Goals Matter

By Scott Spiker


The Online Magazine from First Command Financial Services

Military Families Saving More and Cutting Debt

Concerned about the economy and potential cuts to military retirement benefits, active-duty personnel and their families are intensifying their frugal financial behaviors by saving more and cutting debt.

The average monthly amount deposited into savings and retirement accounts by middle-class military families (senior NCOs and commissioned officers in pay grades E-6 and above with household incomes of at least $50,000) climbed to $2,988 in fall 2011 – up $730 from the previous year, according to the First Command Financial Behaviors Index®. During the same period, average monthly payments on short-term debt totaled $1,137 – up $90 from the previous year.

These changes come at a time when the long-term financial confidence of military families is beginning to unravel. The Index reveals that just 37 percent of middle-class military families are extremely or very confident  that their financial situation will improve over the next year. And just 34 percent are extremely or very confident in their ability to retire comfortably.

“This drop in consumer sentiment is the result of concerns over the economy in general and military retirement benefits in particular,” said Scott Spiker, CEO of First Command Financial Services, Inc. “Two thirds of middle-class military families say they feel nervous about a proposed phase-out of the traditional 20-year retirement system. One in five respondents say they are going to start looking into different retirement options. Combined with continuing economic uncertainty, the result is a loss of long-term financial confidence among active-duty personnel and their families.”

How well are you managing your long-term finances? It’s important to recognize when you may be getting in over your head. If you see flashing yellow lights as you review the following warning signs, take heed before it’s too late.

Too Many Credit Cards
You probably want to have at least one credit card for emergencies and for times when you’d rather not carry cash. But if you carry several credit cards and use most of them, you may be asking for trouble. It’s easy to forget how much you’ve charged when you’re using more than one or two cards. And, having several cards with open credit lines — even if you haven’t charged anything on them — can lower your credit score.

Charging Too Much
Being at or near your credit limits on one or more credit cards is a sure sign that you’re overspending. If you can’t pay off the balance each month when the bill comes due, you may be headed for trouble. When you’re making only the minimum payments on your cards, it may take you several years — 20 or more — to pay off a large balance. Think about that the next time you’re ready to charge an item like clothing or electronics that will already be in the garbage bin long before you’ve stopped paying for it!

Not preparing for emergencies
If you had to replace your roof or pay medical bills that aren’t covered by insurance, where would the funds come from? Putting money into an emergency fund to cover unexpected expenses is one of the best ways to take control of your finances. Not having cash for emergencies can put you in a real financial bind.

Running out of money before payday
Does your paycheck just cover your bills? Does buying something extra during the month leave you short of cash for necessities? Being constantly out of money is a warning sign that your resources are overcommitted. If you have little or no money left after each paycheck, it’s time to change your spending habits.

If any of these warning signs seem familiar, maybe it’s time to take charge of your finances. Come up with a plan for getting yourself out of debt today and saving money for tomorrow.

First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through knowledgeable advice and coaching of the financial behaviors conducive to success, First Command Financial Advisors have built trustworthy, lasting relationships with hundreds of thousands of client families since 1958. Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index® assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 530 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 4.3 percent with a 95 percent level of confidence. www.firstcommand.com/research Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. SDS is a behavioral science and consumer psychology consulting firm with special vertical expertise within the financial services industry. SDS specializes in advanced research methods and statistical analysis of behavioral and attitudinal data. First Command Financial Services, Inc., is the parent of First Command Financial Planning, Inc. (Member SIPC, FINRA), First Command Insurance Services, Inc. and First Command Bank. Financial planning services and investment products, including securities, are offered by First Command Financial Planning, Inc. Insurance products and services are offered by First Command Insurance Services, Inc. in all states except Montana, where as required by law, insurance products and services are offered by First Command Financial Services, Inc. (a separate Montana domestic corporation). Banking products and services are offered by First Command Bank. Securities products are not FDIC insured, have no bank guarantee and may lose value. A financial plan, by itself, cannot assure that retirement or other financial goals will be met. In Europe, investment and insurance products and services are offered through First Command Europe Limited. First Command Europe Limited is a wholly owned subsidiary of First Command Financial Services, Inc. and is authorised and regulated by the Financial Services Authority. Certain products and services offered in the United States may not be available through First Command Europe Limited.