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NEWS | April 5, 2017

Recommendation to enhance service member’s financial stability

By U.S. Coast Guard Lcdr. John Downing Coast Guard Sector Charleston

Personal financial management is difficult. Personal financial management while serving in the military is daunting. 

 The financial demands placed upon military families are constantly increasing which causes a loss of resiliency and long-term financial uncertainty amongst service members. Serving in the military is a noble occupation, yet as an all-volunteer force, it is not a career path designed to make a person immensely wealthy. 

Currently, military service is a well-paid job with outstanding benefits. However, many of these benefits are designed to cover only the short-term living expenses of members while their long-term financial health is overlooked. The best method to reduce and manage these factors is a consistent flow of enhanced financial education and support services. 

 Service members receive many outstanding financial benefits including high-pay, low-cost health care, tax-free allowances including housing and sustenance. Additionally, they may also receive state-tax breaks on income which can stretch paychecks beyond their civilian counterparts. However, other vague items are more detrimental to service members for long term financial growth and stability. 

 Home ownership, for instance, has long been the keystone for a person’s ability to amass wealth. Yet military members, who typically are in two to four-year duty assignment rotations, are often dissuaded from purchasing a home. Moreover, while some personnel are ordered to areas where growth makes a three or four year home purchase a smart and possibly profitable endeavor, many end up in locations where home sales are stagnant and a home purchase would exceed the cost of renting. Add to this, the uncertainty of remaining in an assignment for the full tour length based on needs of the service, which makes buying a home problematic and costly. 

 While basic allowance for housing often exceeds most typical rent costs, members are often not comfortable or savvy enough to systematically invest each month in stocks, bonds or other financial products.

 What this equates to at the end of a successful 20 year career, is a military member who rented a home at each duty station who may not have a net worth equal to that of a geographically stable home- owning civilian. Because of the lack of opportunity to pay off or build substantial equity in a home, a service member may have a gap of potentially hundreds of thousands of dollars in personal net worth.     

 With these challenges in mind, the best means to prepare service members for long term success and sustainable wealth is through readily available and realistic financial education coupled with a modification of currently available services. 

 Both the Department of Defense and Coast Guard have command financial specialist programs set up to assist members with budgeting while making them aware of current and emergent financial programs. The scope is limited however and personnel providing the support are precluded from giving investment advice. 

 My proposal is that each service should provide no-cost access to a fiduciary, someone who acts in the best interest of their client. The fiduciary should recommend realistic financial plans while helping service members invest money for the future. Such a program would provide service members better long term financial health beyond their military service and would reduce poverty among older veterans.