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With the new year in full swing, many people have made resolutions to exercise more, eat better, quit smoking, further their education and more.
Another common resolution people make is to manage their finances responsibly. But January marks more than the beginning of a new year and making resolutions, the month is also dedicated as National Financial Wellness Month to raise awareness for healthy financial habits.
“Financial stability is important because your finances really affect all aspects of your life,” said Anna Bennett, 86th Mission Support Squadron Airman and Family Readiness Center community readiness consultant. “Your finances can affect your overall well being. Finances are a cause of stress, which can cause stress-related problems such as high blood pressure, heart disease and insomnia. In addition, financial instability can affect servicemembers’ careers.”
While there are several ways to be financially responsible, here are just a few tips to get started with the year.
Creating budgets
Creating a budget or spending plan is one of the most common ways to help manage debt, but it also helps maintain financial stability.
“Some people see budgets as a financial diet, that it limits you from spending your money,” Ms. Bennett said. “Really, your budget does just the opposite. Your budget shows you how much you can spend and what you can spend it on.”
The consultant said the simplest way for someone to create a budget is to get a sheet of paper and write down their take-home pay. Then, they’ll want to make a list of all the expenses they have – rent, utilities, eating out and entertainment. This will help keep track of how much is coming in and how much money is going out.
“Once you have identified your bills and all your financial responsibility, your budget shows you your surplus,” she said. “On the flip side, if you don’t have a surplus, you’re budget shows you where you can cut in some areas. The average person spends a lot more on entertainment and eating out then they think they do. It really is a great financial roadmap to show you where you’re at and where you want to go.”
The A&FRC also offers help with budgets for those who need it as well as budget spreadsheets. Resources can also be found online.
Emergency fund
Whether staying in or getting out of the military, members should think about setting aside money for emergency funds.
“It’s important to save money because emergencies are going to come up. Emergencies always come up,” Ms. Bennett said. “If you don’t have emergency savings, where do you get that extra $2,000 for an unexpected gas bill? Hardships are going to come up.”
In the recent January JAGLINE sent out by the Ramstein Law Center, it gave a few examples of how to save money. One idea stated if someone made it through 2009 in decent shape financially, they already had a plan set up for 2010 because of the 3.4 percent pay increase military members were given, and that percentage could go straight from base pay into a savings account or other investment.
Ms. Bennett said people should have anywhere from nine months to one year of base pay or living expenses in their emergency fund due to the economy. Active-duty military have a little more flexibility because of a stable paycheck, but three-to-six months of living expenses is still a good rule of thumb.
Retirement fund
Another reason to set money aside is for retirement.
The military offers members a program to help them save money for retirement known as the Thrift Savings Plan, which allows servicemembers to allot the amount of their choice toward their fund.
“I love TSP,” Ms. Bennett said. “The Thrift Savings Plan is a great way to invest with minimal fees. There is a professional fund manager who manages the money. In addition, you can be your own fund manager because you can manipulate between the funds. The Government Fund is the most secure fund, whereas the International Fund is a higher risk. You have a range. It’s a great way to invest; it’s a great way to learn about investment. You can track and see how well your funds are doing.”
Military members can also set up Roth or Traditional IRAs through their banks or other military friendly organizations. The consultant said those who get out of the military and had TSP set up, can roll their TSP into a Traditional IRA or a company 401K, as well.
For more information on TSP, visit www.tsp.gov.
Downloading credit reports
According to federal law, everyone is eligible to download a free credit report from each of the three credit-reporting agencies: Equifax, TransUnion and Experian. By downloading credit reports, this will help members know if they have fraudulent charges or identity theft.
“Know what’s on your credit report,” Ms. Bennett said. “The average person has errors on their credit report, and they’re not aware of it. Once you find out what’s on your credit report, dispute that info right away if it’s incorrect.”
Ms. Bennett also said if you notice an accurate statement on your credit report that is negative, you can put a statement on the report. This will help the lender know what was going on at that time of your life in case a missed payment was not because of financial irresponsibility but extenuating circumstances.
For more information, visit www.ftc.gov/freereports. To get your free credit reports, visit www.annualcreditreport.com
The Ramstein Law Center cautions people to be sure only to visit these official sites as some Web sites advertise “free” reports, but require you to sign up for a service of some kind or charge a fee.
Air Force programs
The Air Force offers several financial programs for military members and their families at Ramstein.
Through the Ramstein A&FRC, Team Ramstein has several financial education classes to choose from such as “How to Manage Your Money,” “Money Personalities” and “Basic Budgeting.” These courses combine education and entertainment into what the consultant calls “edutainment.” For more information, contact them at 480-5100.
Also, as part of the Department of Defense Financial Readiness Campaign, Military Saves Campaign Week is scheduled for Feb. 21 through 28. This campaign is geared toward military members and their families to help encourage and motivate them to save money. The Ramstein A&FRC will offer several opportunities and events for Team Ramstein to participate in during the week.
Ms. Bennett said financial management isn’t hard or difficult, it’s just something that needs to be learned.
“It’s a lifestyle change,” she said. “It’s not something we automatically know. I encourage people to educate themselves and learn how to manage their money. It’s an ongoing process. Go online, pick up tidbits here and there or come to a class. Any opportunity you can, listen up. It doesn’t have to be something you do all the time, because it’s a choice. If you’re not financially smart, set up allotments. Never let anyone draft anything from your account. Then anything left over is yours to spend. That’s being financially responsible.”
