The 3 Biggest Mistakes Ex-Military Service Personnel Make with their Money

In a perfect world, financial planning would be a breeze no matter what stage of life we are in. The hard truth is that for most, avoiding money pitfalls is easier said than done. Here are the 3 biggest mistakes ex-military personnel make - and how to avoid them!

Mistake 1: Failing to Take an Active Role

Whilst you’re in the military, there are fewer active money decisions that need to be made. Pension contributions and life insurance, for example, are taken care of for you, without much if any input needed by you.

But once you’re in the civvie street, you have to take a more active role in arranging your finances.

Quite a bit more decision-making is necessary after military service, especially when it comes to your workplace benefits package. For example, many employer pension plans will match your contributions up to a limit, but often the employer’s default option is not the maximum available.

Tip - make sure to contact your employer’s HR or Payroll department and find out what the maximum matched contribution is. 

A second area is life insurance. Many larger employers either provide life insurance as a core part of their benefits package or it is available as an add-on. But the problem is that most employees don’t sign up for the benefit, or don’t pay the very small premium to get comprehensive life insurance.

Tip - contact your employer and find out if they provide employees with a ‘Death in Service’ benefit and what the cost is to increase it, if you need to.

Mistake 2: Avoiding Basic Financial Skills

Countless life skills are developed during military service, but financial management isn’t always one. Part of that is because some of the big ticket items are provided for you, like your housing, food, and travel costs. There simply isn’t the time or need to create a personal finance budget or dive into money management strategies.

In the civvie street, that just isn’t the case!

Instead of avoiding these basic financial skills altogether, ex-military can do themselves a favour by getting to know how these tools work to their benefit. For instance, a budgeting app or an excel spreadsheet can be your best friend in getting a handle on your money each month.

Keep it simple by dividing expenses into basics, leisure, luxury, and milestone categories.  Be clear about the income you have at your disposal each month. From there, you can determine what’s left to spend and save.

Tip - download a budgeting app to hold you accountable and keep you on track, top recommendation: YouNeedABudget.

Mistake 3: Not Having a Plan

Planning, strategy, implementation. This is the bread and butter of the military, but it’s amazing how often we forget all the best laid plans when we are taken out of the environment. It’s not uncommon for ex-military personnel I meet to tell me about the change of structure and organisation in their personal lives that they had in their military lives.

Creating a plan with a trusted partner not only gives you an understanding of what where you are, and where you’re heading, but it provides you with detailed next steps and contingency plan. Without a plan, there is no real way to know if the steps you are taking are helpful or harmful to your bigger financial picture.

Tip - take a piece of paper, and write down what you want to achieve, personally and professionally, within the next 3 years. Then work out the steps to achieve them.

The old saying, "those who fail to plan, plan to fail", is painfully true when it comes to your financial life.

Transitioning out of military service does not mean you are doomed to face one of these common financial mistakes, but without taking active steps, you are likely to face these challenges. Commit to doing one thing today to sidestep these common pitfalls, no matter how big or small.

As an exclusive offer for friends, family, and colleagues of our valued clients, we provide a Second Opinion Service to help the ones you care about understand their financial situations better. If you know someone who would benefit from this second opinion service, feel free to pass this information on to them directly.

Get SMART About your Goals

Nothing feels better than accomplishing a goal you’ve set for yourself. Maybe you’ve been burning the midnight oil at the office and finally got that big promotion, or maybe you’ve put in countless hours of sweat into a home renovation. Regardless of your objective, seeing the end result is a beautiful thing.

It’s no different with goals related to your money, but for some reason, for a lot of people financial objectives seem a bit more challenging.

Goals that Work – and Ones that Don’t

Would you set off on a cross-country road trip without some idea of where you were headed or when you wanted to arrive? Most of us would avoid that disaster by having some sort of plan in place. Your financial goals should follow the same thought process: what do I want and when do I want it? In other words, they should be SMART: specific, measurable, achievable, relevant, and trackable.

You can work hard and set aside a few pounds here and there, but without setting specific goals, you are likely to feel a bit lost. Setting objectives for your financial life starts with understanding the specific “thing” you’re aiming for and then defining what success means in the context of that objective.

For example, your objective of wanting to retire by age 60 with enough assets to draw 75% of current income is a specific, measurable goal that you can track periodically. Simply stating you want to retire one day is lofty at best and sets no parameters for measuring your progress. Knowing where you want to go is great, but if you have little to no idea where you’re starting from, you’re in trouble!

Action is Everything

Your ’retire by age 60, drawing 75% of your current income’ objective only works when you figure out what’s needed to get there. To frame your goal, you will need to ask intelligent questions, such as:

• How much do you need to save now in order to reach the right account balance?

• Which investment vehicles do you need to set up to save in a tax efficient way?

Answer these questions and you’ll be on your way to sketching an actionable financial plan.

But if you’ve struggled with major financial goals, you’re not alone. Working toward something as far off as retirement, buying a second property or funding your children’s education can be overwhelming to think about, let alone plan for. These goals seem too big and too distant, but breaking down your financial goals into smaller, manageable chunks can help.

Let’s go back to our retirement goal – start with the big picture. If your lifestyle in retirement involves expensive hobbies, you’ll probably need more than someone who plans to just potter ‘round the garden.  

Focus on understanding the big number first, and then break that down into smaller pieces that fit into your everyday life right now. Establish milestones for yourself that are realistic (i.e. savings X amount by the end of next year) so you don’t set yourself up for missing the mark.

Accountability Along the Way

If you’re like most people, setting a goal is not where the problem lies. Of course, you want to retire, or buy a beach home, or send the kids off to school without the burden of tuition – these goals are not uncommon. Unfortunately, reaching them without too many hiccups is. If you are struggling with reaching financial objectives, it’s time to get SMART about what you want. 

Being accountable to another person who understands what you are trying to achieve is a powerful step in actually reaching your goals. At Jones Hill we know what it takes to get to the next level of your plan, and we bring a perspective that is both unbiased and proactive. We will boost your level of understanding about different methods to achieve your goals, leading to an ongoing relationship that helps you build, achieve and maintain your best financial life.