Military Financial Education Workbook Financial education to assist military personnel and their families prior to and returning from deployment.

Transcription

1 financialgenius.usbank.com Military Financial Education Workbook Financial education to assist military personnel and their families prior to and returning from deployment.

2 Index Introduction Financial Review Financial Checklist Worksheet Develop a Spending Plan Four Step Spending Plan Spending Plan Worksheet Ideas to Decrease Spending Ways to Stretch the Dollar Establishing a Reserve Fund Reserve Fund Worksheet Legal Readiness for Servicemembers Financial Aid & Student Loans Resources Action Plan My Action Plan Worksheet

3 Introduction U.S. Bank is committed to supporting members of the armed forces and their family members and we understand that service in the U.S. Military can mean a life of mobility. Learning to manage money successfully can help you better deal with the uncertainties you face every day. Your financial health is vital to your career in the military, whether it is for one tour or for twenty years. Lack of financial responsibility can cause a domino effect with other job responsibilities, which can possibly result in negative evaluations, loss of promotions, loss of security clearance, reduction in rank or even administrative discharge. Communication is crucial for armed forces personnel and often families avoid talking about money. Some individuals do not learn how to plan their finances before entering active duty; married couples may argue about finances instead of openly discussing them; and parents do not always share their financial concerns or knowledge so that their military children can understand the situation. Prioritizing your finances will enable you and your family to have better uality of life with less stress, more money in savings, improved purchasing power and increased financial security. Establishing a solid financial plan and reserve fund can prepare you for the challenges that life could throw your way. This workbook will help you create a financial strategy that will serve you and your family while you serve our country. Course objectives will help you with the following: Review your current financial situation Complete a financial checklist Develop a spending plan Establish a reserve fund Tips for financing college Commit to an action plan Military Financial Education page 1

4 Financial Review Do you have your finances in order? What current issues should be part of the family discussion concerning money? Are you aware of all the military benefits to which you are currently entitled? When you are called to duty, you have many things to think about. Knowing where to turn is imperative to addressing your needs in preparation for deployment. You can review the list of Benefits for Service Members, such as healthcare coverage, housing and relocation services, family support, education, retirement savings and more, at You may also consider contacting your military branch s ombudsmen network, financial personnel in your chain of command or your unit s Family Liaison Officer. Creating a list of financial uestions and issues to be addressed is helpful think about your bank accounts, credit cards, monthly expenses, insurance premiums, any legal responsibilities and unexpected expenses. Financial Checklist Worksheet Review this list and add any items of concern that are not listed here. Make sure to discuss these items with your spouse or your child(ren) s designated caregiver or a parent so your finances can be handled properly while you are away. What type of bank or credit union accounts do you have and where are they located? Do the current accounts allow family members access to funds? Where are the bank statements and account numbers stored? Who will have the checkbook and who will have the debit card? How will you communicate the use of either to ensure there are sufficient funds to cover bills? Is everyone knowledgeable about writing checks, recording transactions and balancing the account to the monthly bank statement? How will you determine if there are insufficient funds and what is the plan if this happens? If you have credit cards, do you know the current amounts owed? Are the credit card numbers written down in a safe place? Are the numbers and company contact information written down in a safe place in case of loss or theft? If allotments or direct deposit to the bank are delayed, who can you contact? Do you have a list of monthly expenses, payment amounts and due dates written down? Who will be responsible for paying the bills? Is your life insurance policy up-to-date with correct beneficiary information? Where is the policy stored? Do you have a safe deposit box? Where is it located? Who can access it? Do you have car insurance, homeowner s insurance, renter s insurance or other insurance? Are the premiums current? Where are the policies stored? In whose name are the utilities, cellphone(s), cable and/or Internet services? Who can reuest changes, upgrades and repairs? Is your will current? Who has a copy? Where is the original kept? Do you have a current power of attorney? Who has a copy? Is your Page 2 Record of Emergency Data up to date? Other: Other: Military Financial Education page 2

5 Develop a Spending Plan A good way to start taking control of your financial situation is to develop a personal spending plan, a step-by-step plan for meeting expenses in a given period of time. A spending plan: Reduces the anxiety of not knowing whether you have enough money to pay your bills on time Gives you a sense of control over your money Builds assets that will improve the uality of life for you and your family A spending plan is all about choices, needs vs. wants. There may not be enough money for everything you want, like cell phones, cable, car types, gym memberships, hobbies, name brand clothing, etc. And sometimes, there may not be enough money for what you need, like food or gas. Choosing how to use your money, knowing what your income and expenses are every month, and establishing a reserve fund for emergencies will help you take control of your financial situation. Four Step Spending Plan There are four basic steps to preparing and executing a spending plan: 1. Determine your monthly income and expenses. 2. Keep track of your daily spending (ask your bank for a transaction ledger to help with this process). 3. Write down what you actually earn, and what you actually spend each month. 4. Find ways to decrease spending, and increase income. Follow your plan for one month. Review the plan, cut out any unnecessary spending and recalculate your spending plan for the following month. It s important to communicate with family members or close friends about your priorities and expenses in order to develop your spending plan. Military Financial Education page 3

6 Spending Plan Worksheet Use this worksheet as a guide to help you create your own spending plan. Add income opportunities or expense items as necessary. INCOME Expected Per Month Actual Per Month Salary pay (after taxes) After-tax wages from spouse s income Basic allowance for housing/subsistence Other military allowances (uniform) Child support Social Security/Supplemental Security Tax refund/earned Income Credit Apartment rental income Other (investment income, bonuses) EXPENSES Expected Per Month Actual Per Month Housing Rent/Mortgage Food Groceries Dining Out Transportation Gas, Bus Pass, Parking Car Maintenance/Repairs Utilities Cell Phone/Home Phone Cable/Internet Electric/Gas/Water/Garbage Loan Payments Auto Loan(s) Credit Card(s) Student Loan(s) Insurance Renters/Homeowners Insurance Auto Insurance Life Insurance Miscellaneous Entertainment Clothing Supplies Medical Other Other TOTAL INCOME TOTAL EXPENSES Military Financial Education page 4

7 Ideas to Decrease Spending Once you have a good handle on your monthly income and expenses, you can take a closer look at easy ways to reduce your spending. According to Bankrate.com, the 10 biggest money drains are the things that you can easily do without. Take a look: 1. Coffee: The average price of coffee is $1.38 (or more depending on the coffee vendor), reports the National Coffee Association. If you buy a cup of coffee every morning for a year that could add up to at least $500 a year. That's money that could be contributed to your retirement fund or savings account. 2. Cigarettes: The average price for a pack of cigarettes in the United States is $4.54. A pack a day can cost you about $1,660 a year. 3. Alcohol: The average cost of one beer is $5 including tip. If you buy two beers a day, it can add up to $3,650 a year. It gets even more expensive if you buy a round of drinks for your friends. 4. Bottled Water: A liter of bottled water will cost you $1.50. Buying one bottle of water a day will cost you around about $540 a year. This purchase will cost you and the environment in the long run. 5. Manicures: A $20 weekly manicure could rob your savings of $1,040 a year. Doing your own manicure will only cost you about $5 - the price of a bottle of nail polish. 6. Car washes: The average cost for basic auto detailing is about $58 and if you have your car detailed every two months it will cost you $348 a year. 7. Buying Your Lunch Everyday: $9 will generally cover a decent lunch most work days. If you buy rather than pack a lunch five days a week for one year, you shell out about $2,350 a year. 8. Vending Machine Snacks: The average vending machine snack is about $1. Buying a snack a day will cost you $365 per year. 9. Interest Charges on Credit Card Bills: The median credit card debt for most Americans is $6,600. Rate tables on Bankrate.com indicate that fixed interest rates on a standard average is 13.44%. If you make the minimum payment each month it will take you 21 years to pay off the debt. 10. Unused Memberships: A gym membership that goes unused is probably $40 a month, which can add up to $480 a year. Either use the membership or cut your losses. If you re diligent and cut back on the extras, such as expensive coffee everyday, you ll be able to contribute more money to your savings account or reserve fund than you expected. Ways to Stretch the Dollar Carry small amounts of cash to limit your spending. Eliminate or control your use of credit cards. Buy only what you need versus what you want. Take your written savings goals as a reminder when shopping. Shop on-base, which is always tax free. Use a grocery shopping list to prevent impulse buying. Stick to it! Use coupons to save money on items you need. Cook meals at home, freeze food/save leftovers and take lunch to work instead of eating out. Buy used clothing, furniture, etc. Limit your song, ringtone and app downloads. Shop around for the best deal on big-ticket items, like cars and appliances. Some stores offer discounts to military personnel. Pay your bills on time to avoid late fees, extra finance charges, utilities being turned off, eviction, repossessions and a bad credit rating. Avoid rent-to-own stores, pawnshops and check-cashing stores. Use direct deposit for your paycheck or federal benefits it s safer and easier than using paper checks, and your bank may reduce or eliminate the monthly fee if you have direct deposit. Military Financial Education page 5

8 Establishing a Reserve Fund According to a 2009 survey conducted by American Consumer Credit Counseling, 52% of enlisted military personnel and 32% of officers reported not saving at all. Deployment can put additional strains on your budget as new costs may arise. Setting aside an emergency fund, also called a reserve fund, is one of the most important steps you should take to safeguard your financial stability. A reserve fund set aside in a savings account can earn interest. The purpose of your reserve fund is to cover a major unexpected cost such as a medical bill or car repair, or the need to cover basic living expenses should your spouse lose a job or get laid off. To start a reserve fund, begin by saving a little at a time. You ll see how uickly a reserve fund can grow. Take it step by step: 1. Review your spending plan to see where you can economize. 2. Transfer excess money from each month s budget to your reserve fund. 3. Build the account one day at a time. 4. Start saving today to reap the rewards tomorrow! Each branch of the military can provide emergency funds for cases of financial hardship. Typical allowable needs might include food or rent, funeral expenses or medical expenses. Fines, credit card bills and other nonessentials are not eligible for assistance. For specific information on any emergency-relief fund options at a military facility, connect with your ombudsmen network, talk with the community service office or visit your branch of the military online: Army Emergency Relief Navy-Marine Corps Relief Society Air Force Aid Society Coast Guard Mutual Assistance Military Financial Education page 6

9 Reserve Fund Worksheet Consider your situation. What changes will you have to make in your life if you are deployed or when you return from active duty? What costs are associated with those changes? What additional expenses could you or your family encounter? Use this worksheet to help you determine how much money you should set aside. EXPENSE Monthly Cost Childcare and caregiver costs for single parents and married couples deployed at the same time Include money to be paid to a caregiver, money needed to pay for transportation to get children to the caregiver, and any additional costs children might face living with a caregiver. Childcare and caregiver costs for married couples Include any amount to be paid for child care that you do not currently pay. Include extra money to ease stress on your spouse. Income difference If you know that your military pay will be less than your civilian pay, list the difference here. Healthcare cost difference Do you know if healthcare insurance will cost more or less every month while you are on active duty? Other costs Home: Car: TOTAL MONTHLY COST Add up the costs you entered for the items listed above TOTAL AMOUNT NEEDED IN RESERVE FUND One or two years of reserves is recommended Military Financial Education page 7

10 Legal Readiness for Servicemembers The United States Department of Justice enforces the Servicemembers Civil Relief Act which provides military members about to enter active duty with protection regarding rental agreements, eviction, interest rates, mortgage foreclosure, insurance and tax payments. Always be proactive and take the first step in contacting your landlord, credit card issuer, lenders, etc., as soon as you are aware that you will be entering active military service. For assistance, military members can contact their nearest Armed Forces Legal Assistance Program office. The checklist is designed to help you prepare your legal affairs. Place a check in the box once you and your family have discussed where the documents are located. Store information in a safe place since it contains confidential information. Document Birth certificates Marriage certificate Divorce decrees/separation agreements Death certificates of deceased family members Naturalization or Citizenship papers Current record of emergency data Military records DD-214 Court orders pertaining to support and custody of your legal dependents Legal papers/adoption papers Social Security number/cards Yours: Spouse: Children: Up-to-date will(s) Power of attorney (general or specific) Advance medical directive (durable power of attorney) Executor appointment Medical power of attorney for children Updated beneficiary for Service Members Group Life Insurance (SGLI) Completed family care plan Up-to-date ID cards for all family members Location Insurance Policies Life insurance policy(s) Agent: Telephone: Household insurance policy(s) Agent: Telephone: Automotive insurance policy(s) Agent: Telephone: Military Financial Education page 8

11 Financial Aid & Student Loans Upon return from active duty, you may decide you want to further your education and attend college. Scholarships, grants and federal loans should be the first financial aid options you consider, and for good reason. Scholarships and grants do not have to be paid back and Federal loans may have a lower interest rate than private loans. Consider these helpful tips: Apply for GI Bill benefits through the Department of Veterans Affairs. Complete a Free Application for Federal Student Aid (FAFSA) every year or when your circumstances change (job, income, family, etc.). Read your financial aid documents carefully and be aware of all obligations. Keep looking for new scholarships, grants and opportunities for work study. Communicate freuently with the financial aid office on campus, and let them know if you are in financial trouble. Understand that student loans are an investment in your future, but they put you in debt and must be repaid! Understand the terms of the loan. Use student loan money only for school expenses. Resources American Consumer Credit Counseling Department of Veterans Affairs GI Bill Military.com Military Saves National Endowment for Financial Education Secretary of Defense Military Compensation Benefits for Service Members United States Department of Justice Servicemembers Civil Relief Act Military Financial Education page 9

12 Action Plan An action plan is a simple list of all the tasks you need to finish and changes you need to make in order to meet an objective; it gives you a framework for thinking about how you will complete each task efficiently. Action plans also help to ensure you don t miss any crucial steps in achieving your goal(s). Use your goals to create a spending plan and reserve fund by focusing on the following: Commitment what do you plan to do? Obstacles what might you face? Action steps to success! Understanding what did you learn with this session? My Action Plan Worksheet Main message for me from this session: My personal commitment to action: Obstacles that may get in my way: What I need to do to succeed: Military Financial Education page 10

13 Notes Military Financial Education page 11