After years of serving in the United States Marine Corp and now working as a financial advisor to Veterans and their families, I’ve seen certain financial pitfalls pop up time and time again. As an advisor, I am well-equipped to understand both how these challenges affect Veterans and how to best address them. Here are 5 financial pitfalls Veterans should avoid.
Not Having Adequate Life Insurance
Financial planning is about planning for what you don’t think will happen(running out of money in retirement), what will happen (kids going to college and your retirement), and what might happen (the unexpected death of an income earner). No one wants to think about their death, but having a life insurance policy in place is crucial to ensure your family will be taken care of in the event of an untimely death.
As a Veteran, you are probably familiar with Servicemembers’ Group Life Insurance (SGLI) and Veterans’ Group Life Insurance (VGLI). Though these benefits are cost-effective and a great start for life insurance, the coverage levels are often not high enough to cover Veterans and their families, especially if you are married, have kids, or a mortgage or other personal debt.
Consider other life insurance options as a way to truly safeguard your family in the event you were to pass away. For example, if you are a member of the American Armed Forces Mutual Aid Association (AAFMAA), you have the option to purchase term life insurance through this association. The AAFMAA offers up to $800,000 in term life insurance. (1)
If you already have VGLI, you may also purchase USAA Life Insurance as a form of supplemental coverage or purchase it as your primary life insurance. (2) With USAA, Veterans can roll over some of their coverage from SGLI and add a term life event option rider, which will allow you to increase coverage for major life events, such as marriage, buying a house, or the birth of a child. (3)
Not Having an Estate Plan
Another financial pitfall I see is Veterans neglecting to put an estate plan in place. This can be dangerous for both you and your loved ones.
Make sure you have basic estate planning vehicles in place in the event of your death or incapacity. An attorney can help you draft important documents, including:
- Last will and testament: Outlines who will receive your assets upon your death.
- Living will: Specifies what type of life saving intervention you would like if you are incapacitated or in a vegetative state.
- Power of attorney: Appoints a person to make financial, business, and sometimes health-related decisions on your behalf in the event you are unable to do so.
Having these essential estate planning vehicles in place will give you comfort and make it easier for your family to help in these types of circumstances.
It’s also important to make sure that your beneficiary designations are up to date on all your important financial accounts and policies. This ensures that the correct people receive your assets without the delay and unnecessary costs associated with probate. Be sure to double-check your designations still make sense after major life events like marriage, divorce, or the birth or death of a family member.
Lack of Budgeting or Systematic Savings Program
A budget paired with a systematic savings program will ensure you aren’t living paycheck to paycheck, help you plan for the future, and give you a source to cover unexpected financial emergencies that occur. Unfortunately, many Veterans struggle to implement a consistent budgeting and savings program.
To get started, track your expenses for one month and compare them to your net income. You’ll know if you are overextending yourself on a month-to-month basis. Next, set aside any extra money you have into an emergency savings fund. Once you build up 3-6 months’ worth of expenses, it is time to start putting aside at least 10-15% of your income toward retirement. Setting up automatic contributions into your retirement account will help you stay on track.
Not Balancing Regular Investment Accounts and Retirement Accounts
Strike a balance between how much you contribute to regular investment accounts and any retirement accounts. Both are great for building savings and achieving growth over the long term. However, retirement accounts have tax advantages that standard brokerage accounts do not.
For example, if you have an IRA, try to contribute the annual limit so your savings will grow on a tax-deferred basis. After you’ve maxed out your retirement contributions, invest any leftover dollars you want to save into other types of investment accounts. With a standard brokerage account, you can often access different types of investment products that aren’t available with IRAs.
After years of having most of your expenses covered by the military, it can be overwhelming to return to life as a civilian. Because of this, many Veterans fall into the trap of overusing credit which can quickly spiral into late fees, interest charges, and significant debt.
Avoid this pitfall by limiting credit use to only what you can afford to pay off every month. Don’t open more lines of credit than you need, and don’t treat credit like it’s “free money.” It’s important to use credit responsibly so you can improve your credit score and provide opportunities to finance large purchases like a car or home, but taking on too much credit card debt can derail your financial plan for years to come.
Take the Next Step
Your financial life can be complicated, and sometimes it’s challenging to know which direction to go. Working with an experienced professional who provides trustworthy and objective advice can help you avoid these pitfalls and more.
Our team at Horizon Planning Group works closely with our clients to design financial strategies that provide confidence, clarity, and comfort for you and your family. To learn more about how we can help Veterans safeguard their financial futures, schedule an introductory meeting online or reach out to me at (770) 627-4157 or Nick@MyHorizonPG.com to get started.
Nick Marrano is a financial advisor at Horizon Planning Group, a full-service fiduciary financial planning firm committed to always doing what’s right for their clients. With almost 10 years of experience, Nick spends his days serving his military and first responder clients who give their lives to serve others. As a former U.S. Marine, he understands their challenges and desires to help his clients navigate their military benefits and customize a plan to their lifestyle that allows them to pursue their goals with confidence.
Nick has a bachelor’s degree in finances from Kennesaw State University. He lives in Marietta, Georgia, with his wife, daughter, and their two dogs. His favorite things to do are being outdoors with his family, traveling, and completing projects around the house, but he also won’t say no to unwinding with his friends and playing Xbox. Nick cares deeply about his community and gives back by volunteering with the Make-A-Wish Foundation and local charities that support foster-care needs. To learn more about Nick, connect with him on LinkedIn.