Financial responsibility -- vital to readiness
By Lt. Col. Michael Ebner, 61st Fighter Squadron
/ Published January 23, 2015
LUKE AIR FORCE BASE, Ariz. --
In the "Band of Brothers" miniseries, there is a line in the movie where the soldiers are told to make sure they sign up for life insurance to ensure their next-of-kin gets $10,000 upon the soldier's death. While none of us are about to make a combat jump in 1944 to fight the Nazis, Airmen still have the responsibility to plan for financial contingencies.
With sound financial preparedness, Airmen can prevent unnecessary distractions while focusing on the mission, both at home and deployed. To be prepared, Airmen can focus their financial efforts in three key areas -- insurance, debt and saving.
Airmen must ensure family members, such as a spouse, children, parents, etc., have the financial resources necessary to adjust for unforeseen events.
To cover those events, the first area in financial responsibility is adequate life insurance. For young Airmen without dependents, the Servicemembers Group Life Insurance is a great term life insurance plan that covers all activities while on active duty. While the $100,000 death gratuity covers all Airmen and is automatic upon death, SGLI is optional and must be allotted out of the paycheck. If selected, SGLI provides an additional $400,000 to the designated beneficiary(s). For those Airmen with families, SGLI probably does not provide sufficient funds for a long-term family care plan. Many life insurance calculators can be found online to help calculate your needs. USAA's calculator is particularly helpful for military members and takes less than five minutes to calculate, and you don't need to be a USAA member to use it.
The second area to address is debt. First, Airmen must live within their means. If debt exists, especially with credit cards, then get rid of it. Some debts are inescapable, such as a mortgage or car payment for a vehicle that you "need." I know there are plenty of folks out there that have credit card debt. Carrying this debt kills financial health and the sooner you stop the bleeding, the better! After becoming debt free, the opportunity exists to intensify saving efforts.
Financial experts recommend starting a savings plan as soon as possible once employed. One technique is to break a savings plan into three parts -- near-, medium- and long-term.
Near-term savings is the emergency fund that covers unexpected financial requirements such as a family emergency or job loss. Hello retention boards! Typically, three to six months of monthly income is adequate to cover these requirements.
Medium-range savings are those funds reserved for purchases planned in advance, such as a down payment for a house, future college payments, or buying a car. Yes, it is possible to buy a car with cash, and it doesn't need to be a new Ford F-150. For college savings, a 529 plan is a great financial tool that allows money to grow in a tax shelter and when used for education, is not taxed. Another great option to pass education benefits to family members is the post 9-11 GI Bill.
Finally, retirement planning is another important element that helps bolster financial preparedness. The Thrift Savings Plan is a simple financial savings tool that allows invested money to grow tax free. Members can select a regular or Roth TSP which have different tax implications. In most cases, the Roth TSP is a better method for savings, but Airmen should look at both options prior to making a decision. For government civilians, the TSP is an even better deal because the government will match up to five percent of contributions.
This article is just scratching the surface of financial tools. For more information, squadron supervisors should be able to answer questions or direct Airmen to the appropriate financial authority. Similarly, supervisors should be having financial discussions with subordinates during feedback sessions.
Addressing the three areas of insurance, debt and savings leads to an improved financial state. Members who achieve financial readiness are less likely to be distracted while performing the mission, which our nation expects us to execute and complete without failure.