The 5 Biggest Mistakes Service Members Make With Their Money

In a perfect world, we’d all live below our means, save a significant portion of our paychecks, and stay out of debt. Unfortunately, that’s not the case. We make mistakes, fail to plan, and sometimes get into financial hot water.

Veterans and service members know this all too well, but there are five really specific traps that seem tailor-made to steal veteran money.

Here are five of the most common and how you can avoid them.

1. Getting married too soon.

I knew an E-5 who got knocked down to E-3 before his discharge and was on divorce number three before he turned 30. It all started with his tech-school wife. Divorce can be the most expensive decision you ever make. It can also be one of the hardest to predict. You get married when you’re ready to spend your entire life with someone.

If you feel pressured to marry someone before a six-month course ends, how are you going to last 40, 50, or 60 years? Don’t be afraid to wait a year or more to decide if they’re the right person before rushing into marriage. If they are the kind of person you want spend forever with, they should be willing wait for marriage.

2. Buying a post-deployment car.

I bet you can’t drive through the gate on your way to work without passing three different car dealerships. I’d also wager that there’s an E-4 in your unit who drives a car worth more than he makes in a year. The latter is a result of the former.

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You come back from a deployment with a pile of entitlements. You take that handful of cash to the local dealer and sign away one-third or more of your paycheck for the next five years. It might impress your friends for a while, at least until you spend the money from your next deployment paying down the loan after you had to sell it for less than half what you paid for it. It’s better to save up, pay cash, and drive a cheaper car.

3. Taking out payday and title loans.

This one goes hand in hand with the overpriced car. You see Cash Cow or TitleMax or Lending Bear on the way to work everyday. When you get a little behind on your bills, you figure a loan might help you make it until your next payday.

Here’s the problem: Not only are they going to charge you a finance fee, they’re going to charge you between 300 and 500% interest. The worst credit card on earth won’t charge you nearly that much for a cash advance. I can’t believe anyone would ever use a payday loan, but you wouldn’t find one outside of every base on Earth if somebody wasn’t falling for it. The smarter option is make a budget, live within your means, and put some money away for emergencies.

4. Putting off retirement savings.

This one gets a lot of us. Yeah, you’ve got a pension — maybe — if you do 20 years. But the rules are changing, and after 2018, a lot of you are going to have to take more responsibility for your own retirement.

Even under the old system, the pension isn’t nearly enough to survive on comfortably. A 20-year E-6 gets a pension of less than $23,000 per year. And don’t think the $50 a month you’ve been putting into the Thrift Savings Plan is going to make up the difference either. You should be putting away 10 to 15% of your take-home pay for retirement.

5. Buying a house every assignment.

It sounds like a good idea, but don’t ascribe to the notion that paying rent is just throwing money away. The idea is that you’ll build equity and make a ton of money on the sale, or that if it doesn’t sell, you can just rent it out. The fact of the matter is that you don’t know how long you’ll be at a given assignment, and you have no control of when you have to move.

Your branch doesn’t care if the housing market is in a slump. If they want you to move, you’re going. You can lose tens of thousands of dollars depending on when you permanent change of station. Just ask anyone who tried to move in 2009. Better idea: Find a place to rent that’s less than your basic allowance for housing and put the difference in savings for when you finally settle down for real.