NEW YORK (TheStreet) — Military members are prone to making the same financial mistakes as other consumers, especially when it comes to budgeting, paying down debt and saving for retirement.
Here are five common mistakes made by those in the service and the ways to remedy them.
Problem 1: Getting Into Debt
Since military members always have a steady, government-issued paycheck, they are attractive customers for lenders who often approve them for credit cards and loans. Too many businesses are eager to "help" service members purchase expensive items with their new credit, because the companies can charge exceptionally high interest rates, said Michael Meese, a retired Army brigadier general and the COO of the American Armed Forces Mutual Aid Association (AAFMAA ) in Fort Myer, Va.
Solution: Have an emergency fund. Just like other Americans, saving three to six months of your monthly expenses in a rainy day fund can help mitigate any emergences and to avoid "going into debt to make ends meet," Meese said. All military members have to do is save "1/12th of their paycheck each month and they can create an emergency fund in less than three years," he said.
Problem 2: Retail Therapy
Since military members often face additional pressure and stress from deployments and moves, they receive additional compensation in the form of special pay and entitlements. Instead of budgeting for their expenses and retirement needs, some members and their families overspend "as a means of coping with the stresses of military life,” he said.