Part One: Keeping Your Credit In Check
The year is still young, but how are those New Year’s resolutions holding up? It’s never too late to get back on track and never too early to make a new resolution to better your life.
With the holiday season over and the decorations packed away, often two things remain; memories and maxed-out credit cards.
One thing you might not have thought about doing this year is keeping track of your credit. This isn’t just a personal goal; it is every Sailor’s duty to know the risks tied to their credit score.
While it may be common knowledge that debt affects an individual’s credit rating, for Sailors, it can have a deeper consequence than the interest rate on a car loan.
“If Sailors don’t make their payments, it’s tracked on their credit report,” said Yeoman 2nd Class Veronica Garay, Command Security Assistant. “The DOD keeps track of that. If you don’t pay what you owe, the debt can affect your clearance, your rate and even possibly your rank.”
Thankfully, Sailors who find themselves struggling to make payments have a few ways to get help. In addition to the Command Financial Specialists located on USS Nimitz (CVN 68), the Navy-Marine Corp Relief Society (NMCRS) and Fleet and Family Support Centers (FFSC) all provide budget counseling to guide service members out of debt.
“Our financial planning program works on the “70-20-10” principle,” said Walter Barrett, Personal Finance Manager at Bangor FFSC. “The 10 means that we want 10 percent of our income going to some sort of savings. That’s savings that sticks around, not Friday night’s party money. Seventy percent can go toward living expenses. Car insurance, rent, grocery money; that’s all living expenses. Up to 20 percent of your income can go to debt. Once we exceed 20 percent, we need to start having a conversation.”
Barrett also said that credit card owners don’t have to max out their card to damage their credit; keeping a balance that’s more than 30 percent of a card’s limit can lower your score.
With all of the potential pitfalls of modern finance, some people may try to avoid debt by not having a credit card. In today’s world, that might not be the best idea.
“We’re in a credit-based society, having credit and developing it is important,” said Barrett. “It would be great to pay cash for everything, but if you pay cash, you have no credit, and that’s almost like having bad credit. Inherently, having a credit card is good, if managed properly.”
Proper management requires Sailors to know how to make a budget and keep to it.
“We are firm believers that budgeting is the best way to keep a service member out of debt,” said Mary Kay Gombos, Director of Bremerton NMRCS. “Good financial direction prevents them from living beyond their means, buying things that they don’t need instead of taking care of things that they do need.”
As Murphy’s Law states, anything that can go wrong, will go wrong, often at the worst time. This means even with a budget, unexpected expenses will pop up. One of the main purposes of NMCRS is to help Sailors in this situation.
“We have two loan programs,” said Gombos. “First, we have Quick Assist Loans, which a lot of people call a ‘no questions asked loan.’ There is a one-page application, but as long as you don’t have any outstanding loans, you have not had disciplinary action in the last six months and you have at least four months left of active service, you’re eligible. If you are ineligible for a Quick Assist Loan, we do have a regular loan program.”
Gombos said the regular loan program resembles applying for a bank loan. The big difference between these loans and borrowing from a bank, however, all loans from NMRCS are interest-free.
The money for these loans is not furnished by the government, but instead is donated by Sailors and Marines through NMRCS fund drives.
“The Bremerton and Bangor branches share our clients,” said Gombos. “Together in 2015, we assisted with $1,121,608 worth of disbursements across 2,195 cases. We did a lot.“
All of this is possible because Sailors took the first step and sought help. If you are starting to loose track of your credit, don’t put it off until next year. You have the power to make 2016 a great year.
Part Two: Cash For Today, Funds For Tomorrow
Think about your money for a minute: not just the cash in your pocket, your savings, or your next paycheck, but your finances as a whole. Are you in debt, or do you owe nothing? Do you faithfully contribute to your future with a Thrift Savings Plan (TSP), or do you feel you can’t afford it?
Many Sailors stationed aboard USS Nimitz (CVN 68) may find that they live at one of these extremes. With the right planning and resources, Sailors can set themselves up for financial success.
This process starts with Nimitz’ Sailors monitoring where their money is going. By tracking spending and keeping budgets, Sailors can discover just how much they can save while minimizing unnecessary spending.
“You would be ultimately surprised by how much money you spend on impulse shopping,” said Senior Chief Navy Counselor Dean Miller, Nimitz’ Command Financial Specialist. “Sailors would be surprised by how much is spent walking into the exchange with the idea of getting a candy bar and walking out with $25 of this and that.”
No matter what situation Sailors may find themselves in, they can always be more financially responsible. By cutting spending by even a small amount, it is possible to have more money to pay debts. If a Sailor is debt-free, then that cash can easily go into short-term, “rainy day” savings, or a long-term retirement fund.
Electronics Technician 2nd Class Neil Mamaril agrees. He now promotes responsible saving and spending, but he wasn’t always very thrifty.
Mamaril grew up poor. After joining the Navy he earned more money than he was accustomed to and preferred to purchase expensive cuts of meat when grocery shopping. That luxury had to be put on hold when he needed to reduce spending to help his family. As a result, he was able to cut his grocery bill in half, thus freeing up necessary funds.
“A lot of Sailors waste a lot of money eating out constantly,” said Mamaril. “Going out to a restaurant, you’re going to spend three to four times as much as you would just buying groceries for the night.”
Mamaril benefited from money-saving techniques he learned through a Navy-Marine Corps Relief Society (NMCRS) budgeting workshop, which helped him at a time he needed it most. In addition to helping cut back his grocery bill, Mamaril also learned about the importance of spending money wisely.
Although Sailors can manage the amount of money they spend on day-to-day things like groceries, sometimes unexpected expenses are unavoidable.
One way Sailors can avoid much of the stress associated with sudden necessary expenses is by having a healthy “rainy day” fund: a savings account that is large enough to handle most emergency spending, and can be withdrawn from without penalty.
“You can’t just rely on a TSP because that money isn’t fluid, you can’t withdraw it at will,” said Mamaril. “You need to have money in a good savings account, so that money is readily available. If something comes up and you need to pay bills, you’re going to be hurting if you don’t have that rainy day fund.”
Mamaril also said that the NMCRS workshop helped him see the need for sufficient emergency savings by highlighting often-overlooked expenses such as insurance co-payments and vehicle maintenance costs.
With today’s money in order and enough cash saved away for an emergency, Sailors need to focus next on the long-term.
“The easiest way to save is to set it, and forget it,” said Miller. “Have it come out of your paycheck and go someplace regularly and consistently. Sailors have one of the best vehicles for saving out there, available to all members of the armed forces, and that’s TSP.”
It’s important when trying to “set it and forget it” that Sailors set their savings up correctly. A simple oversight can be an expensive mistake in the long run.
TSP includes several different savings plans to guide the security and growth of savings. Participants are free to choose any plan they want within TSP, but some are better for young Sailors than others.
“The problem with TSP is a lot of Sailors get in there and they leave their money in the “G” Fund, which is making less than 3% interest,” said Miller. “That’s terrible. Go grab one of those Lifecycle Funds.”
The Lifecycle Fund automatically manages Sailors’ money. This plan starts with higher risk and aggressive investments and tapers toward slow and stable investments as the service member gets closer to retirement age.
TSP offers multiple ways to manage your money, each with their own benefits and drawbacks. Sailors need to educate themselves on which plan is right for them.
Sailors with questions about TSP are advised to contact their departmental financial specialist.
Sailors looking to become masters of their own money should consider Fleet and Family’s Million Dollar Sailor program. The class is usually held quarterly with notifications sent to departmental First Classes via email.
So the next time you find yourself reaching for your wallet to buy things that weren’t on your shopping list, pause for a moment. Did you “set it and forget it”? Are you saving up for a rainy day? Remember, you have the power to make your money work for you.
Story by MC2 Ian Zagrocki