A Financial Field Manual for Deploying Service Members

Financial Preparation

Financially preparing for deployment can make a tremendous difference for service members and military families.

Deployment can be one of the most challenging aspects of military life for service members and their families. The emotional stress associated with distance and the dangerous nature of the job can take a significant toll on everyone involved.

Military members stepping into their first deployment without a clear sense of what to expect financially often struggle with everything from credit and income to unnecessary expenses and granting Power of Attorney.

In fact, Defense Department surveys consistently rank finances among the leading causes of stress for most military families. They can also affect service members in the field.

“Soldiers who are distracted by financial issues at home are not fully focused on fighting the enemy, thereby decreasing mission readiness,” Army Secretary John McHugh wrote in a May 2010 letter to elected officials.

Although the monetary and credit challenges of deployment can vary greatly depending on your unique situation, there are important steps for everyone to consider.

This guide aims to help service members and their families shore up their fiscal needs before, during and after a deployment so they are able to focus on the mission at hand and also be ready to integrate back into the responsibilities and routines of civilian life.

Trying to get a sense of the big picture when it comes to your finances can seem overwhelming in the lead-up to a deployment. There are key areas to consider, and we’ll take a closer look at some of the most important.

To kick things off, let’s examine an important legal tool that protects service members and their families:

Servicemembers Civil Relief Act (SCRA)

SCRA protections

Foreclosure prevention and interest rate caps are two of the protections provided by the Servicemembers Civil Relief Act.

Active duty personnel are shielded from some civil and financial obligations because of their service. These protections are spelled out in the Servicemembers Civil Relief Act, or SCRA, which President Bush signed into law in 2003.

The legislation, which built upon the Soldiers’ and Sailors’ Civil Relief Act of 1940, provides relief to military members and their families in a number of areas, including:

  • Home mortgages
  • Termination of leases
  • Protection of eviction
  • Instituting a 6 percent cap on interest rates
  • Reopening default proceedings

The SCRA provides more protections than those listed above. The U.S. Supreme Court has ruled the original relief act must be read with “an eye friendly to those who dropped their affairs to answer their country’s call.” The same holds true for the current statute.

In order to qualify for certain protections available under the Act, a veteran’s obligation must have originated prior to the current period of active military service.

Mortgages backed by Freddie Mac, Fannie Mae and some private mortgage lending companies have programs in place to assist active duty service members in financial trouble. Recently discharged service members can also push back evictions or foreclosures for up to nine months.

Let’s take a closer look at a few SCRA provisions that protect service members and their families:

Interest Rates

One of the biggest money-saving protections of the SCRA is the cap on credit card interest. Notify your creditors that you have been called to active duty. They will not be able to raise your interest rate above 6 percent on debt incurred before deployment. Banks also can’t ask for the difference in interest upon your return.

This can come in especially handy for high interest rate auto loans and credit cards. If your payments to these creditors are already established with an allotment, keep it the same.

Leases

If you signed a lease and then received your orders, the SCRA allows you to terminate a lease within 30 days of signing due to deployment. It also safeguards service members from evictions from properties with rent up to $2,932 a month.

Getting rent to the landlord can be difficult in these situations and sometimes property managers aren’t very forgiving. If an eviction notice is issued, you can submit an SCRA request to the courts with proof that the inability to pay is due to deployment.

Cell Phones

In the unlimited data and texting world we live in, a cell phone bill can be a huge drain on a deployment budget. The average phone bill is $60 per month. Many companies have clauses built into their service contracts that allow service members to simply suspend service for the duration of their deployment and reactivate upon returning home

If for some reason you run into resistance, the SCRA is there to help.

Banking & Credit

Banking and credit

Having a plan in place for saving money and limiting credit card exposure can help military families during deployment.

At the outset, start thinking about the expenses your family will be dealing with while you’re away. You may want to start a new savings account or add more to an existing one to help cushion the blow should unexpected expenses arise. Having direct deposit set up during basic training is a big benefit.

Here are some general banking tips worth exploring:

  • Having checking and savings accounts with the same bank can simplify the process of transferring funds.
  • If you don’t have one already, consider opening a joint account. Simplify finances by being able to pay your spouse’s bills and take care of any other related financial problems.
  • Creating a separate checking account for paying bills can ease the confusion about who is paying what and when.

Your bank accounts aren’t the only things you need to keep an eye on during deployment. Notify creditors and other financial institutions about your deployment. Depending on your MOS, you might give them your email address and ask to be alerted if there are any problems with your accounts.

In general, credit cards can cause a lot of trouble during deployment, especially for couples. Set personal credit limits for each other so you won’t unnecessarily accrue or add to your credit card debt during a deployment. Determine who will be using each card and for what.

Paychecks & Allotments

Service members looking to stick to a strict budget during deployment may want to take advantage of the pay allotment options offered by the military. Pay allotments will automatically set aside money for specific uses.

There are two main types of allotments, discretionary and non-discretionary. Service members often set up discretionary allotments for things like commercial insurance, payments to a dependent or loan repayment. These can be stopped any time, but you may need to be strategic about it.

Common military pay allotments often include:

  • Payment to Dependent
  • Car loan payment
  • Mortgage or rent payment
  • SGLI (life insurance)
  • Child Support

Paydays come on the 1st and 15th of each month. Some service members split their allotments, while others typically set them up for the first of the month. If you don’t stop the allotment before the 14th of the month, you may see the next scheduled payment go out.

Non-discretionary allotments cover specific obligations, like debts you owe to the government or child support payments. They also can’t be initiated or ended whenever you choose.

You may have up to six discretionary allotments and a varying number of non-discretionary allotments as long as your total isn’t more than 15 a month.

Taxes

Taxes

Imminent danger pay and other types of income you make while deployed may be exempt from federal income taxes.

Deployment can cause additional financial stress during tax season.

Military members who serve in a combat zone can subtract certain pay from their income. The IRS has a complete breakdown and provides much more detail, but some types you may be able to subtract include:

  • Active duty pay earned in any month you served in a combat zone.
  • Imminent danger/hostile fire pay.
  • A re-enlistment bonus if the voluntary extension or re-enlistment occurs in a month you served in a combat zone.
  • Pay for accrued leave earned in any month you served in a combat zone. The Department of Defense must determine that the unused leave was earned during that period.
  • Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters and other non-appropriated fund activities. The pay must be earned in a month you served in a combat zone.
  • Student loan repayments. If the entire year of service required to earn the repayment was performed in a combat zone, the entire repayment made because of that year of service is excluded. If only part of that year of service was performed in a combat zone, only part of the repayment qualifies for exclusion. For example, if you served in a combat zone for 5 months, 5/12 of your repayment qualifies for exclusion.

Retirement pay and pensions do not qualify for the combat zone exclusion.

You may also be able to get an extension of up to 180 days or more to file taxes. To learn more, just go to the IRS website and type “military” in the search box. You may also want to consult a tax attorney.

Federal debt is a particularly nasty kind of debt, especially when it comes to goals like buying a house or obtaining credit. Avoid the headache and hassle all together and nail down what you need to do as soon as possible.

Savings & Debt

Consider using your non-taxed income for more long-term financial needs. Take the additional pay and stuff it in a savings account. Look into using the Savings Deposit Program. These are set up for contributions during deployment, and you’re expected to withdraw these funds within 90 days of demobilization. These accounts currently earn 10 percent interest, which is considered taxable.

Add to your Thrift Savings Plan for retirement. Create an education fund to help defray college costs for your children. These types of funds come out of post-tax income, so they’re not taxed when you make withdrawals.

Since Imminent Danger and Hazard Pay aren’t taxed, you’re investing and ideally earning a return on non-taxed money. Figure $400 per month over nine months equals $3,600. In an interest-bearing account like a Roth IRA for 30 years with an average rate of return of 10 percent, you’re looking at $62,800.

For education funds, check into state-sponsored programs and consider consulting a tax professional. It’s even possible to get tax credits or deductions for these kinds of investments come tax season.

If you put the money into a savings account, you can still invest in the same accounts mentioned above with a lump sum amount when you return. Or leave the money available for emergencies or larger expenses you might encounter.

Savings and Debt

Saving about 10 percent of your income is a great goal. Anything less than 5 percent can leave you vulnerable.

Saving at least 10 percent of your income each month is a tough but prudent challenge. Falling short of at least 5 percent in monthly savings can leave your emergency reserves vulnerable.

One method to consider is often referred to as “Pay yourself first.” Rather than pay all your bills and save whatever is left, earmark funds for your savings account every paycheck. A solid budget helps ensure you have a good handle on how much you’ll need for monthly expenses.

You can also use some of that additional income to tackle any debt you have. There are multiple schools of thought, and it’s important to find one that fits best for you. One approach is to target whatever debt has the highest interest rate rather than gravitate toward smaller debts.

Others may pay off those smaller amounts first; crossing one off the list is a good feeling that can help fuel the push to eliminate debt. Find a path that works for you, but remember to keep your other monthly payments in mind.

Power of Attorney (POA)

Granting Power of Attorney is an important step that can make a world of difference when it comes to making decisions back home. It’s also a serious legal step that requires some understanding.

Power of Attorney can give your designee – known as the “attorney-in-fact” – the ability to execute contracts, sign documents and handle money on your behalf. This tool can cover all kinds of needs, from medical and mortgages to banking and legal and beyond.

You are in essence giving a person of your choosing the same rights you possess. Married couples tend to tab their spouse, but single service members may have a tougher time. Either way, choosing a long-trusted family member or friend is often the best path.

There are two main types of Power of Attorney: General and Specific. A General POA is essentially a blanket permission for someone to act as you regarding any contract or financial obligation. That would seem to make life easier, but a General POA also conveys significant trust in your attorney-in-fact. His or her bad decision can negatively affect your credit and your finances for years.

Service members are often told to consider only using Specific POA. It’s a much more narrow permission that applies to specific acts and contracts (like a home purchase, for example).

Power of Attorney is sometimes perceived as a major hassle. Although there are websites that offer POA paperwork, it’s often better to visit with a legal stationer, attorney or the installation’s legal office. Once the paperwork is filled out and notarized, many states require that it be filed with your county clerk, usually found in city hall.

If you’re at a loss for where to start, a Judge Advocate General (JAG) office can usually help you navigate the process, including revoking the POA upon your return home. Be sure to keep a copy of the notarized paperwork on hand. Financial institutions will want to see documentation when it’s time for an attorney-in-fact to make decisions.

Life Insurance

Life Insurance

Life insurance isn’t a pleasant topic of discussion, but it’s a critical one for deploying service members and their loved ones.

You’ll need to update or sign off on your enlisted or officer records before deploying. Life insurance isn’t a pleasant topic, but it’s obviously a critical one. If current or future circumstances or needs have changed, you may need to update your life insurance and other legal instruments.

Many service members opt for the Servicemembers’ Group Life Insurance (SGLI). This is a government-operated group life insurance plan for those on active duty, ready reservists, members of the National Guard, cadets and midshipmen of the four service academies as well as the Reserve Officer Training Corps. Coverage ranges from $50,000 to $400,000 in increments of $50,000. Those on active duty are automatically signed up for $400,000 coverage unless otherwise stated or an opt-out is chosen.

Frequently Asked Questions about Servicemembers’ Group Life Insurance (SGLI)

Q: Who qualifies for SGLI?
A: Anyone who fits into the following category:

  • Active Duty
  • Ready Reservist
  • National Guard
  • Commissioned Corps of the NOAA
  • Public Health Services
  • Cadets and Midshipmen of the four Service Academies
  • Reserve Officer Training Corps

Q: How much coverage is available with SGLI?
A: Anywhere from $50,000 to $400,000 in increments of $50,000.

Q: How do I sign up?
A: Active duty service members are automatically signed up for $400,000 coverage unless otherwise stated or an opt-out is chosen.

Q: How much coverage do I really need?
A: This is a personal question for you and your family. While being over-insured is preferable to being under-insured, a person without dependents may want to save on monthly premiums and bump down to a lower coverage amount. Consider the cost of death expenses, housing, education, outstanding debt and loss of income supporting your dependents when deciding what kind of coverage you need.

Q: What are premiums like using SGLI?
A: The low rate is one of the things that sets SGLI apart from civilian life insurance. At 6.5 cents per month for every $1,000 of coverage, the full $400,000 plan costs $26 a month. An extra $1 premium is included for the Traumatic Injury Protection Program, which insures the service member for an additional $100,000 to cover medical expenses that may result from a traumatic event. Known as TSGLI, the additional coverage is required for anyone participating in standard SGLI.

Q: Where will the money go upon payment?
A: This is completely up to you. Once you decide how much coverage you need, you also select a beneficiary or beneficiaries. It’s important to update this as often as necessary after divorces and remarriages to avoid potential legal issues down the road. Additionally, if your situation calls for the beneficiary to be a minor, set up an account with an adult custodian to hold the money free of charge until they turn 18.

Be sure to keep your SGLI information up to date before a deployment to avoid any confusion after a marriage, divorce or remarriage.

Suspending Utilities

For single renters, using the SCRA to terminate a lease and putting belongings into storage may be the easiest and cheapest option during deployment. If that won’t work, be sure you aren’t wasting money on utilities. Many utility providers offer an easy way to suspend or cancel services, but be sure to check into potential cancellation fees.

Some companies will waive fees for suspension due to a military deployment, especially if you plan on restarting the same utility upon your return. Utilities in your area may have different rules but it never hurts to ask so you aren’t stuck paying $80 a month for cable TV you can’t watch.

Automobiles

Auto insurance

Tweaking your car insurance might be a way to save money during deployment. Make sure you follow state laws.

There’s a lot more to owning a vehicle than making car payments and filling up at the gas station. Insurance, inspections, titles and registration are additional expenses you may need to consider.

Check the registration expiration before you leave. If it will expire while you’re away, renew the registration early so there won’t be any problems continuing your insurance. You might be able to save some money, too.

There are pros and cons to each of these car insurance options, so consider your approach carefully.

Continuing Coverage

If you have a shared vehicle or plan on having someone else use the car while you’re away, you’ll want to continue coverage. You may be able to get a slightly lower rate by temporarily decreasing the number of insured drivers.

Suspension

While you may usually pay for full coverage on multiple drivers, look into reducing or suspending your coverage while you’re away. Many insurance companies offer a free suspension of service because of a deployment.

Cancellation

Cancelling the insurance all together is an option. It’ll certainly save money, but you may get stuck paying higher rates when you return. You also run the risk of paying for damage or other problems out of pocket should something happen to your automobile while you’re gone. Before you decide cancellation is your best choice, be sure that it is legal to own a vehicle that is uninsured even while in storage. Many states require the minimum coverage amount no matter the status of the vehicle.

Beyond registration, inspections and insurance, hand over the title to whomever will be responsible for the vehicle while you’re away. This may also be a handy piece of paper for your attorney-in-fact to have along with insurance records, bank account numbers, your birth certificate and Social Security card.

You also probably don’t need to rush to the DMV upon returning home. Active duty service members in many states get a 90-day grace period for expired tags.

What if there isn’t someone to take your car while you’re gone? Some service members can leave their with family, but others will need long-term storage. You may be able to use a lot at your installation, if there is one. Check out other storage options, too, with an eye toward price, security and the fine print. Look for a place that will start your car once in a while and opt for covered storage, especially if you’re stationed somewhere with volatile weather.

PCS

A Permanent Change of Station (PCS) can be a precursor to deployment. Transferring to a new installation for extra training or pre-deployment assignments is common, but there are ways to save money and even profit from the move.

Do-It-Yourself moves, formally known as a Personally Procured Move, have become increasingly popular in recent years. Service members take responsibility for all planning and financial responsibilities associated with the move. Service members can choose between a full DITY move, a government move or a partial DITY move.

The government reimburses service members up to 95 percent of what it would have cost them to pay for the move. That means with careful planning and savvy use of military discounts, most people can move for less than the government reimbursement and actually make money on the move.

Military PCS

When it comes time to PCS, you might be able to make some money by going the do-it-yourself route.

Making Money on a DITY Move

1. The first stop will be your local transition office. Here you will be able to find, fill out and file all of the necessary paperwork. This step is incredibly important because requests filed after a move will be denied, resulting in no reimbursement. When you file the paperwork you’ll receive your reimbursement estimate, which you’ll want to keep handy for the end of your move.

2. The second step will be planning your moving strategy. This will vary greatly depending on how busy your current lifestyle is, the distance you’ll be traveling and the scope of your personal belongings. You’ll need to decide whether to enlist the help of friends and family or to hire a moving company. The same goes for using either a privately owned vehicle or renting a moving truck. To save on expenses, many people decide to handle the hard work themselves and ask to borrow transportation from friends and family.

Although a typical privately owned vehicle or rental will be insured, it’s important to double check your renter’s or homeowners insurance to make sure your personal belongings are safe in transit. Having to replace just one big-ticket item can eat up any profit from a DITY move.

3. Your next step is to tap into every military discount you can find. If you can’t utilize trucks and trailers from a friend, be sure you use a rental service that offers a military discount. For example, Door to Door offers a 50 percent discount on their services as well as several other discounts. Penske Truck offers a 20 percent discount with a valid military ID. Beyond moving services, consider utilizing military discounts at hotels, restaurants and home improvement stores.

Before you hit the road, you’ll need to make a pit stop at a certified public scale to get a weight on your truck with and without belongings. This weight will be used to calculate your reimbursement, so it’s imperative that you get both measurements and accurate readings. Use this CPS locator to find a scale in your area.

4. The final stop on the road to a successful and profitable DITY move is submitting the forms for reimbursement. Although the exact process varies depending on your branch, you’ll most likely have to mail your information into a central office or visit the Traffic Management/Joint Personal Property Shipping Office at your new duty station.

This step is incredibly important. Missing documents or incorrect information can cost you a reimbursement and the total bill for the move will be yours alone. You will need everything dictated to you by the TMO/JPPSO at your original base.

A complete submission will often include:

  • Forms given to you by your original base
  • Weight tickets
  • Expense receipts
  • Official orders
  • Anything else from the TMO/JPPSO office

Identity Theft & Credit Monitoring

Unfortunately, deployed service members are prime targets for scammers. Steady credit monitoring before and during the deployment is the best way to avoid getting scammed and sustaining serious damage to your credit score.

Whether you do it yourself or have someone trusted back home take care of it, be sure to keep a close eye on bank statements, credit card bills and your credit report itself. You can get one free copy from each of the three credit bureaus over a 12-month span. A good strategy is to space out those reports during the year so you can look for errors or signs of identity theft.

Beyond credit reports, there are other steps you or your loved ones can take to help safeguard against identity theft, including:

  • Consistently check banking statements for unauthorized purchases
  • Go paperless so you receive less confidential information through the mail
  • Carry only what you need and keep documents like your Social Security card and birth certificate at home in a safe place
  • Place an active duty alert on your credit report so the credit bureaus know to increase monitoring and strictly verify your identity

Budget Follow-Through

The financial stress of a deployment can quickly fray any well-prepared plan. Mutual support and understanding can play a big role in helping keep things on track.

Commit to the spending plans you agreed on before you left and try not to rely on credit cards, regardless of the interest rate. There’s certainly going to be room for flexibility and adaptation if emergencies or other unforeseen events occur. The key is turning all that planning and preparation into action, often a single step at a time.

Post-Deployment

Post-Deployment

It’s important to stay focused on financial health and balance long after a deployment comes to a close.

The goal is that all the planning and preparation paid off, and you’re coming home to at least the same general financial picture — if not a better one. But that’s obviously not always the reality on the ground.

The good news is a 2010 survey found that military members are more financially literate and on top of monthly payments than civilians. The bad news is military members are more prone to using high-risk loan products like payday loans and carrying significant credit card debt.

The stress and strain that can accompany readjustment can make it tough to re-establish old habits when it comes to saving, budgeting and spending. The financial transition can be even tougher for younger service members who come home with a considerable chunk of change in their pockets.

Maintaining a grasp on moderation is critical. So is keeping a focus on your long-term fiscal health and future.

Here’s a look at a few big considerations in the early going:

Look Over Your LES

Settle in and spend some time with your Leave and Earnings Statement (LES). Make sure all the personal information is still correct. Any special pay or allowances accrued during the deployment should no longer appear. If they’re still on the LES, report the error as soon as possible. The last thing you want is the government suddenly asking for a refund for overpayment.

You also may want to talk with your family about whether to change the allotments you set up pre-deployment.

Big-Ticket Items

It’s not uncommon for service members to return home with the urge to splurge. The itch to purchase big-ticket items like a new car or furniture can be a strong one, and it’s not necessarily a bad thing. The key is making sure you can do so while maintaining your savings, your rainy day fund and your overall monthly balance of debts to income.

No matter what you need, avoid rent-to-own stores at all costs. You’ll likely spend at least twice the original cost for something that doesn’t gain value over time.

New Budgets and Old Bills

You might return home with more money in the bank, but remember any special pay or allowances you were receiving are no longer part of the picture. Smaller paychecks may be a shock to the system. Don’t let them cause any long-term damage. Instead, evaluate your finances to reflect the dip in monthly income and budget accordingly.

If you discontinued any utilities or other services, triple check your first billing statements for any unnecessary fees for restarting your services. If you were promised no fees, make sure the company is held accountable.

You might also consider evaluating the non-essential services you discontinued or placed on hold while gone. Do you still need them? The same goes for resuming things like insurance. Maybe the cheaper policy you switched to pre-deployment still makes sense moving forward.

Education and Resources

Getting Help

Don’t be afraid to ask for help to shore up your financial picture. There are all sorts of resources out there.

We’ll leave you with one final thought: It’s OK to ask for help.

Budgets, bills and saving plans aren’t strong suits for everyone. There’s so much other planning that goes into deployment preparation that the prospect of talking finances can overwhelm.

The Defense Department’s Military Installations search can connect you to financial management experts at your installation. Use the pull-down function in the “Looking for specific program or service?” box and select “personal financial management services.”

Military OneSource also provides financial counseling services in communities across the country. Contact Military OneSource at 800-342-9647 to learn more.

For emergency financial support, you can also reach out to the military relief organizations:

  • Army Emergency Relief: 866-878-6378
  • Navy-Marine Corps Relief Society: 703-696-4904.
  • Air Force Aid Society: 800-769-8951

Individual service members and military families coping with financial emergencies can also reach out to military charities and non-profits, including Veterans United Foundation, the philanthropic arm of Veterans United Home Loans. The company’s employees have donated more than $6.2 million in the last two years alone.

To learn more, visit Veterans United Foundation online.

Wrapping Up

This guide is by no means exhaustive. It’s more of a place to start. Service members and military families all come to this point with unique fiscal circumstances, not to mention hopes and dreams.

Deployments have the ability to knock those dreams off course by wrecking your financial foundation. Taking time to step back, take stock of where you are and where you want to be and then planning accordingly can help see you through the financial challenges of deployment.

Photos courtesy of Official U.S. Navy Imagery, CodyR, Chase Lindberg Photography, bradleygee, Tax Credits, Alex92287, DoNotLick, DVIDSHUB and marc falardeau