A Matter Of Life... Or Debt
Defense Credit Unions Help Military Families With Financial Counseling and Debt Management ServicesBy Jill Lisinski
Winter 2003-04
In my job as a credit union financial counselor, we have a saying: "People don't plan to fail, they fail to plan."
Our office sees three to five cases a week involving military personnel or military family members in serious financial distress, mostly due to poor financial management skills and lack of financial education or limited resources. I often hear the client remark upon the close of our initial meeting, "If only I had known about this service a year ago, I wouldn't be in the position I'm in today."
"The Department of Defense spends close to $1 billion annually on service members experiencing personal financial management difficulties," according to Dr. E. Thomas Garman, former professor at Virginia Tech's College of Human Resources and Education and Distinguished Scholar at the InCharge Institute of America.
Many Military Families in Bad Financial Shape
A 1998 study by the Military Family Institute, with Garman's participation, provided alarming insight into the dismal financial condition of many military members and their families. The study revealed that, of the $1 billion cost estimate:
- An estimated $117 million is spent for the direct administrative costs of handling the consequences of service members' financial mismanagement. Letters of Indebtedness, bad checks, wage garnishments, bankruptcies, retention, and military service assistance are some of the situations where the DoD intervenes.
- $560 million to $840 million is spent for indirect costs, such as lost productivity due to the personal financial difficulties of service members.
Furthermore, the study found that, out of the Navy's 430,000 members at that time:
- 99,000 wrote bad checks on the Navy Exchange System
- 35,000 had their wages garnished
- 43 percent reported problems paying monthly bills
- The Navy-Marine Corps Relief Society provided $48 million in direct aid for 91,000 financial assistance cases.
Defense Credit Unions Offer Financial Counseling and Education to Military Families and Service Members
Defense credit unions want our military families to know that financial counseling and education are available, often at no cost. We do more than help the member balance his or her checkbook from time to time or refer the person to the nearest credit repair agency. We take care of our own, through in-house financial education, budget counseling, money management, and (if available) debt management.
At our credit union, for example, some 425 credit union members annually take advantage of our free in-house financial counseling services - including debt management, at no cost to the member or participating creditors. (Sixty percent of our debt management clientele is military.) A positive alternative to bankruptcy, debt management helps members resolve their credit card debt through credit union-brokered renegotiations with creditors, employing such steps as lowering the interest rate and/or monthly payment amount, waiving late fees while on the program, or accepting reduced payments. In return, the member agrees to commit to a "cash-only" lifestyle for the length of the program, which ranges from six weeks to 60 months.
The counselor helps members learn basic financial management and budgeting skills so they can see how to avoid financial pitfalls encountered in the past. Upon completion, members are referred to the in-house financial planner for a no-cost initial consultation, where they learn how to build wealth through investment basics.
Our records indicate that members completing the debt management program eventually improve their credit scores, enabling them to qualify for new loans or other services offered within the credit union. This experience fosters increased member loyalty and satisfaction.
The goal of most military financial counselors, of course, is to prevent debt problems before they start. Establishing contact with young service members and military families with little or no credit (or debt) - and who are willing to listen - provides the best audience to educate about the real world of finance.
Military credit unions and the personal financial services they provide continue to be among the most widely available - yet largely untapped - resources for our members, DoD military and civilian personnel. With recent technological advances (such as personal credit union home banking or electronic billpaying), it is becoming easier to remain loyal to one's primary credit union, even while changing duty stations multiple times throughout a military career.
Defense credit unions are committed to help commanders, resource managers and other base officials enhance the personal financial readiness of all assigned personnel.
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Jill Lisinski is an Accredited Financial Counselor and Financial Counselor Manager with ABNB Federal Credit Union, Virginia Beach, VA.
