Veterans Day: a time for respecting service — and finances
Updated: Nov 9, 2010 09:39 AM EST
Enlarge this pictureThe 2009 GI Bill can help military veterans pay for their education. (©U.S. Department of Veterans Affairs)
By Andrew Housser
Veterans’ Day is Thursday, Nov. 11. The holiday reminds us to remember those who have served the country in the armed forces. It’s also a good reminder and time for all Americans — including military service members and veterans, and their families — to respect themselves by checking up on their debt and financial plans.
Here are some steps to get started:
1) Understand your credit rating
Review your credit report for free once a year by visiting the websites of the three major credit reporting agencies (Equifax, Experian and TransUnion) or www.annualcreditreport.com. If your score is low, you might have to pay higher interest rates or even be denied credit in some situations. Low credit scores can affect employment, housing and even security rankings. If the report has mistakes or errors, contact the credit bureau immediately to request corrections.
2) Avoid payday loans
Legally, payday lenders cannot charge an annual interest rate higher than 36 percent to service members. But that interest rate is still very high — much more than credit cards, for example. That makes payday loans hard to pay off. Some payday loan borrowers fall into a bad cycle of debt, repaying a small loan for months and months. Instead, if you need money in the short term, look for other solutions: Borrow from a trusted friend or relative (and pay them back!), or even take a loan or credit-card cash advance if necessary. Then be sure you rework your budget so you will not run into the same problem again.
3) Build your credit score
If you have no credit history — or poor credit — use a prepaid card, gas card or store card to gradually build a credit history. Charge a few small expenses that are within your budget. Pay the bill on time every month. Always pay off the full bill to avoid interest charges.
4) Live within your means
Many service members earn a modest income. But it’s still a natural impulse to splurge when you re-enter civilian life. Don’t fall victim to the urge to take out loans or run up credit card bills to buy new furniture, electronic toys or sports equipment. Find smaller, affordable indulgences that will help you feel at home without running into debt. Start a small savings account to save up for the other purchases later.
5) Pay yourself first
Build a savings account so you will be prepared for emergencies without going into debt. Even $500 or $1,000 makes a big difference. To “find” money, hold a yard sale or work odd jobs and save what you make. If you have a paycheck deposited directly into your bank account, send a part of your check directly into a separate savings account. Eventually, you’ll want to have enough saved to cover expenses for three to six months of basic living costs. Once you’ve saved up this rainy-day fund, keep sending part of every paycheck into long-term savings, such as for education or a future home purchase.
6) Cover yourself and your family
Be sure you have health insurance, auto insurance and life insurance. Include disability insurance to help pay expenses if illness or injury forced you to quit working.
7) Have your own financial identity
Even if you are married, always keep at least one credit card in your name only. If you divorced or your spouse died, it could be difficult to obtain credit in your own name in the short term.
8) Take advantage of education and student debt resources for vets
The 2009 GI Bill can help military veterans pay for their education. The former GI Bills are still in place, however, and might be more beneficial to some veterans. The Veterans Administration has created a website to help veterans choose the right benefit. If you have existing student loans that are difficult for you to pay, the nonprofit Leave No Veteran Behind might be able to help.
9) Get help with debt
If you are in serious debt and cannot even make required minimum payments, consider getting help. Depending on the situation, debt consolidation, debt settlement or credit counseling may present viable options.
It isn’t an easy choice to serve your country, and it isn’t easy to manage your money properly, either. But with proper discipline, you can do both. On Veterans Day, take time to care of yourself by taking care of your finances.