Preparing for financial emergencies
simple advice for military families

This article is an excerpt from theMilitary Spouse Finance Guide: Financial Advice for the Homefront,a recently published book from Pioneer Services. With forewords by Sylvia Kidd of the Association of the United States Army and Command Sergeant Major Roger Stradley (Ret) of USA Cares, Inc., the Military Spouse Finance Guide provides real-world advice for military families wanting to take control of their money, rather than having their money control them. To get additional information, or to order a copy of the guide directly fromAmazon.com.

One of the most important steps for financial independence is being prepared for unexpected bills. And the best way to do that is to create an Emergency Savings Account (ESA). This is important because it prevents you from having to finance car repairs, a trip home to see family, or other expenses.

The need for an ESA

In a survey of active-duty military personnel by the Rand Institute, military families were asked if they had any financial difficulties within the last year. Some of the questions included whether or not they had bounced a check, fell behind on their bills, had to borrow money from family or friends to help make ends meet, or even if they had their car repossessed. More than half of the junior enlisted ranks (E1 to E4) reported having one or more of these difficulties. Noncommissioned officers (E5 and E6) had also experienced such problems, with 40 percent saying they had encountered difficult financial situations.

Most of these money woes could have been easily avoided, however, by having an ESA.

The amount of your ESA

Deciding how much to set aside is unique to each family—there is no hard and fast rule to determine how much is needed. Some experts have recommended a flat $500, while others have recommended three to six months living expenses. Regardless of what you choose, the point is to be able to pay for all of your family’s bills for at least two months should all sources of income become unavailable.

One of the few rules that everyone agrees on is to “pay yourself first.” This means savings comes first, before the nonessentials are bought and before the vacation is planned. But where do you find the money? Where are the hidden savings?

There are a few tips that can save you money almost every day:

• Save on groceries by planning and clipping coupons; it can save you $250 a year.

• A “change jar” can easily net $100 or more each year.

• Pay cash whenever possible to save yourself thousands in interest.

• Increase insurance deductibles and potentially save hundreds of dollars each year.

• Eliminating two fast food meals per week can save more than $500 each year.

• Deposit your spouse’s reenlistment bonus in your ESA, thus building it quickly.

These tips are only the beginning—there are many ways to save enough money to prepare for your financial future, so think of creative ways to find extra money each month. And when you add all those up, you can easily have anywhere from $500 to two month’s salary set aside relatively quickly, letting you move on to your mid- and long-range financial goals.

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Deciding on the type of account

Your ESA should:

• Be readily available

• Pay you interest

• Have no penalty for withdrawal (including early withdrawal for some accounts)

• Be insured or guaranteed

This can include savings accounts, money market accounts, or money market mutual funds. Remember that while Treasury bills and Certificates of Deposit are relatively safe and secure options, they take longer to access and you may not get their full benefit (i.e. interest) if you withdraw money before they mature.

No matter what type of account you choose, consider having your spouse make the deposit via allotment. Doing so makes the deposit automatic and is a key part of the “pay yourself first” philosophy.

With adequate emergency savings, you can focus on how to best meet your family’s needs, rather than worrying about finding the money to handle difficult financial situations. Once an ESA is established, your family can apply those same savings habits toward longer-term investments or Thrift Savings Plans, and start down the road to financial success.

To find out more information about loans and other Pioneer Services, visitPioneerMilitaryLoans.com.

About the Military Spouse Finance Guide:

The Military Spouse Finance Guide covers a wide range of topics, provides real-world examples, and is full of easy-to-follow financial tips. To further Pioneer Services’ support for military spouses and their families, all proceeds from the sale of the book will benefit a military-family-based non-profit organization.

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