Marine Corps Base Quantico -- Ultimately, the best way to be financially fit is to pay cash for everything. If you don’t have enough cash to purchase what you want, save until you do. Always have a ready savings of at least $1,000 on hand for emergencies only. And in the meantime, contribute regularly to a long-term savings account such as the Thrift Savings Plan.
Sounds simple, right? But is it practical for the military lifestyle? If you could start off in the military at age 60, having already learned life’s lessons, you would stand a better chance of obtaining financial security. Instead, you start off as a young person with your whole life ahead of you. Following are the ways in which a young person can get into financial trouble almost immediately.
Transportation: With a steady income, you are ready to buy your first car. The used car dealer just outside base is offering no down payment and no credit check. And, they have that sporty little car you have always wanted. So you buy it. A couple of months down the road—provided the car still works—you realize that you can’t seem to pay all of your bills.
We usually see clients when the service member has missed at least three car payments and is in danger of having the car repossessed. Many times, the problem is that the service member has not taken into account the cost of car insurance, which is usually substantial for a young, unmarried person. Also, he or she doesn’t realize the cost of maintaining a used car. The Navy Marine Corps Relief Society (NMCRS) offers budgets for buying a car and Marine Corps Community Services (MCCS) hosts car-buying 101 programs. One of the first things we look at is the Blue Book Value of the car you just bought. Surprisingly, it is usually worth a lot less than you realize.
Should you buy a new car instead? The new car dealer is offering an 84-month repay at a price that you can afford, which sounds like a good deal. But think of it in terms of seven years instead of 84 months. Will you even be in the military with a regular paycheck seven years from now? And will the new or used car be sufficient to carry two children in car seats? What will happen to your car when you deploy? If you can sit down with someone and go over these issues and take a few deep breaths before buying, you will be on the road to success.
Housing: We are seeing more young people buying houses than in the past. The reasoning is: Why pay someone else rent when you can use that money toward your own house? And that is a good question! But, there are so many other issues that need to be considered. Again, please make use of NMCRS and MCCS resources for advice before purchasing a house. A monthly mortgage payment may be manageable and less than rent, but utilities, which are often covered in monthly rent payments, also need to be paid. A rented apartment is usually smaller and the utility costs are less.
Home ownership also involves fixing the house when it is broken. Replacing the water pipe from your house to the public access point, for example, can cost thousands of dollars. This isn’t something you can do yourself and insurance will not pay for all of it. Consider that a good rule of thumb for emergency savings for a house is $10,000.
The biggest drawback to owning a house while in the military is that you have to move. Are you going to sell the house? Are you going to keep it and rent it out? What if it doesn’t sell or rent quickly? Home ownership is part of the American dream, but may need to be postponed for a lot of service members.
Pets: Those cute, furry family members can be very costly. The normal vet bills for shots, pills and fleas are enough by themselves. One major injury to a pet can be financially devastating. I had a cat that jumped off the deck and broke his knee. The vet bill was $4,000. So, how much should you have in savings for a pet -- $5,000? What happens when you get orders to go overseas? Are you going to leave your pet with Mom? What if Mom doesn’t want it? If you are taking your pet with you, you have to make sure you take all the necessary steps to ensure that your pet is ready and able to be transported to the overseas location. And there is the choice of breeds. There are a growing number of dog breeds that are not allowed in base housing and in some rentals.
Credit Cards: We are not seeing as many major credit cards as we are seeing “six months same as cash” store credit cards. There are a lot of businesses that will not take cash and want you to have a credit card. But, you have to be smart about credit card use. Pay the bill off at the end of every month. Do not carry a balance. If the business offers you 12 months “same as cash,” don’t make the purchase if you don’t have the cash for it. During those 12 months, interest is accruing at 18 percent or more. If you go one day over the 12 months and haven’t paid off the balance, 12 months of interest is added to your loan, and it will continue to accrue as long as you owe a balance. These are not good deals so don’t give in to the hype. If you don’t have the money now, you won’t have it in one year.
Overdraft protection: Some banks offer “overdraft protection” that allows you to overdraft your account and charges you fees for each overdraft, up to a certain amount each month. Then they take the whole amount out at the end of the month. If you have ever sat down and figured out how much you are paying in interest, you may be surprised. It is sometimes in excess of 300 percent. If you find yourself in this situation and you truly want to stop it, please call us at NMCRS.
These are just a few of the “necessities” in life that can start you off on the road to debt. If you can put some of these purchases off until you have a comfortable savings, you are better off. If not, please be smart about your choices. NMCRS is here to help you with a budget and to plan for your financial future.
Contact the NMCRS at (703) 784-9754 or Quantico@nmcrs.org.