Military spouses take on money matters
August 9, 2003
Meg McLean knew from the start that marrying a member of the Navy’s Explosive Ordnance Disposal team — the “bomb squad” — could have its stressful moments. What she didn’t count on was that having a military husband would also come with its own set of financial challenges.
It was a nerve-racking but not uncommon predicament that helped McLean learn the value of being financially savvy. A mounting credit card bill was near due, her husband’s paycheck had mistakenly come in at half its usual amount, and she was left to resolve the situation while her husband carried out his duties half a world away. To make matters worse, the credit card company couldn’t legally discuss the bill with her because her name wasn’t on the account, she had no idea who to call at the command to address the paycheck discrepancy, and she could only speak with her husband once every six weeks.
“It’s the things you never think of that get you,” says McLean. With patience and persistence, she worked through her situation, but after five years of marriage and her fair share of close calls, today she has taken control of her family’s finances and is prepared to meet money problems head-on. She now finds herself in the role of coach and confidante within her own circle of military friends, and recommends that all military spouses — husbands as well as wives — learn the basics of money management to prepare for a change in status or unforeseen family development.
McLean’s situation is common. Today, more than 220,000 of America’s 1.4 million active-duty military personnel are stationed away from home, and roughly half of those are married. As husbands and wives serve their country in a far-away place, the spouses left at home must take on temporary roles such as single parents and money managers. Without a plan in place to deal with the challenges of an extended deployment, or even more difficult life-altering events like death or divorce, a family’s financial well-being could be in jeopardy.
Rather than waiting until necessity requires a crash course in personal finance 101, military spouses should consider following McLean’s lead by preparing a contingency plan in case of a financial emergency. Should the day come when you’re suddenly forced to manage your household’s finances alone, prior planning could prove invaluable. Taking some basic steps now can help ensure that you stay on solid financial ground in the near future, and through the different life scenarios you may face down the road. Following are six key suggestions:
Play the name game
As evidenced by McLean’s struggle, having access to your spouse’s accounts and the legal authority to make decisions on his/her behalf can eliminate a world of hassle. To make sure your financial service providers will work with you in your spouse’s absence, ensure that your name is listed as a joint account holder on credit cards, banking and investment accounts, even utility and phone bills. Furthermore, contact your JAG office to create a durable power of attorney, which (provided it meets the standards of your financial institutions) will allow you to manage any legal matters that may arise, such as refinancing the home or changing investment allocations.
Both spouses should also consider drafting a will and health care directive — which your JAG office should also be able to help with — as well as a letter of instruction for heirs, an informal document to accompany and clarify the will.
Credit where it’s due
A healthy credit history is vital for most financial transactions, such as buying a home or renting an apartment. Over the years, you build a good credit history through your ability to pay bills and debts on time. But if all of the family financial records have been under your spouse’s name, it may be difficult for you to qualify for a loan or be approved for a lease without his or her assistance. You can easily start building your own credit history by opening at least one bank account and credit card with your name as the primary account holder.
Balance the budget
Understand your current financial situation by determining how much it takes to pay for essentials each month, tracking spending, knowing how much debt is owed and what funds are available for emergencies. Achieving confidence about your spending and saving decisions can make money management one less source of stress.
Keep eye on the future
Time is your best ally when it comes to funding retirement, due to the benefits of compounding. It’s never too early to begin thinking long-term, reviewing your budget, and starting a regular contribution plan. In addition to investing in the Thrift Savings Plan available to military personnel, the McLeans make automatic payments to a 401(k) plan through Meg’s employer, taking advantage of the company’s matching contribution. Other options include an IRA or Roth IRA, retirement savings vehicles that are available to both spouses, including those not working outside the home. Keep in mind that there are IRS limits that apply to IRAs.
Be sure you’re insured
If you’re even partially dependent on your spouse’s salary for your financial well-being, an adequate life insurance policy is essential to lessen the shock of a sudden loss of income. Couples should consider whether the standard Servicemen’s Group Life Insurance will be enough to meet their needs. For nonmilitary working spouses, disability insurance may be a wise investment to protect your own income, and a separate life insurance policy can help ensure the comfort of your children in the future.
Get regular check-ups
Regardless of your life situation, the good news is that you can always ask for help. Just like an annual physical, it’s wise to visit with a professional financial planner to help ensure that your financial plan is on track. By partnering with a salaried planner — one who does not get paid a sales commission when you choose certain financial products — you can feel assured that you’re getting unbiased advice that is in your best interest.
As Meg McLean and others will testify, by preparing now, you and your spouse can take comfort in knowing that you are in control of your financial destiny, no matter what the future may hold.
— Mitch Swanda is a salaried certified financial planner practitioner with USAA, a San Antonio-based company founded in 1922 to provide financial services for military personnel. He served six years on active duty in the U.S. Navy.