Military Veterans Reflect on Money Matters

U.S. military service members and their spouses face unique financial stressors and challenges.

A 2024 survey released by the National Foundation for Credit Counseling found that military households (service members and military spouses) are more likely than the general population to experience financial strain.

For example, service members are more than twice as likely to have missed credit card payments or three times as likely to transfer debt between cards. Service members are more likely than civilians to use nontraditional financial services such as payday loans, prepaid debit cards and cryptocurrency.

Military families also face frequent relocations, which can make financial planning, long-term ties to financial institutions and spousal employment difficult, according to an opinion piece in Federal News Network.

Three BECU employees share their financial observations about saving, the GI Bill, personal and auto loans, VA home loans and more, drawn from service and experience, along with tips for fellow service members.

However, Bobby wanted to save for some big expenses — including college — so he decided to develop a savings plan during his second deployment to Okinawa. He deposited a few hundred dollars from every paycheck into his savings account.

Once the money was out of sight and stored in savings, it was easier not to spend it.

"After a few months, I increased the amount I was putting in savings," he said. "It was just easier not to buy that super cool-looking third backpack that I didn't need."

"A somewhat humorous but practical tip for saving money while deployed: Get deployed somewhere without an ATM. It's hard to spend money you don't have access to."

Bobby spoke from experience, deployed to Ramadi, Iraq, six months before his end-of-service date. But Bobby left Marine service with over $20,000 in savings and was able to enroll at Washington State University.

Using the GI Bill To Pay for College

Bobby used the GI Bill for tuition reimbursement, one of the most well-known of seven federal benefits for veterans' education. According to the most recent Veterans Affairs report, in 2023 alone, 103,679 individuals used the GI Bill for some educational benefit.

The GI Bill helps pay for tuition, fees, books, housing and other educational costs for active-duty service members, veterans, National Guard or Reserves members and qualified survivors or dependents.

"Engage early with your intended university's veteran student services office," Bobby recommended. "They educated me on qualifying for reduced tuition and ensured my GI Bill was approved before the initial school semester's start."

Bobby learned he qualified for reduced tuition due to taking enemy fire and being in combat while deployed.

He said it's important to remember that the GI Bill isn't a blank check you get at the start of the school year but a reimbursement after you've paid for tuition. The student is responsible for initial educational costs.

"It's vital to ensure that you have money saved or loans figured out," Bobby said.

Decision-making felt challenging after getting out. "I wanted to get a nice used car and looked at a top-of-the-line Toyota 4Runner, which would have cost me around $18,000 at the time." But he had to juggle the Toyota with first-semester college costs.

"I had to turn down the 4Runner and get an older used Subaru Outback for $6,000. The Outback, while not as sexy, got me through closed mountain passes, blizzards, and every type of weather Eastern Washington can throw at you," Bobby said.

"It was an easy decision in the long run, but at the time, it was definitely a challenge to turn down a car I really wanted for the car I needed."

"Young people in the military are a group without established credit and may not have experience living independently yet," Fergus said. "They're anxious to do something big for themselves besides joining the military, so they get to a new base and want to get a nice car to feel accomplished and have access to leave the base."

He recommended avoiding this as it often leads people to payday loans.

"People try to fix issues with credit or budgeting with payday loans," Fergus said. "These loans have high interest rates and fees, which can easily lead to a cycle of debt that seems impossible to escape."

Compared to the general population, service members are slightly more than twice as likely to use payday loans, and spouses use these high-rate loans four times as often.

Protections for Service Members

Numerous steps have been taken in the past 10 years to restrict lenders' attempts to prey on vulnerable service members. For example, the 2016 Military Lending Act provides rights to service members when credit products are involved. 

These rights include limiting the amount of interest to 36% and preventing prepayment penalties or waivers of consumer protections. The Military Lending Act also prevents any lender from requiring you to divert automatic payments from military paychecks (allotments) to get a loan.

However, some companies are still targeting military families, and the Consumer Financial Protection Bureau has pursued violations of the Military Lending Act. One 2022 CFPB analysis estimated that fewer than 6% of National Guard and Reserve members' loans received required rate reductions, leading to nearly $10 million in savings lost per year.

Recent claims have included the nation's largest pawn lender, an online lender and the company TitleMax in 2023. TitleMax allegedly charged unlawful fees and interest of up to 100% and committed other violations of Military Lending Act rights regarding car title loans. The vehicle's title secures these short-term, high-cost consumer loans.

Reducing Debt and Building Credit

Debt presents a particularly difficult problem for service members, who may be denied security clearances in some situations due to debt, hampering their ability to advance their careers.

Younger people might instead look into secured loans or secured credit cards to build credit; that good credit can help you get a lower auto loan interest rate in the future.

"Keep it as basic as possible and use your teammates and chain of command to help you travel around for a while," Fergus said. "Once you've established credit, research how to use credit unions to fund your future vehicle and avoid spending outside of a manageable budget."

Fergus notes that more service members could seek advice from the on-site Department of Defense Office of Financial Readiness.

There, Personal Finance Counselors offer free financial consultations, retirement advice and navigating benefits, taxes, spending, credit and unique rights under the Military Lending Act.

The counselors offer personalized financial assistance, with one-on-one or general budgeting advice.

Saving for the Future

"Younger military members need to make learning about finances a top priority after training," Fergus said. "In the first two to four years, learn about taxes and how to maximize your retirement accounts, including the Thrift Savings Plan."

He explained that the Thrift Savings Plan is the military equivalent of an employer's 401(k) plan. After two years of service, the military matches contributions up to 5% of your annual pay.

Once you separate, you can roll the TSP into an employer 401(k) plan or an Individual Retirement Account (IRA). "Many people just withdraw it, and don't understand the penalties and opportunity cost of starting retirement savings again from ground zero."

Also, when a service member gets out, new challenges arise regarding managing your finances. For example, service members with families lose the service-related pay that isn't taxed, such as subsidized housing and meals. "When you lose that, it can feel like you're taking a pay decrease when you get a civilian job," Fergus said.

"Take time to plan should you consider transitioning out of the military," Fergus said. "Overall, I hope you use one of the many resources to make informed decisions."

"I was fortunate to land a job with a military bank and insurance company, and they graciously paid for me to complete a Master of Business Administration degree," Marc said — leading to a retail and mortgage banking career for over 19 years.

"In my opinion, the VA loan is the greatest benefit offered to VA loan-eligible current and former military personnel," Marc said — after personally using VA loans eight times. In three instances, the loans were used for new construction.

VA Loans Help With Homebuying

VA loans help veterans, service members and eligible surviving spouses buy homes using private banks and credit unions. The loans are unique for their low interest rates and limited closing costs. The VA doesn't require a down payment (although some lenders may), and yet there's no need for private mortgage insurance, no matter the size of your down payment.

More than 28 million homes have been purchased by veterans, service members and survivors with the help of VA loans. More than 3.7 million veterans have active VA-guaranteed home loans, with 400,695 guaranteed home loans in 2023. The dollar figure the VA guarantees is called the loan entitlement, and can be up to 25% of a home loan.

"The VA website is the best resource, combined with a licensed mortgage loan officer specializing in VA loans," Marc said, if you're considering a VA loan. When interviewing potential real estate professionals to help you purchase a home, ensure they understand the VA loan process.

VA home loans are used to purchase a primary residence — but with a potential future twist.

"One little-known fact is that if you are looking for a new primary residence and have the entitlement available, you may turn the present property into an investment property," Marc said. "The key is to consider if you have adequate entitlement left to do so, you're purchasing a primary residence, and you can repay according to VA guidelines."

In addition, two VA-eligible borrowers can purchase a home together, using one entitlement, both, or splitting the entitlements as they see fit.

Yet veterans, like many Americans, sometimes struggle with the costs of home ownership. In 2024, the VA announced a new program to help more than 40,000 vets stay in their homes and avoid foreclosure.

This can help prevent future difficulties, as demonstrated by the VA's need to find permanent housing for more than 40,000 homeless veterans every year for the past two years.

Future Financial Education and Success

U.S. service members and veterans face distinct financial circumstances because of the nature of their work. Reaching out to knowledgeable individuals and resources can help.

"Many people haven't learned about financial subjects through the educational system," Fergus said. "If you didn't learn from family how to do your taxes or what your credit score means, make it a priority to reach out and ask someone who knows and who you can trust."

Related Content