially Disadvantaged Farmers and Ranchers and Veteran Farmers and Ranchers Program (a.k.a The 2501 Program)
The U.S. Department of Agriculture provides small business grants, education, training, outreach, and other forms of support to veterans and minorities looking to begin or expand agricultural operations. Funding opportunities are closed for 2017.
Veterans can also search for additional grant opportunities through grants.gov; however, Everts says her office typically counsels people to bootstrap their business because the process of searching and applying for grants can take a significant amount of time.
Other small business financing options for veterans
While funding is important, it’s often not the only resource veterans need to successfully start or grow a business. Here’s a look at some other great resources:
Boots to business
The Boots to Business entrepreneurial program is offered by the SBA. The curriculum includes a two-day classroom course on entrepreneurship as well as an eight-week online course with in-depth instruction on preparing a business plan and starting a business.
At the end of the eight-week online course, participants will have the tools and knowledge they need to identify business opportunities, draft a business plan, and launch a small business.
Business counselors at the outreach centers provide mentorship and work with veteran entrepreneurs on business plans, feasibility analysis, and provide training on franchising, marketing, accounting, and more.
Syracuse University Institute for Veterans and Military Families
Entrepreneurship Bootcamp for Veterans with Disabilities
Available to post-9/11 veterans with a service-connected disability. The boot camps feature a 30-day online program, nine days of live training, and 12 months of post-program support.
Bootcamp for Veterans Families
Available to military families who serve in a caregiver role to a veteran with a service-connected disability. The boot camps feature a 30-day online program, nine days of live training, and 12 months of post-program support.
Veteran Women Igniting the Spirit of Entrepreneurship
Women veterans and female military spouses can receive entrepreneurship and small business management training through Veteran Women Igniting the Spirit of Entrepreneurship. This three-phase program includes a 15-day online course, a three-day entrepreneurship training event, ongoing mentorship, training, and support opportunities for graduates launching or growing a business.
There is a one-time $75 registration fee for the program, but the SBA covers a two-night hotel stay for event attendees and all meals and educational materials during the conference. Veterans can view the program calendar and apply online.
The International Franchise Association created VetFran, a strategic initiative to teach veterans about becoming a franchise business owner. Veterans and their spouses can get help figuring out whether franchising is right for them and search a directory of franchises, many of which offer discounts or grant free franchises to veterans.
American Corporate Partners
American Corporate Partners connects post-9/11 veterans to corporate mentors from companies such as Deloitte, Morgan Stanley, AT&T, Coca-Cola, and Intel for year-long, one-on-one corporate mentoring. Mentors help veterans with small business development, professional communication and leadership skills, and career development.
The program is open to service members, veterans, and spouses who meet the following eligibility criteria:
Currently serving and recently separated veterans who have served on active duty orders for at least 180 days since 9/11.
Surviving spouses and spouses of severely wounded post-9/11 veterans.
Service members who served less than 180 days of active duty since 9/11, but who were injured while serving or training.
SCORE (previously known as the Service Corps of Retired Executives) is a nonprofit association of thousands of volunteer business counselors throughout the U.S. Their Veteran Fast Launch Initiative provides mentoring and training to veterans transitioning to entrepreneurs. The program is a package of free software combined with mentoring aimed at helping veterans and their families start and succeed as small business owners.
In addition to templates and tools to help veterans plan and operate their businesses, veterans also receive five hours of free financial advice from a CPA.
National Veteran-Owned Business Association
The National Veteran-Owned Business Association (NaVOBA) doesn’t provide funding for veteran-owned small businesses, but it does provide networking opportunities for veteran entrepreneurs, encourages the federal government to spend their contract dollars with veteran-owned businesses, and advocates with state governments to pass laws creating opportunities for veteran-owned businesses.
The Bunker is an incubator for veteran-owned technology startups. They have local chapters throughout the U.S. that provide educational programming, resources, and networking for military veterans and their spouses interested in starting and growing a business. Their EPIC Entrepreneurial Program is a 12-week course designed to help participants launch a business.
The exact information you’ll need and qualifications to be approved for a loan depends on the funding option you’re interest in and the bank you’re working with. Some have simple applications and quick approval processes. Others will want to see collateral, business plans, personal financial statements, bank statements, and credit scores. Whatever funding opportunity you pursue, Everts recommends taking some time to prepare before applying. “Get your numbers in a row and know how much you can contribute to the business,” she says.
[DISCLOSURE: Cards from our partners are mentioned below.]
There are many credit cards offered to military members and civilians alike that have great rewards programs, interest rates and features. But if you’re a service member who needs a credit card leading up to deployment, don’t jump at the first card that looks decent.
Many cards have features offered only to military members, and others go above and beyond the requirements for interest rates and fees set by the Servicemembers’ Civil Relief Act.
Here are four credit cards for military members awaiting deployment.
Rewards: 2% cash back on all purchases for PenFed HonorsAdvantage Members, 1.5% cash back on all purchases for everyone else Signup Bonus: None Annual Fee: $0 Annual Percentage Rate (APR): Variable 9.74% to 17.99% on purchases; 0% for 12 months on balance transfers, then variable 9.74% to 17.99 Why We Picked It: Military members get double cash back on all purchases. For Military Members: Current and former military members qualify to become PenFed HonorsAdvantage Members, and will get 2% cash back on all purchases. There’s no annual fee and no foreign transaction fee. Plus, balance transfers get 12 months interest-free. Drawbacks: You must be a PenFed member to access this card.
2. Navy Federal GO REWARDS Credit Card
Rewards: Three points per dollar spent at restaurants, two points per dollar spent on gas and one point per dollar spent on everything else Signup Bonus: None Annual Fee: $0 APR: Variable 9.99% to 18% Why We Picked It: Everyday purchases earn points with a variety of redemption options. For Military Members: All purchases earn reward points, with special rates on dining and gas purchases. Points can be redeemed for travel, gift cards, merchandise and more. There are no foreign transaction fees. Drawbacks: Points expire after four years. You must be a Navy Federal member to access this card.
Rewards: 5% cash back on up to $3,000 in annual gas station and military base purchases, 2% cash back on up to $3,000 in annual supermarket purchases and 1% cash back on everything else Signup Bonus: None Annual Fee: $0 APR: Variable 12.9% to 26.9% Why We Picked It: Cardholders earn great cash back rates on gas and on-base purchases. For Military Members: This card earns a fantastic 5% cash back rate at gas stations and military bases, 2% cash back at supermarkets and 1% cash back everywhere else. There are no foreign transaction fees. During deployment, USAA will cap the interest rate on qualified accounts at 4%. Drawbacks: You must be a USAA member to get this card. There is no signup bonus.
Rewards: 1% cash back on all purchases and an additional 1% upon payment Signup Bonus: None Annual Fee: $0 APR: 0% for 15 months, then variable 14.49% to 24.49% Why We Picked It: This card has a strong 0% intro APR offer and earns double cash back on all purchases upon payment. (Full Disclosure: Citibank advertises on Credit.com, but that results in no preferential editorial treatment.) For Military Members: All your purchases earn 1% at the time of purchase and an additional 1% when you pay. You also get 15 months interest-free, which is a long time to pay off purchases and balance transfers. Drawbacks: You’ll have to wait until you pay to earn the full cash back. There is a foreign transaction fee.
How to Choose a Card for Military Members
The Servicemembers’ Civil Relief Act caps interest rates for all established credit obligations at 6% during your time of active duty.
But some credit cards go beyond the minimum federal requirements and will set interest rates below 6% and waive fees while you’re deployed. Many of these policies are difficult to find online, so you should call the issuer of any card you’re considering to check their active duty policies.
Beyond that, you should choose a card that best meets your needs at home or abroad. While military credit cards are designed specifically for service members, you shouldn’t discount civilian cards, as they may have strong offers and military-friendly policies as well.
Cards with strong rewards programs, low interest offers and other perks all have their own benefits and drawbacks. Be sure to consider your spending habits and how a credit card can meet your specific needs.
What Credit is Required for a Card for Active Duty?
Credit cards for military members have highly variable credit requirements, ranging from poor to excellent credit. But if you’re looking for a card with strong rewards or low interest rates, you’ll likely need good to excellent credit to qualify. Be sure to check your credit score before applying, as you’ll want to be reasonably confident in your chances of approval. You can check two of your credit scores for free at Credit.com.
At publishing time, the PenFed Power Cash Rewards Signature Visa, Citi Double Cash and USAA Cashback Rewards Plus American Express credit cards are offered through Credit.com product pages, and Credit.com is compensated if our users apply and ultimately sign up for this card. However, this relationship does not result in any preferential editorial treatment. This content is not provided by the card issuer(s). Any opinions expressed are those of Credit.com alone and have not been reviewed, approved or otherwise endorsed by the issuer(s).
Note: It’s important to remember that interest rates, fees and terms for credit cards, loans and other financial products frequently change. As a result, rates, fees and terms for credit cards, loans and other financial products cited in these articles may have changed since the date of publication. Please be sure to verify current rates, fees and terms with credit card issuers, banks or other financial institutions directly.
A lot goes into managing your military career. Whether it’s meeting physical fitness standards or testing to make rank, you’re responsible for keeping everything on track. One area that’s necessary for a successful military career but doesn’t receive as much attention are your finances. When your finances are running smoothly, they don’t play a part in your military career, but when they’re not, then it is a problem for your job.
Knowing these four things about money and the military can keep your military career on track and help you avoid future financial problems.
1. Security Clearances & Your Finances
Many service members are required to have a security clearance for their job in the military. The Department of Defense uses a set of guidelines to determine a person’s eligibility for clearance. One of the 13 guidelines covers finances. It’s Guideline F, and it says, “An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Unexplained affluence is often linked to proceeds from financially profitable criminal acts.”
The guideline is saying when you’re in debt, you may be tempted to compromise information or technology you have access to in exchange for money. Guideline F doesn’t just apply to an initial application for clearance. It also applies to individuals being reinvestigated. This is where people serving can run into problems with their military career.
Reinvestigation can be at 5, 10 or 15 years after your initial clearance is obtained depending on if it’s top secret, secret or confidential. Losing your clearance can mean losing your job or being separated from the military if your job requires a security clearance. The F guideline says “a history of not meeting financial obligations” may be a disqualifying factor in obtaining a security clearance. If you’re in the habit of not paying your bills and have debt in collections you may be putting your military career in jeopardy. It’s important to pay your bills on time to keep your credit report and therefore your security clearance in good standing.
2. Government Travel Credit Card (GTCC)
In the course of your military service, you may be required to use a GTCC during a temporary duty for official expenses you incur for travel. The credit card is provided through the Government Travel Charge Card Program and has detailed regulations on its use. (To qualify you must have a qualifying credit score of at least 660. You can check two of your credit scores for free with Credit.com.) Making a poor choice with this credit card can lead to serious problems in your military career.
Service members are required to sign a Statement of Understanding to ensure they know all directions from the DOD for the use of the credit card. One direction that gets military members in the most trouble is the requirement to file a travel voucher within five business days after completing their trip. By not submitting a travel voucher on time, your reimbursement will be late, and you will not have the funds you need to make the payment on your GTCC. If there are any unauthorized charges, they’ll be the cardholder’s responsibility, which will increase the amount of money you personally owe. It may be a credit card you can only use for official expenses, but it’s still in your name. The repercussions of a late payment start with notification to your leadership that you have not paid your bill. Once nonpayment hits 61 days, the card will be suspended. Not paying your GTCC can affect your personal credit or worse could cause you to be separated from the military. Use your GTCC for official expenses and pay the bill on time to avoid the GTCC affecting your credit or military career negatively.
3. The Thrift Savings Plan (TSP)
The TSP is similar to an employer 401K but for military personnel and government employees. It’s available to help them save money for retirement at a relatively low cost. One common mistake that can become a financial problem is if a person signed up for the TSP before Sept. 5, 2015, the money they contributed to the TSP was automatically invested into the Government Securities Investment Fund (G Fund), unless they selected otherwise. Many people never go back into their TSP account and change their investments.
The problem with that is, over a person’s 20-year military career the G Fund is at risk to earn less than inflation.To have a TSP account balance with low or no return comes as a shock to many nearing retirement. To avoid this mistake, review your TSP investment allocation to ensure you have investments selected that align with your risk tolerance.
4. The Savings Deposit Program (SDP)
Being in the military has its financial perks, and one of them is the SDP. This program allows members of the armed forces serving in a combat zone to save up to $10,000 on each deployment. The SDP earns up to 10% annually. It’s not a requirement to use, but it’s a great resource to help service members get ahead on their savings and improve their finances.
Once you’re in the combat zone 30 days, you can start the SDP with your finance office via cash, check or direct deposit. The limit you can deposit at one time is equivalent to the amount you earn in basic pay. For example, if you make $1,000 per month in basic pay, that is the max you can deposit at on time. If you earn $7,000 basic pay in a month, you can write a check to begin your SDP with $7,000 and then set up allotments each month to continuing saving until you return or reach $10,000. Building a surplus in savings prepares you for financial problems that may pop up in the future.
Image: Catherine Lane
This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.
When I first joined the U.S. Air Force, I was scared out of my mind. I had just committed four years of my life to something I wasn’t 100% sure I could do. Not to mention, I was getting yelled at and working harder than I ever had in my 19 years of life. There was a lot to process. Through it all, I learned many life lessons.
It wasn’t just life skills I picked up in the military. I also learned financial lessons. Today I’m a financial coach helping others with money. My service in the military laid the foundation for my financial career. Some of the lessons I learned there were harder than others, but each contributed to how I handle money today. Here are the financial lessons I learned while serving in the military.
1. Have Control of Your Money at All Times
Physical money management is taught early on in basic training. Every bit of cash you have needs to be accounted for and neatly organized. Our instructors asked us to write down the serial number of every dollar you earn. This reduces theft and teaches the habit of keeping track of the money you earn and spend. Not everyone keeps the serial number of all their bills, but you should know where your money is and how it’s being spent, saved or invested. If you don’t have a handle on your money, who will? You are the one in charge of your money, not anyone else.
2. If You’re on Time, You’re Late
In the service, you quickly learn you need to be ahead of schedule for everything. Being late is not acceptable. If you’re late, it could affect an entire mission. Planning to complete tasks early ensures you’ll be on time even if something unexpected happens. This applies to paying bills and saving as well — something could come up to make you late. Instead of waiting until late on the day your bill is due, take care of it in advance to ensure that even if problems come up, your financial life stays on schedule. Even better? Consider automated payments so you don’t have to worry about being late.
3. Save Money From Every Paycheck
Every supervisor I had while serving made it clear to me: Living paycheck to paycheck was not the way to live. For most young folks joining the military, it’s their first time away from home and their first time earning a paycheck. The sudden influx of money and freedom can lead to crazy spending and zero saving. (Even if you don’t serve, this is a common experience for recent graduates starting their first job and receiving their first salary.) Each supervisor I had encouraged me to live within my means and save part of each of my paychecks. By saving money from each check, you’ll build up money for when the unexpected happens.
4. Use Your Resources
As a new Air Force recruit, I didn’t know all the resources available to me. Fortunately, I had supervisors who mentored me through some of my early financial mistakes, like charging all new things for my apartment instead of borrowing household items from the lending closet on base. I could have used the borrowed items and bought the things I needed as I was paid instead of running up my credit card debt. The lesson here? Take advantage of any free resources you have before spending money unnecessarily. Asking for help to find the free resources available can save you money. (Use this free credit report summary to your advantage to see how your spending habits are affecting your credit.)
5. Learn From Your Mistakes
When you make a mistake in the military, your supervisor, drill sergeant or peers will call you out on them immediately. Mistakes will happen — they’re part of learning and growing. In the military, I learned not to try to hide or forget my mistakes but to review them to figure out ways to avoid them in the future. That way I don’t make the same mistakes over and over. When it comes to finances, this applies in several ways. For example, charging a bunch of household goods on my credit card was a mistake, but I learned ways to avoid making that mistake in the future by using free resources or only spending what I had saved for.
This story is an Op/Ed contribution to Credit.com and does not necessarily represent the views of the company or its partners.
U.S. military members transitioning out of service can find themselves facing many unique money challenges. After all, duty to one’s country can understandably push personal money management to the back burner. Fortunately, there are steps veterans can take to secure the funding they need to achieve their financial goals.
Here are some tips for veterans looking to secure a mortgage, small business loan or other types of financing.
1. Know What Federal Benefits Are Available …
There are programs out there designed to help veterans and their families overcome the various money challenges that can arise when a family member is on active duty. For instance, veterans are eligible for VA home loans, which often feature no down payment, no mortgage insurance and flexible underwriting requirements. And there are various grants, loans and business development programs backed by the U.S. Small Business Administration that can help former military members and budding entrepreneurs.
Veterans can get acquainted with the general benefits available to them on the Veterans Benefits Administration website. Prospective entrepreneurs can begin looking into business financing by checking out the Small Business Administration’s Office of Veterans Business Development online.
2. Research All of Your Options
That’s not to say veterans should limit themselves to federal loan programs. For instance, when it comes to mortgages, “to be sure, VA loans aren’t the right fit for every veteran,” Chris Birk, a Credit.com contributor and director of education for Veterans United, a VA loan lender, said. “Understanding all of your mortgage options is also key to getting the best deal possible. Even veterans with sterling credit and a 20% down payment would benefit from comparison shopping between conventional and VA loans.”
3. Consider Financial Institutions That Cater to Vets …
If you do decide to go for a VA loan to buy a home, consider finding a mortgage lender who knows the ins and outs of that type of financing.
“VA loan market share has soared over the last decade, but it’s still a niche product for many lenders and real estate professionals,” Birk said. “Working with companies and professionals who know the ins and outs of VA loans can help ensure veterans get the most from this benefit.”
Similarly, you can look into finding a credit card issuer or bank that caters to former and current military members. (We’ve got a list of some of the better military credit cards here to help you get you started on your search.)
And there are several startups, venture capitalist funds and, even, angel investors out there that offer small business financing exclusively to veterans and military members that may prove worthwhile, depending on your financial situation.
4. … But Be Sure to Assess Your Finances Holistically
We say “depending on your financial situation” because it’s important to consider factors beyond your status as a veteran when making money decisions. Take credit cards as an example. Ultimately, the right one for you will be influenced by your current financial situation or goals. For instance, if you’re trying to pay a lot of debt, you might want to look into a balance-transfer credit card.
The same thing applies when exploring other financing opportunities — just because you’re a veteran doesn’t mean products designed for veterans are going to be the ones that best need your financing needs.
5. Watch Out for Scams
Due to the money challenges some veterans face (often related to spending extended periods of time out of the country or relocating frequently), they often find themselves on a scammer’s radar. That’s why it’s a good idea to vet any business you’re thinking of getting a loan from before filling out applications. You can start by conducting a thorough search online or checking a company’s status with the Better Business Bureau.
6. Brush Up Your Credit
A good credit score can make all types of financing more affordable, so it’s a good idea to see where you stand before applying for a loan. You can get a free credit report snapshot, along with two free credit scores, updated every 14 days, on Credit.com. You can also pull your free credit reports from each of the major consumer credit reporting agencies each year at AnnualCreditReport.com.
If you need to build credit, you can look into credit-builder loans or secured credit cards, which help people with thin files establish a history of using credit wisely. If you need to improve your credit, you can focus on paying down high credit card balances, disputing credit report errors and limiting applications for new credit, all of which can hurt your credit score.
Several military programs offer scholarships and grants in exchange for your prior military service, or a promise of service in the future. But, what if you already have a degree and are working to pay off your student loans? You may want to consider one of the military’s student loan repayment programs.
In 2013, CNN reported on Thomas McGregor, an attorney who enlisted in the Army to help pay off his $108,000 student loan debt. Between his income and a loan-assistance program, he was student loan free within four years.
Military service isn’t for everyone, and you should seriously consider the potential impact of signing up for a multi-year commitment. It was a good fit for McGregor, who decided to stay on after his three-year service ended. However, he was deployed to Iraq and Afghanistan, and some of his friends were injured or died in combat.
If you decide joining the military is a good choice for you and are paying down student loans, the loan assistance programs could guide your decision to choose one branch over another. While the different programs sometimes share similar names, the qualifications, requirements, and award amounts can vary from one branch’s program to another.
Make sure the loan-repayment guarantee is in your contract before enlisting and double-check your loan’s eligibility for repayment through the program. For example, a program may pay off some types of federal student loans, but not state or private loans. Restrictions also apply based on which position you enlist in, your length of service, and whether or not you have prior military experience. In some cases, the loan payments count as income for tax purposes.
The military’s loan repayment programs and offers can change based on government funding and a branch’s need for new recruits. You can find an overview of the programs below, and you should follow-up with a local recruiter to clarify specifics and find out whether or not you’ll qualify.
JAG Corps Student Loan Repayment Program – Eligible attorneys can receive up to $65,000 in student loan repayments, payable over three years following the completion of your first year of service. The payments can go towards undergraduate, graduate, or law school loans and payments will go directly to your lender. If you stay on past four years, then you can qualify for a $60,000 in cash bonuses: $20,000 for two more years of service and another $40,000 for four more. That’s not specifically earmarked for your loans, but you can use them to pay off your debt. That would be $125,000 over 8 years, in addition to your salary and other benefits.
Healthcare Loan Repayment Programs – The Army offers special pay and incentives to doctors, nurses, dentists, veterinarians, psychologists, and other healthcare professionals. Depending on your profession and specialty, you may be eligible for up to $120,000 in student loan repayments over three years of active-duty service in addition to salary, bonuses and special pay. Reserve-duty servicemembers may receive up to $50,000 for three years of service for loans.
College Loan Repayment Program – The Army also offers some highly qualified Military Occupational Specialists (MOSs) student loan assistance if they enlist for at least three years of service. At the end of each of the three years, you’ll receive the greater of $1,500 or 33.33 percent of your outstanding principal loan balance, less taxes. There’s a maximum potential payout of $65,000.
Army National Guard and Reserves
College Loan Repayment Program– The Army National Guard and Army Reserves have similar student loan payments for some highly qualified Military Occupational Specialists (MOSs). You could receive the greater of $1,500 or 15 percent of your outstanding loan principal at the end of each year of service, up to a maximum of $20,000. To qualify, you must enlist and serve for at least six years. Parent PLUS loans can be covered.
College Student Pre-Commissioning Initiative Student Loan Repayment Program – The Coast Guard offers recent college graduates who are 19- to 27-year-olds up to $10,000 per year, for six years, in student loan aid. The program requires candidates to complete a series of trainings, including basic training and leadership training, and enlist for five years as a commissioned officer. There are some interesting catches: you can’t have more than two dependents and if you’re single, you can’t have sole or primary custody of dependents. Online degrees also don’t qualify.
Health Professions Loan Repayment Program – The Navy pays select health care professionals up to $40,000, minus approximately 25% for federal income tax, in student loan payments each year in exchange for agreeing to continue, or begin, active duty service. The hefty tax portion will be taken out prior to sending the payment along to your lender.
Student Loan Repayment Program – You could receive the greater of $500 or 15 percent of your initially disbursed loan amount each year, with a maximum $50,000 payout and minimum six-year service agreement. You must have at least one disbursed Title IV federal loan.
Public Service Loan Forgiveness
The Public Service Loan Forgiveness (PSLF) program isn’t military specific, instead it’s a federal loan-forgiveness program contingent on your employment with a qualified government or non-profit organization. Only federal student loan that are part of the Direct Loan program qualify for PSLF. However, you may be able to consolidate non-qualifying federal loans (such as a Perkins loan) into a qualified Direct Consolidation Loan.
With PSLF, your remaining loan balance will be forgiven after you make 120 qualifying monthly payments (10 years’ worth) while employed full-time. The 120 payments don’t need to be consecutive, and some, or all, of the employment, could be within the military. You currently won’t have to pay income taxes on the forgiven amount.
Additional Military Benefits
In addition to the loan repayment programs, your federal student loans may be eligible for a capped 6-percent interest rate during active duty, and up to five years of no interest if you’re serving in qualified hostile areas. You may also be able to postpone payments during active duty, but the loans will still accrue interest.
The military’s student loan forgiveness programs may be able to help repay your loans, but don’t take the decision to enlist lightly. Other employers offer loan repayment programs, and potentially less-dangerous jobs qualify for the PSLF. If you do decide to enlist, compare the loan repayment programs and be sure to get the loan repayment included in your contract.
Budgeting during deployment or transfer to a new assignment might be on the mind of many military service members. What might not be are credit scores and how they could impact the costs for everything from a credit card’s annual percentage rate, or APR, to a new mortgage.
Here are four tips for how to maintain good credit while serving in the military.
“The best advice is to make savings a priority while avoiding unnecessary spending,” Bruce McClary, the vice president of communications for the National Foundation for Credit Counseling, said in an email. “Adequate savings will help avoid financial emergencies that would otherwise lead to unmanageable debt. Savings also helps during periods of transition from military to civilian life.”
While you’re serving can be a good time to save, as some of your expenses may be covered by the military. This can help you save for emergencies or hefty future expenses, like raising a family or buying a home. (Though some veterans can qualify for 0% down VA home loans.)
2. Communicate With Those Back Home
If you are sharing an account with someone at home, it’s a good idea to discuss payment plans and spending before you leave so everyone’s on the same page. But the communication shouldn’t end there.
“Staying in touch with joint account users, such as spouses, can help avoid any surprises while keeping accounts paid as agreed,” McClary said. “At the same time, you should use all means available to monitor account activity online whenever possible.”
3. Use Online Resources to Your Advantage
Depending where you are deployed, you may or may not have frequent internet access. However, if you do, there are several online tools to help you maintain good financial habits while serving in the military, like online banking and budgeting tools.
“Those serving on active duty can set alerts that help them keep a closer eye on how an account is being used, giving them instant access to charges and balances,” McClary said. “Payment due date reminders can also be helpful, along with automatic payments.”
Having a late payment can subject you to late fees, and missing one altogether can potentially harm your credit score. So even if you have automatic payments set up, it’s a good idea to monitor those and ensure they go through as scheduled.
“If automated payments have been arranged, set a schedule where you can check to see if they were processed correctly,” McClary said.
If you don’t have internet access while overseas, consider having a trusted family member check your accounts to make sure any automatic payments are processed correctly and on time.
Members of the military who are deployed can also consider placing an active duty alert on their credit reports.
“An active duty alert remains on the report for one year,” Rod Griffin, Experian’s director of public education, said in an email. While the alert only lasts a year, it can be renewed. “It notifies creditors that you are a member of the U.S. military and that you are currently on active duty,” he said. “An active duty alert does not require a lender to contact you directly to get your approval before granting credit in your name, but it does enable them to take appropriate action to protect your identity.”
[Offer: If you need help fixing errors on your credit report, Lexington Law could help you meet your goals. Learn more about them here or call them at (844) 346-3296 for a free consultation.]
Lacey Langford was taking classes at a local community college when she realized she’d rather work full-time to save money for school. “My father was an Army officer, and I decided I wanted to join like him,” says Langford, now 38, who lives in Summerfield, NC. “He convinced me to at least talk to the Air Force recruiter. That was it. I realized it would be better for me and I committed to the Air Force.”
Three years into her active duty, Langford started taking classes at night, using the Air Force’s Tuition Assistance program and the GI Bill. She later separated from the Air Force and completed her degree at the University of North Carolina at Wilmington. She estimates that the GI Bill paid for 100 percent of her tuition, 85 percent of her books, and about 40 percent of her room and board expenses. “I am happy with the way it worked out, walking out of school with zero student loan debt,” says Langford, who today is a financial planner. “I also gained valuable work experience and discipline. The discipline alone has reaped major rewards.”
With the average 2015 graduate coming out of school with more than $35,000 in student loans, being able to get a degree without all the debt is appealing, to say the least. Langford’s path to tuition coverage is one way to do it, but the military offers a variety of ways to pay for schooling or even to pay back student loans. Here are a few options:
1. ROTC Scholarships
Some schools offer the opportunity to apply for a Reserve Officers’ Training Corps (ROTC) program that could pay for nearly all of your tuition, fees and books charges for four years of school, in exchange for a commitment to enter the service as a commissioned officer when you graduate. You generally promise to serve for at least four years post-graduation. There are also two- and three-year scholarships available, depending on how many years you have left in school. Each branch of the military has their own information and program.
2. Montgomery GI Bill
During basic training, recruits get the chance to sign up for this GI Bill plan, paying for it with $100 a month during their first year in the service. Once enrolled, however, eligible members can receive a monthly stipend while attending classes, based on their active duty status and how long they’ve served. For instance, effective October 1, 2015 through September 30, 2016, those who have completed an enlistment of three years or more and enrolled in full-time school qualify for a monthly stipend of $1,789. Rates generally go up every year.
3. 9/11 GI Bill
Any veteran with at least 90 days of active duty after September 11, 2001, with an honorable discharge, is eligible to take advantage of this benefit. The biggest benefit goes to those with at least three years of active duty service. For those with three years of active duty service and attending a public school, the 9/11 GI Bill will pay up to 100% of tuition and fee payments for an in-state student. For private or foreign school attendees, payment is up to $21,970.46 per academic year.
4. Tuition Assistance
Each branch of the military also offers its own tuition assistance program, in which active duty members can get money toward tuition and fees for qualified programs. The Air Force, Army and Marines offer up to $4,500 per fiscal year with caps on credit hour costs, and the Navy offers up to $250 per semester credit hour or $166 per quarter credit hour. The Coast Guard offers up to $3,375 per fiscal year. This may also be an option for you if you belong to one of the service’s Reserve units.
5. Student Loan Repayment
If you’ve already incurred student loans, you may be able to enlist in the military and have them paid off over time. Each branch offers its own program for this. The Army and Navy, for example, will repay up to $65,000 of a soldier’s qualifying student loans, and the Air Force will repay up to $10,000. Generally, after each year of completed active duty, your service will pay 33-1/3 percent or $1,500, whichever is greater, of your total unpaid balance.
There are other programs that may assist with school costs or loan repayment, depending on your position, active duty status and career field. You can get more information on all programs at military.com/education, or find specific information from the military branch you’re interested in.
A word of caution
Although these are all valid pathways to an education without massive student loan debt—or any debt at all in some cases—experts advise that students shouldn’t join the military for the tuition assistance alone. “There are people for whom the military is great, but for some people, the military is just not for them,” says Ryan Guina, founder of TheMilitaryWallet.com, who used the military’s Tuition Assistance program to get his degree while on active duty with the Air Force. “If you’re going to join for a specific benefit, make sure all the other aspects are in line with your values and what you’re looking for out of life. I encourage people to look at the military as a whole and not just a means to an end.”