A little help for military families

Donna Callahan remembers how much time and emotional effort it took to handle her family’s altered finances when her husband, a commander in the R.I. Army National Guard, was sent to Iraq for a 15-month deployment in 2004.
“It’s all new, and it’s really the last thing you want to do at that time,” said Callahan, the family readiness group coordinator for her husband Col. Christopher Callahan’s unit, the 1-126th aviation battalion at Quonset Point, and executive director of Rhode Island Employer Support of the Guard and Reserve.
Financial planning is important when a family member who serves part-time in the Guard or Reserve is activated for deployment overseas, military and civilian financial planners say. In such a situation, the spouse staying home must contend with pay, benefits, tax status, insurance and other aspects of family finances altered by the military’s active-duty system.
The need for thoughtful financial planning is particularly great for many in the Guard and Reserve whose income decreases when they are activated to serve overseas, said Stacy Viens, the Rhode Island National Guard’s family assistance program director.
“A lot of service members take a cut in pay, depending on what they do out in the civilian sector,” Viens said. “It puts a hardship on the family. We have a lot of young soldiers – a lot of young families – who don’t have a considerable amount of savings in the bank at this point in their lives, and things can happen. You know, a broken water tank, car issues that need to get fixed.”
Some financial planning professionals offer their services to such families for free, and early next year the Financial Planners Association of Rhode Island will launch a marketing campaign to make military families aware of the financial planners in the state who do, said Steven Grasso, a certified financial planner in the Cranston office of Edward Jones and president of the association.
Service members already can search for free financial planning options at FPARI’s Web site, through a Web link on the main page that connects to the national Financial Planning Association’s Web site.
There are several things that a military family should do before a breadwinner is deployed, including setting up a will for the service member and making sure they have a good life insurance policy, Grasso said.
Additionally, a financial planner can help military families to take advantage of tax breaks and grants and loans for children in college who might not have qualified for financial aid before, he said.
Perhaps most important, a good financial planner will help a military family with a breadwinner serving overseas to start living on a budget and putting money away, if possible, he said.
“Now that there’s a person missing from the household, we have to pay attention to how you spend your money,” Grasso said. “We’ll lay out a budget and help them on the budgeting side.”
Having money saved will protect a family against a temporary financial crisis in the event of an unexpected interruption of military pay, said Jeffrey H. Massey, a certified financial planner in Lincoln and a former Army enlisted man and officer in the Rhode Island National Guard.
As an example, Massey recalled a fellow officer from his days in the National Guard whose company was activated in September 1991 in preparation for the first Gulf War, and who didn’t get his first paycheck until the last week of December.
The officer’s wife, who was home with three children, deposited the check in the local credit union just days before former Gov. Bruce Sundlun shut down the state’s credit unions to deal with the banking crisis.
“That was just the most horrible story you can imagine,” Massey said. “So I think if there’s any point to be made, it’s important for military people to reserve some money in case they change locales and their pay is delayed.”
At the very least, military families with someone serving active duty should have three months of living expenses in reserve, and ideally six months’ worth, Massey said. Such families should not be overwhelmed if they have no savings to begin with and their finances are tight, he said.
“It’s about just getting into the behavior pattern [of saving money] – small amounts, even if it’s just $10 a paycheck, $20 a paycheck,” Massey said. “Once you get that cushion you should be able to breathe a little easier.”
Such savings should be held in a money market account or other liquid account that doesn’t charge penalties for withdrawal. If a family needs to pull money out of a CD or other investment vehicle in an emergency, the early withdrawal penalties can sometimes be waived by a bank manager, Massey said.
“They don’t want that information out there, but they can be, because I’ve intervened for clients and we’ve gotten penalties just waived,” he said. “Think about it – you’ve got a military wife that’s home with two kids, her husband’s in a war zone, he’s not getting paid, they have a CD and she goes to that manager. Do you think the manager is not going to waive those penalties?” •