Debt After Military; Tips for Money Management

Monday, January 06, 2020 / 08:30 AM / Sponsored Post / Pete McAllister / Header Image Credit: Stripes

When enlisted in the army, your patriotism is reflected in your salary, and you should take full advantage of it and turn it into a resource that will help you when you leave the service. It's common to have debts even when you are serving in the military, which makes it vital to learn how to manage your money. If you are about to leave the service, these tips will help you get out of debt and manage your money.

Take Care of Your Credit Score

When on active duty, it's common to ignore your credit score because of your relationship with the military. As a civilian, your credit score becomes the most significant factor in getting loans and lower interest rates. A credit score of 700 and above is considered great with that of more than 800 considered excellent.  Most people range between 600 and 750, which is what's needed to show confidence that you repay your future debt. If your score is lower than this, and you are still in service, paying your debts on time will help you pull your score higher.

Consolidate Your Loan

Consolidation is taking out one large loan to repay your small loans.  It can help you manage your loans because you don't have to worry about paying tons of smaller loans at the same time. Although the VA does not have consolidation loans, they have a VA loan refinance that's considered the same as a consolidation. If you own a home that was financed with a VA loan, you may be eligible if you meet other qualifications. The VA will appraise your home to make sure that consolidating your debt will not exceed the value of your home.

Don't Let Credit Card Debt Pile Up

The Servicemembers Civil Relief Act protects you from paying high-interest loans while you are on active duty, but standard interest rates kick in when you leave. Interest rates are usually double digits, so if you are not careful, your interest can pile up. Don't ignore the bills. Instead, pay them on time to maintain a high credit score and reduce the stress that comes with paying too many costly bills. Read the fine prints on your credit card to learn when you need to make payments, so you stay on top of your game. 

Start Saving Early

The most effective way to manage your money is to always have a buffer account. If you haven't opened one yet, it's time to start thinking of saving money for emergencies and retirement. Open a dedicated account for emergencies and start contributing to 401K. When you have enough saved to last you at least six months, start thinking of investing your money in stocks, bonds, and other investment plans. Growing your money will give you freedom when you leave the service and secure a comfortable like for you and your family.

The earlier you start managing your money, the easier it will be to get out of debt. Talk to a financial advisor and know your options before making any significant financial decision.

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