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.

Are you being overcharged? Fancy saving £332 per month?

When initially taking a mortgage, many homeowners choose to take a fixed rate or tracker rate that lasts for between 2-5 years.  When these rates end, in most cases the borrowing will transfer onto the lenders ‘Standard Variable Rate’ (SVR) and for most lenders, this means the rate charged will be between 3.74% to 5.74%.  

Dave Rees, our mortgage expert, reveals how you could save up to £332 per month on your mortgage.

Typically, the rate for Standard Variable Rates are higher than those that are available if taking a new mortgage, so for most people a significant saving can be made by shopping around for an alternative.  For example, a mortgage of £200,000 with 20 years remaining would cost £1,291pcm on a typical SVR of 4.74%.  However, assuming there was equity of at least 25%, a 2 year fixed rate could be obtained at 1.44% - this would cut monthly repayments to £959pcm(*).

Alternatively, a 5 year fixed rate could be obtained for 1.69% with a £749 fee that would cut payments to £982pcm (*)  A new lender will require the property value to be confirmed and a solicitor to be involved but the lenders offering these products (and many others) would pay these costs on behalf of the applicants.

Consideration should also be given to taking a new product with the current lender as in most cases, lenders will offer borrowers competitive options as an alternative to switching to the SVR and if no additional borrowing is required, this is usually a quick/simple process with little/no additional underwriting involved.

Ideally, these options should be considered 2-3 months before the current product ends, to help ensure if changing, that the new product can start as soon as the current product ends.  For advice and guidance on product options, please contact Dave Rees on 01225 775923 (Option 2) or 07932 469797 or email at dave@davereesmortgages.co.uk

(* Products quoted correct as of August 2017)

Welome Ellis!

Hello!

I’m Ellis and the newest, and 7th member of the Jones Hill team (apparently this makes Jones Hill one of Bradford on Avon’s largest employers!).

I’m sure I’m going to be speaking with many of you over the coming months, so I thought sharing a little bit about me first would be a great start.

I competed for Great Britain in swimming, which meant I got to travel across the world representing our Country.

In my spare time, I generally enjoy running, baking, sampling multiple gins (an ever-growing, extensive collection is essential), country pubs, and absolutely love dogs. 

My partner is a School Teacher, so we relocated from Norwich as part of his job.  In Norwich I worked as a retirement solutions specialist for a little firm called Aviva, so I’ve got a really good background in understanding how financial services providers work. 

When I realised my partner and I were going to be relocating I looked around for the best financial services employer I could find, and quickly found myself at Jones Hill – this is my third day!

My motto for life is: …. 'If you think you are beaten, you are. If you think you dare not, you don't. If you'd like to win, but think you can't, it is almost certain you won't. The person who wins, is the person who believes they can'……

At Jones Hill, I will be looking after and developing our systems and processes with the aim of continuously improving your experience and journey with us. If you have any thoughts or ideas, drop me a line.

I look forward to meeting you all soon,

Ellis

A challenge and a Half

It was at the end of 2016 when I was given a runner’s ticket to the 2017 Bath Half Marathon by my local Crossfit Gym in Trowbridge. Although I’ve run a fair share of races, I’d never run this far on tarmac.

Now, I’m not a particularly, ultra-fast runner - once or twice a month I’ll do Parkrun at Southwick Country Park, with a personal best of 20 minutes 57 seconds - not too shabby for an old fella!

I knew I’d never keep up with the racing snakes, so decided to make it more personally challenging than just running faster!

So, I decided to do the Bath Half whilst carrying an 80lb bergen (military rucksack), which is a tad under 6 stone - it’s a bit like carrying both my children, Maddi and Archie, on my back for 13.1miles.  The bergen was filled with useful kit - rations, spare clothing, basha (tent-like thing), first aid kits, cooking equipment, wet weather gear, and lots and lots of water.

There was a method in this madness - I wanted to see how close to the Guinness World Record of 2 hours 30 minutes I could get!

Carrying such a huge load is very similar to walking your dog in a park. It's’ very sociable!  One of my very first clients came over to say hi even though we hadn’t seen each other for almost 8 years!  Thankfully I was able to remember Jo was a tree surgeon, who he worked for, and his family!  Lots of serving and ex soldiers came up to try the bergen on - the word ‘nutter’ was mentioned a few times!

The race started and I realised within 100 metres that it was going to be a very tough challenge right the way through.  Although the course is relatively flat, with that weight on your back, it didn’t feel at all flat.

The support along the route was terrific - from bands, drummers, cadets and the public as well as friends and family.  There was loads of support to the extent that by the end my shoulder was aching from the congratulatory shoulder slaps from other runners!

By mile 8 by left knee was aching and I was getting sharp pains on the side any time I tried to do more than a fast walk.  This meant the end to me getting anywhere near the World Record, but there was no way I wasn’t going to finish.

The last 2 miles were a long, long hard slog, and the final half mile was simply brutal.  I wasn’t out of breath and I was fully hydrated, but my legs, hips and shoulders were screaming blue murder and my heart rate was averaging 130bpm.

I rounded the corner toward the finish line ahead, to find a small but determined crowd egging me on.  I had no choice, however painful it was - I couldn’t walk it, I had to sprint it, and staggered over the line in 3hrs 40 minutes.

On the other side of the finish line I dropped the bergen off my back with a resounding thud.  One of the 8 or 9 medics, who crowded around shaking my hand, went to pick it up for me and couldn't get it more than 10-12 inches off the ground, so 2 of them managed to get it on to a wheelchair and accompanied me off the course.

It’s taken me about a week to start back in training and I can now run properly again!  Would I do it again?  Well, I’m already down for next year’s, so who knows!




In the meantime, lots of people have kindly donated to my fundraising page for Clic Sargent - feel free to help with this if you would like to.

The High Cost of Bad Behaviour

Behavioural finance, the idea that we make choices based on intuition and emotion more than rational thought, helps us understand what drives our decisions – our biases, fears, and overall feelings about money. But emotion and intuition rarely pave the way for sound decision-making.

The need to make decisions, big or small, is present every day, including choices about money. From saving and investing to paying down debt, making the “right” decisions is not always black and white.

If you want to avoid making costly mistakes with your financial planning, here are the things you will need to understand.

Identifying Behavioural Biases

No matter how rational you think you are, we are all human and act on emotion from time to time.

Several biases, or triggers, are built on this premise, here are some of the most common that relate to your money:

  - Overconfidence: the tendency to place too much confidence in your choices about money (like when we found that one ‘star’ fund manager)

  - Anchoring: using old, outdated information or rules of thumb to justify past decisions

  - Representativeness: making connections that aren’t really there (Trump won the election, the market went up, so that must be good for the economy, right?)

  - Loss aversion: a reluctance to accepting loss, even if it’s costing you money (I won’t sell it now, because it’s sure to come back)

  - Regret reduction: avoiding certain actions so regret is not an option

  - Blind spots: failing to see the behaviours that hold you back


Each of these biases in financial decision-making can cost you significantly. For example, being overconfident about your goals may mean you fail to spot check them periodically, which could mean falling short of your objectives.

Failing to see the missteps in your financial behaviours or the holes in your plan may result in not saving nearly enough or continuously selecting the wrong investment.

Likewise, holding on to a poorly performing investment simply because you don’t want to realise the loss can mean even bigger losses down the line.

If you’re avoiding regret, it usually means you’re not taking the right actions to reach your objectives. You may have been burned by the market before and are sitting on the sidelines waiting for your time to get in. But the evidence shows it’s ‘time in the market’, not ‘timing the market’ that really counts.

Biased short-term perspectives based on emotional responses result in lost opportunities, wasted costs, and more importantly, unhappy and subpar investment returns.

How To Overcome Your Behavioural Biases

So, how do you overcome behavioural pitfalls with your financial planning?

First, you have to recognise that decisions based on emotions are likely to be poor decisions.

For instance, according to behavioural finance research, by focusing your attention on emotional feelings instead of proven, rational methods, this can cost you 4-5% in lost returns on your investments each year. Now that’s an expensive mistake!

Understanding what triggers you to make, or avoid making, certain decisions is the next step. If you see yourself falling into one of these categories, try setting up a list of hard and fast rules that can help steer your next move.

For example, never make investment decisions straight after reading the morning papers. Instead, take some time to cool down and reflect before coming to your decision.

How a REAL Adviser Can Help

If after this, you found that you’re still succumbing to behavioural biases, there is where working with a REAL financial adviser can help

Getting advice from an experienced professional who not only understands these biases but also works to stand objectively in between you and the big mistake is a service worth paying for in its own right.

REAL advisers do just that. We provide unbiased professional advice when it’s needed most – when your circumstances change, when markets are volatile, or when there’s doubt about your future success.