First Florida Credit Union

Warning Order: Reservists Financially Prepare for Activation

by Michelle M. Haas-Dosher, CCUFC / February 3rd, 2003

"They say the great casualties of mobilization are the two F's: family and finances. Your family life takes a huge hit and your finances take a huge hit. For most people, I've found this to be true," says the Rev. Kirk Morledge, Madison, Wis. Lt. Cmdr. Morledge had served as a Navy reservist for almost 10 years before he was faced with a military call-up. Until last year, his duty consisted of one weekend each month and two weeks each summer. He returned last summer from an eight-month-long assignment overseas. "Sometimes it takes a rather high-profile mobilization to remind reservists that they actually could get yanked out of their houses," says Morledge. It's like thinking, "I'm not going to get struck by lightning--it won't happen to me. Being activated in a military call-up is the same thing. That's what I thought until it happened. "You literally have to look at every detail of your financial life," says Morledge, who had only four days' notice that he'd be leaving. During that time, Morledge and his wife had to designate a power of attorney, figure out what bills they had, determine how he would get his pay directly deposited into their account, as well as work out an agreement with his employer to figure out his compensation. Federal law requires employers to make jobs available to returning reservists, although not necessarily the same jobs they left. Employers are not required to supplement reservists' military salaries.

Closing the reactionary gap--dealing with a pay differential

"Specifically for Guard and Reserve members, the thing that has to be focused on the most is the differential in pay," says Lillie S. Cannon, deputy director of government relations for the National Military Family Association in Alexandria, Va. There are many cases of people making more than $100,000 a year in civilian employment, but when activated making only $30,000 to $40,000 a year.
"Set up an appointment with credit union personnel to talk about your accounts and finances."
Morledge met one sailor who designed software in civilian life, making an annual salary of about $86,000. When activated, his pay decreased to $36,000 and he was looking at having to claim personal bankruptcy. Back home, his spouse was being hassled by creditors. When a police officer who provided the majority of childcare for his family was activated, his wife left her job to be home with the children. They lost her income, his income was cut, and they immediately couldn't sustain their mortgage. Reservists should financially prepare for possible activation just as they would for any other of life's calamities, says Kim Withers, president of Wyoming Employee's Federal Credit Union in Cheyenne, Wyo. "Always have your debts manageable down to one income," says Withers, who's married to First Sgt. for the Aircraft Generation Squadron Scott Withers. "If you're living your life on the edge and you're using all your income to pay debts, even in good times, all it takes is one rock--a job layoff, deployment--to slip you up and it's a slippery slope from then on. "Most reservists aren't financially prepared for a military call-up, but then again, most people in general aren't financially prepared," Withers says. By saving a small amount out of every paycheck, you'll hardly notice it's gone, but it will start adding up. If you have a crisis--like being activated, needing new tires, a new washing machine--you'll have the money to pay for those things instead of using credit cards and getting into debt, Withers says. As you progress in rank or career--bump up the amount you're saving. Withers says make the commitment to reduce the number of credit cards you have and consider consolidating debt into one loan. Commit to paying that off, whether you use a mortgage, a signature loan, or other collateral to do so.
"You're not just preparing for the possibility of activation, you're preparing for everyday life situations."
Be wary of recurring expenses, which rarely are projected for financially. A lengthy deployment could result in overlooking obligations such as vehicle titles, property taxes, and insurance. "If you do nothing else, make sure your beneficiaries are current, and make sure you're aware of who is on your accounts and who isn't. "If you or your spouse are being activated, set up an appointment with credit union personnel to talk about your accounts and finances," Withers says. Credit union staff can educate and build a relationship with the spouse who is left behind as well as help determine things such as if you qualify for the Soldiers and Sailors Civil Relief Act (SSCRA) of 1940. SSCRA provides a level of protection for federally activated reservists. The act requires creditors to lower their interest rate to 6% unless the creditor can show that the service member's ability to repay is "not materially affected by such service." SSCRA caps interest rates on pre-existing loans--including mortgages, credit cards, and personal loans. However, loan payments must continue and individuals must advise their lender of their status; the lender will not automatically implement the limitation. The creditor may not know of the borrower's change to military status and about the protection of the law. Take advantage of online services to access accounts when overseas--in different time zones, at your convenience, for up-to-the-minute information. Automatic transfers can help because you'll have fewer bills to pay manually. This makes for less stress on spouses left behind who won't have to juggle the bills.
"The thing that has to be focused on the most is the differential in pay."

Know your enemy

"All military services provide an initial dose of financial education instruction at their reserve training sites," says Arty Arteaga, president and CEO of the Defense Credit Union Council, in Washington, D.C. Arteaga, a retired Army colonel with 29 years of service, says this opportunity gives the troops basic financial training and helps them understand the ramifications if they're not financially prepared as they make the transition from a peace-time to a war-time environment. Base family readiness groups have booklets and plans to help. "Education is the best way to prepare for a call-up," says Master Sgt. Scott Withers. Use resources such as your credit union or other financial institution, and be aware of other benefits--such as Tricare, an association contracted by the military to manage military personnel's healthcare. Once military personnel are on active duty--Title 10 Status--they're entitled to everything regular active duty personnel are. On this status you can get medical and dental treatments for free on your military installation, and you'll gain full commissary rights. "Our primary concern is to make sure our personnel are ready to be deployed," Master Sgt. Withers says. "When we deploy our troops, if we have individuals overseas who are concerned about financial issues, their minds are not on the job, and they're not prepared to go and fight a war. If we prepare them now and they get these issues taken care of, once they're deployed they won't have to worry as much and can concentrate on the job. "You're not just preparing for the possibility of activation, you're preparing for everyday life situations," Withers adds. One of your kids could get sick and need long-term care, you could decide to get out of the Guard, a medical issue could arise, or you could lose your job.
"You literally have to look at every detail of your financial life."

Recon and develop strategy

"There are many things you can handle financially ahead of time," Kim Withers says. The thing that's unknown is how you're going to handle everything emotionally. So, the more you reduce things that cause stress, the better prepared you are in handling a deployment or life crisis. Make a copy of membership accounts, insurance policies, loan documents, mortgage documents, and other financial records, and put them in a notebook, she says. You'll have easy access and can take the entire notebook into your credit union adviser if you need help. Keep everything current and make sure both spouses have access. Store the notebook in a fireproof lock box at home. You also can keep copies in a safety deposit box, available at many financial institutions, but keep in mind that the institution might be closed when you need access to your documents. Review insurance policies to make sure your family will be adequately provided for if something happens to you, and have an up-to-date will. Most installations offer this service for free or for a very low fee. To help prevent identity theft, ask for solicited mail only," Kim Withers says. Choose an opt-out option by calling the credit reporting industry's prescreening opt out number at 888-5optout. This stops most credit card offers. Contact your state consumer protection agency for information.

Document and debrief ... after the storm

Individuals returning from a deployment should continue to save and to reduce debt. "Don't go celebrate with a shopping spree," Kim Withers warns. The habits you learned from this crisis are good ones to keep throughout life and good habits to teach your children, too. If you hold on to those habits, eventually you'll be in a much better position to make decisions. The biggest benefit is the comfort from knowing your family's finances will be taken care of and your good credit will remain intact.

NCUA Equal Housing Lender
Printed Thursday, May 26, 2022

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