Personal Finance

Military families' hidden risk: Finances

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Members of the military face challenges every day. Beyond the obvious, they also contend with unique financial hurdles.

Military pay tends to be low, particularly for more junior soldiers, and federal budget cuts and sequestration have pared some military benefits. But when it comes to financial education, service members just don't get much—despite efforts by every branch of the military.

For Jason Ruediger, the lack of financial preparedness nearly cost him his home.

When Ruediger exited the Navy to be more present in his young children's lives, he had high hopes for landing a civilian job. Sure, he had racked up debt, but he figured he could land a college degree, with help from the Navy, and find work in the field of his choice near his San Diego home.

It took 16 months, during which the family fell behind on loans and bills, narrowly avoided eviction, and saw Ruediger's credit score sink to below 500.

Ruediger had received financial advice and tips on resume writing from the military, but he said they just didn't do the trick.

"They talk to you a little bit about finances during training, and within divisions, but it's not really enforced," he said. "I think if it would have been enforced a little bit and constantly touched on, it would have seeped into people a lot more."

Ruediger found another problem with the military's financial education efforts. "They really don't have anybody teaching that you can look up to because you know they're doing well. It's just your supervisor, and you probably even know they have debt and they're up there telling you to stay out of debt."

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Scott Spiker, chief executive of First Command Financial, agrees. Spiker's company offers financial services to members of the military and their families.

"While our country paid attention to the fiscal cliff and the notion of sequestration, it didn't really hit the military until about six months ago in terms of how dire it is and how consequential to them," Spiker said.

On top of benefit cuts, frequent moves mean military families may have to sell a home during market weakness, and also make it hard for spouses to have meaningful careers and build retirement savings.

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In a survey of military service members and spouses by Blue Star Famlies, an organization of military spouses and families, financial education was rated between 1 and 2 in a survey on a scale of 1 to 5, with 5 being the best.

The problem is "probably a combination of content and awareness of services," said Deborah Bradbard, acting director of research and policy at Blue Star Families.

While the military does work on financial readiness with soldiers, Bradbard said that information may not reach a spouse who is actually managing the family finances. Also, "the military tends to be skewed toward the younger age group. If you are 18, 19, 20, you probably have never managed a household before. You may not know a lot about this."

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This isn't just a matter of inadequate information. At a time when military benefits are changing and the financial world is ever more complex, studies show that stress about finances is contributing to the high military suicide rate.

The Defense Department's Suicide Event Report found that in 2012, financial and workplace stress occurred in the 90 days preceding 32 percent of reported suicides. Excessive debt or bankruptcy were stressors in 29 percent.

In addition, a recent survey by First Command found that 76 percent of military families said that someone in the family had experienced stress symptoms due to financial concerns, up from 65 percent in 2013. And some of those symptoms are associated with a greater risk of suicide.

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Part of the problem seems to be that the military generally provides only broad financial advice, out of concern that unscrupulous financial advisors recommending products would steer young, naive soldiers into inappropriate investments.

According to an article by Ann Marsh in Financial Planning magazine, financial advisors hired by the military to help service members are instructed to stick to financial education, not detailed planning.

A Department of Defense spokeswoman said that the financial readiness of service members and their families is a priority. "Providing financial planning services similar to those found in the civilian sector would imply endorsement of specific financial products and services. However, within the military, understanding financial planning and how to access those services is very much a part of financial counseling and is addressed in financial education."

As for the continuity of financial education, she said, "The military services have each developed comprehensive financial readiness programs that are focused on a delivery system that begins at an entry level and is reinforced at the first duty station and progresses throughout a service member's military career life cycle."

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Change may be in the works. The House in June passed an amendment to proposed legislation sponsored by Rep. Rush Holt, D-N.J. that directs the military to study how to provide service members with more effective financial planning. And the Pentagon appears to be renewing its efforts to curb predatory lending to service members.

For its part, Blue Star Families is issuing recommendations that the military renew its efforts to make service members aware of the financial education it already offers.

But as Ruediger discovered, it's not as if military commanders are all that knowledgeable about personal finance, so it's not clear how information can be better transmitted to the most junior members of the military.

Building blocks to get on solid footing

Here, gleaned from experts, are the basic financial building blocks military service members need to get on solid financial footing and stay there.

First, make a budget. That monthly pay may look like a lot of money if you are a single soldier, but if you get in the habit of tracking what you are paid and where you spend it, you will take the first crucial step toward getting a handle on your finances.

You can make a budget the old-fashioned way, with pen and paper, or use an online service like, which will give you a full snapshot of your finances.

Second, stay away from those lenders lining the roads outside your base. They can charge stratospheric interest rates and destroy your finances and credit rating. In fact, stay away from any borrowing that isn't essential.

As part of avoiding unnecessary borrowing, learn to live well within your means. Spend less than you earn, and put what you can into savings. Try the military's Thrift Savings Plan, or open an IRA. You'll be shocked at how your savings grow.

Institutions like regularly work with current and former service members and offer a range of banking and insurance products.

If you do have debt, develop an attack strategy. Figure out which loans are costing you the most, and make it a priority to pay those off first. Some of those payday loans carry triple-digit interest rates.

And don't forget to keep on top of the many benefits the military offers, as well as whatever financial education it makes available, through Military OneSource or other channels.

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Ruediger and his wife Marie have started following these rules, and they are turning around their financial situation. Ruediger's hourly pay has been increased since he started with his employer, and he is continuing to pursue a college degree.

"We're going to this company to help with our credit repair," Jason Ruediger said. "A lot of our personal loans are getting paid off. We're getting to the point where we can start saving a little bit of money every month.

"It's kind of starting to play out a little bit."

—By Kelley Holland, Special to CNBC