Service members urged to take advantage of the PFMP Special to the ICFE from Aviano Family Support Center in Italy

Air Force Aid, Army Community Service, and the Fleet and Family Support Centers are all resources especially designed to help members of the military and their family deal with financial emergencies. Those who are deployed and those about to be deployed, as well as those serving stateside or about to leave the armed services out of financial emergencies should consider the benefits of these programs.

"More importantly it can also help you get a fresh start financially" says Chad D Nelson who manages the Personal Financial Management Program and serves as an Air Force Aid Society Officer at the Aviano Family Support Center in Italy, Mr. Nelson, who is also an ICFE certified credit report reviewer insists that "there is a better way to get a helping hand, and it's right at the end of your sleeve. It is you."

He believes many financial problems experienced, especially by military personnel can be avoided by simply planning ahead. "By curtailing spending on wants and wishes and by socking away a set percentage in the Thrift Savings Plan (TSP), for example, which is a painless "pay yourself first" methodology that makes saving for members easiest, reaching retirement is possible for everyone. The maximum contribution is nine percent of basic pay in 2004, ten percent in 2005 and in 2006 the TSP contribution limits are eliminated all together. By 2006, military members and GS employees can put away up to $15,000 per year according to IRS limitations. This is tax deferred income to be used when we no longer have employment and will wish to use our retirement for the good things in life.

"Putting away a percentage of your earnings every month to meet future emergencies and expenses makes good sense; however, very few of us do this today because of a wide and easy availability of credit. This practice of spending income and saving nothing can prove very dangerous anytime an emergency situation arises," he advises.

Mr. Nelson explains to clients who come in for guidance under the Personal Financial Management Program (PFMP) that the existence of a three to six month reserve fund sitting in a savings account is important. The key to this positive, net worth building exercise is financial self-discipline which people like Mr. Nelson can help their fellow service members develop. They can help establish a plan for both spending and savings and provide some motivation too, so folks will stick to it.

Mr. Nelson teaches his clients that financial success is not based on how many dollars one brings home, but rather what is done with those dollars once they get them there. Mostly, the main ingredient for growing your finances is common sense. Simplicity does lead to financial stability. This begins with being able to determine the difference between needs and wants. Taking care of the needs now and setting aside the wants for later is what he tells his clients. "This is not an easy thing to do in today's "I want it now" mentality. The bottom line is until more income is made or fewer expenses are managed, the lifestyle of "buying it all now" needs to be put on the back burner until our lifestyle can be adjusted."

"Many Air Force Aid Society (AFAS) clients are E-3s" said Mr. Nelson who recently counseled an Airman and spouse who came in for guidance and brought with them their current leave and earnings statement and other expense documentation to justify assistance. Each expense is reviewed along the member's budget and current living status. The need for requesting financial assistance must be explained, Mr. Nelson tells the ICFE. The following is a typical story:

"The car I was driving was costing so much in repairs that I bought a new 2004 car."

"The new car costs in excess of $26,000 and leaves me with a monthly payment of $340."

"The insurance on my old car was costing me $90 a month, but insurance on my new car requires full-coverage, bringing the monthly bill to $210."

"My wife had a job, but had to quit because.... "

"We bought a room full of furniture for our apartment so we would have a nice place to relax when not at work. Next, in order to pay off previous expenses, I took advance pay and ended up spending it on some other things rather than using it for existing debts. We were getting so far behind with our charge card account payments that we took out a "bill consolidation" loan from one of the easy on-line financial institutions."

"By now you might be thinking that no one does things like that," said Mr. Nelson. "But I'm afraid they do. We see applications every week that follow the same scenarios you just read," he continued.

"First, the individual assumes that by needing a new car, the newest model is needed, failing to realize that a two to three-year old vehicle will meet their needs just as well as a new model will. Second, they got credit from the car dealership, whose main business is selling cars, instead of going to a financial institution whose main business is carrying-out financial matters.

"Next, that $340 monthly car payment would have paid for a lot of repairs, especially when added to the increase in insurance premiums. Now you're beginning to see that this Airman is adding to his own financial problems by not using common sense and by not doing his research before making a decision," Mr. Nelson pointed out. "Further, the comment about 'my wife's income is no longer available' meant they depended on that second income to meet payments for wants instead of using it to meet needs. By fulfilling their wants in this way means they created a financial disaster for themselves when that income or ability to generate income was lost," he added.

It appears that too many young married people have the idea that "when I lived at home, we had ..." and they attempt to meet those same standards, almost overnight. What is being missed here is that when they were at home, they were living with parents who had a few years to obtain those "niceties" now being enjoyed. Now that they are on their own, they want to obtain those same standards immediately.

PFMP Manager Mr. Nelson teaches them to plan, research, comparison shop, then save and buy. Those dollars spent on interest, just to have something new now, does not buy anything more than financial instability and uncertainty, and only brings fleeting happiness...until the bills arrive.

Consider this: A $120 pair of sneakers on sale charged on a $1000 credit card balance at 18% APR with the minimum charge of $20 being paid monthly will actually cost $240 by the time the card is paid off. Amazed? Don't be. This is what generated the funds to build most of the skyscrapers on almost every street corner in America. It is the American clich of the "Rich get Richer, and the poor live a little better..."

Taking advance pay or taking out a bill consolidation loan are resources available which may help - but only after looking at what the consequences are when the time comes to make those new payments. Sometimes the short-term solution to a financial problem leads to long term privation and hardship without first focusing on the reasons behind the problem- like lifestyle and behavior. Stop to think - "What will this cause me to do tomorrow?" - before signing that contract for cash today.

The family support center has continuing programs designed to help service members learn more about finances. Take advantage of this opportunity before getting into financial difficulty; not after.

The programs available include:

1) One to One financial management counseling for debt resolution, budgeting for expenditures, cash reserve/emergency fund establishment, savings, investments and the importance of retirement funds for military or civilian employees

2) "Getting Out of Debt" classes are available and are offered on a monthly basis

3) "First Time Investors" classes acquaint the newer members of the military to ideals of how to make more money using tools that generate interest, dividends or simple profit

4) "Personal Financial Refresher" courses that address officers and enlisted that are new to Aviano AB, IT, USAFE. This is a mandatory class that helps to avoid spending and debt problems that currently occur at record number

The objective is to have you learn how to manage your finances, not let your finances manage you.

To determine how good of a spender you are, try the interactive Spender's Quiz and Overspenders Quiz on the ICFE's web site: (

For more information about these and other services contact the CFS about the PFMP at your installation.

To contact PFMS Chad Nelson:

Chad D Nelson Personal Financial Management Program Air Force Aid Society Officer 31 MSS/DPF Aviano Family Support Center DSN 632-5657 Comm 011-39-043-466-5657

The ICFE, an official partner with the DOD's Financial Readiness Campaign.

For more information, please contact:

Paul Richard, RFC Executive Director Institute of Consumer Financial Education PO Box 34070 San Diego, CA 92163