In a recent survey conducted by the National Foundation for Credit Counseling (NFCC), it was found that veterans are almost twice as prone to carrying debt from month to month (58%) compared to civilians (just 34%). Similarly, about 55% of veterans feel unprepared for financial emergencies. But this is not due to veterans being poor or uneducated.
When we compare civilian salaries to military incomes, there is no clear winner in all aspects. Interestingly, veterans are more likely to have finished high school and to have pursued some college education or earned an associate’s degree compared to civilians.
What’s the missing link then? Why do veterans experience more financial challenges than civilians? The answer lies in the lack of financial knowledge, a critical aspect for anyone returning home from service. The forthcoming article will guide you towards the right financial path.
Education
Eighty-seven percent of individuals who enlist in the military are typically between 18 and 20 years old. This suggests that most soldiers have only completed high school education.
Financial literacy is not mandated at the Federal level and is determined by state education systems, leaving many high school students without essential budgeting and financial management skills.
When soldiers retire and become veterans, they often rely on the financial education they received in high school. This lack of resources can hinder their ability to manage finances and support their families. Many young recruits, aged 18-20, have not yet managed their own households, entering a new financial landscape with limited information after their military service.
Health Insurance
Veterans who have not served in the military for at least 20 years are ineligible for government healthcare benefits. Many veterans must seek employment that offers health insurance to cover their medical costs. This can be substantial if they have health issues stemming from their military service. This need places additional financial strain on veterans’ families and their budgets.
Understand that many veterans struggle with PTSD and may have injuries that hinder their ability to work. These circumstances are not covered by government assistance and can place further stress on their spouses, who might need to find employment if they are not already working. Veterans are encouraged to apply for VA supplemental claims if they have service-related injuries or wounds.
Transitioning to Civilian Life
Many veterans not only face the requirement of health insurance but also encounter stress when transitioning to civilian life. Upon retiring, they desire to spend quality time with their families, yet they confront the challenges of civilian life.
Managing finances, an unfamiliar aspect for many veterans, becomes a struggle. Moreover, veterans in states like California are subject to taxation, adding to their financial worries upon returning home.
Another significant issue for veterans is the prevalence of predatory loans targeting them. For instance, veterans are frequently pressured to refinance their homes and acquire new loans under the guise of lower interest rates. This then often proves untrue. As a result, many veterans and their families end up losing their homes and accumulating substantial debt.
Possible Financial Solutions
Despite the economic challenges veterans are increasingly facing due to the inflation period from 2020-2023, viable solutions remain to address the financial disparity between veterans and the general population.
One such solution is to implement mandatory financial and banking education classes within each military branch to ensure the future financial stability of veterans and their families.
While many U.S. military branches offer these courses, they are not emphasized enough during a service member’s tenure. Furthermore, incorporating financial education courses in high schools can benefit future military members, their spouses, and families. Financial literacy is crucial for military personnel and all citizens, irrespective of their career paths.
To address immediate financial needs, veterans can consider cash borrowing using mobile apps as an alternative, providing quick access to funds in emergencies.
Boosting Your Credit Score
While serving in the military, worrying about a credit score may not have been a priority, and that’s completely understandable. However, maintaining a good credit score becomes extremely useful as a veteran.
It’s a common misconception that carrying a balance on a credit card is necessary to improve a credit score. This is false. Instead, consider obtaining one or two credit cards and paying off the balance in full each month. This practice will help boost the credit score, assuming all other factors remain equal.
For starters, aiming for a credit score in the mid-700s is advisable. This range generally qualifies for the lowest mortgage interest rates, though continually improving the score is always beneficial.
A credit score functions as the closest thing to a financial report card. A high credit score often indicates good financial habits and can be a motivating factor as it climbs higher.
Endnote
Being proactive is crucial, and it’s wise to consult experts if you’re unsure about an answer or the potential impact of a financial decision.