Establishing a Financial Future After the Military

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Many military families face financial challenges. Among junior enlisted members of the military, for instance, 19 percent failed to make minimum credit card payments and 11 percent have bounced checks, according to a survey from the Defense Manpower Data Center. What's more, members of the military use payday loans three times as often as civilians, reports the Defense Department's website. Severe financial problems can cause lost security clearances, sanctions, limited advancement possibilities, or even discharge.

After leaving the service, financial habits can make an even bigger difference. Employers, landlords and lenders all take credit history into account when deciding with whom they will do business. And today, money and credit are tight, making those decisions all the more important.

To build a strong financial foundation, ask yourself these questions:

1. Do you have a budget? A household spending plan is your roadmap to financial security. A budget can bring peace of mind by letting you know where your money is going.

2. How is your credit? In a nutshell, a credit score reports how good a credit risk any individual is. Creditors look at credit (or FICO) scores to gauge whether a person will repay debts. Scores typically range between 300 and 850. Credit scores are based on credit history, including debt payments, amount owed and whether you have missed or defaulted on any loans. Higher credit scores are better. By law, all U.S. residents can review their credit report for free once a year. Visit to request your report.

3. Do you have a credit history? If you leave the service with little or no credit history, build one. Charge a few expenses that you know you can pay off on a low-limit credit card. Or take a small loan from your bank or credit union to purchase a used car or an item like an appliance. Pay the bill or loan on time and in full every month. If you have student loans, pay those on time every month. On-time payments are the No. 1 factor in determining a credit score.

4. Do you have a job-hunt strategy? All branches of the military offer support and assistance for transitioning to a civilian career. Take advantage of pre-separation counseling ? and do so before the last minute. Learn how to optimize your resume to explain the skills, expertise and leadership abilities you bring to a civilian job from your military training. Contact family, friends and former co-workers to catch up and to let them know you are looking for a job, housing or relocation. Take advantage of online networks such as LinkedIn to locate former classmates and colleagues for job-hunting purposes. It is becoming more common for employers to search for job applicants online to learn about their character, so do not post risque or questionable comments, photos or information online, including on MySpace, Facebook or other forums. If you have accounts on these forums, now is a good time to clean up those profiles.

5. Do you have a savings plan? Get into the best habit you can form — saving for the future. First, build an emergency fund by setting up your paycheck so that 10 percent of your net income is deposited directly into a savings or money market account. Save, work odd jobs or sell unneeded items; even $500 or $1,000 makes a difference and will help take care of emergencies without going into debt. Set up direct deposit to send part of every paycheck directly into a separate savings account, and aim to save enough to cover three to six months' worth of expenses in the event of an emergency. Once this rainy day fund is in place, continue sending part of every paycheck into long-term savings for education, a future home purchase and/or retirement. Make sure to take advantage of retirement savings opportunities by contributing to any retirement accounts the maximum an employer will match.

6. Are you too eager for home ownership? True, it is a home buyer's market, but credit is under more scrutiny than ever, and home ownership can be costly. In addition to the down payment and mortgage principal payment, homeowners must pay insurance, taxes and maintenance (for home as well as yard and garden) costs. Those who are at all worried about affording a home within their current budget — or unsure if they will stay in the location at least a few years — should rent until they are more confident about their situation.

Your military discipline — or the skills you've mastered as a military spouse — provides the perfect tools to build a strong financial future. By carefully laying the groundwork for a solid campaign, you can master the money game and come out ahead.

For more financial advice, visit's Finance Channel.

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