Military $ Mistakes Costing Vets Thousands

Did you know that nearly 20% of active military personnel struggle with financial readiness? This is a shocking statistic that highlights the need for greater awareness and proactive strategies. For veterans and those currently serving, avoiding common pitfalls can make a huge difference in long-term well-being. What simple mistakes could be setting you back years?

Ignoring the Savings Deposit Program (SDP) During Deployment

One of the most overlooked benefits for active duty personnel during deployment is the Savings Deposit Program (SDP). The SDP allows deployed service members in designated combat zones to deposit unallotted pay into a government-backed account that earns a guaranteed interest rate. That rate can be as high as 10% annually! According to the Department of Defense [DoD Financial Readiness](https://finred.usalearning.gov/FinancialLiteracy/Courses/savings_deposit_program), the SDP is designed to provide a safe and high-yield savings option.

I’ve seen too many service members leave money in low-interest checking accounts while deployed, missing out on significant returns. It’s essentially leaving money on the table. The SDP isn’t just a perk; it’s a financial tool specifically designed to help you grow your savings rapidly during a period when you might not have many opportunities to spend.

Think of it this way: If you deposit $10,000 into the SDP earning 10% annually, you’d earn $1,000 in interest in just one year. That’s a substantial return compared to the paltry interest rates offered by most civilian banks. Don’t let this opportunity pass you by.

Failing to Utilize the Servicemembers Civil Relief Act (SCRA)

The Servicemembers Civil Relief Act (SCRA) is a federal law designed to protect active duty service members from certain civil liabilities. One of its most significant provisions is the interest rate cap of 6% on debts incurred before entering active duty. This applies to mortgages, car loans, student loans, and other forms of debt. The U.S. Department of Justice [SCRA Resources](https://www.justice.gov/servicemembers/servicemembers-civil-relief-act-scra) page offers a wealth of information on this.

Many service members are unaware of this protection or fail to take the necessary steps to invoke it. This can result in paying significantly higher interest rates than necessary, especially on large debts like mortgages. We had a client last year who was paying 12% interest on a pre-service mortgage. By invoking the SCRA, we were able to reduce his interest rate to 6%, saving him thousands of dollars each year.

To take advantage of the SCRA, you typically need to provide your lender with a copy of your military orders. It’s a simple process that can have a huge impact on your finances. Contact the lender directly and ask about their specific procedures for SCRA benefits. Don’t assume they’ll automatically apply the benefit – you need to be proactive.

Inadequate Documentation of Medical Issues During Service

This is a big one, especially impacting veterans seeking disability benefits later on. Thoroughly documenting every medical issue, injury, and illness during your time in the active military is absolutely critical. Even seemingly minor issues can develop into chronic conditions later in life. The Department of Veterans Affairs [VA Benefits](https://www.va.gov/benefits/) website is the place to begin learning about this.

The problem? Many service members tough it out, avoiding medical attention for fear of appearing weak or being sidelined. They might treat injuries themselves or simply ignore symptoms, hoping they’ll go away. This can create a huge problem when filing a disability claim years later. Without documented evidence, it can be difficult to establish a service connection for your condition.

The VA requires a clear nexus between your current disability and your military service. That means you need medical records showing that the condition either originated during your service or was aggravated by it. So, even if you think something is minor, get it checked out and documented. Keep copies of all your medical records, and be as detailed as possible when describing your symptoms to medical professionals. For more information about VA disability claims, check out our guide.

Neglecting Thrift Savings Plan (TSP) Contributions

The Thrift Savings Plan (TSP) is a retirement savings plan for federal employees, including members of the uniformed services. It’s similar to a 401(k) plan in the private sector, offering a variety of investment options and tax advantages. The Federal Retirement Thrift Investment Board [TSP Website](https://www.tsp.gov/) has all the details.

One of the biggest mistakes I see is service members not contributing enough to their TSP, or not contributing at all. Especially early in their careers, many feel they can’t afford to contribute much. However, even small contributions can add up significantly over time, thanks to the power of compounding. Plus, the TSP offers matching contributions for those in the Blended Retirement System (BRS), essentially free money.

Let’s say a service member starts contributing $200 per month to their TSP at age 22, and they receive matching contributions under the BRS. Assuming an average annual return of 7%, their TSP could grow to over $500,000 by the time they reach retirement age. That’s a substantial nest egg that can provide financial security in retirement. Don’t underestimate the importance of starting early and contributing consistently. You can also learn more about how to secure your future after service with proper planning.

(Here’s what nobody tells you: If you get deployed to a combat zone, your TSP contributions are tax-exempt, which can further boost your savings!)

Assuming All Advice from Senior Enlisted is Sound Financial Guidance

Okay, this might ruffle some feathers, but hear me out. While senior enlisted personnel are invaluable sources of experience and leadership, their financial advice isn’t always the best. I say this with the utmost respect for the NCO corps, but financial expertise isn’t necessarily part of their job description.

I’ve heard countless stories of young service members receiving well-intentioned but ultimately misguided financial advice from their superiors. This might include investing in risky schemes, taking out high-interest loans, or making other poor financial decisions. The issue isn’t malice, but rather a lack of specialized financial knowledge. Just because someone is a great leader doesn’t mean they’re a great financial advisor.

Seek out qualified and objective financial professionals for advice. Look for certified financial planners (CFPs) or other credentialed advisors who have experience working with military personnel. Many military bases offer free financial counseling services, so take advantage of those resources. And remember, it’s okay to politely disagree with advice, even if it’s coming from someone in a position of authority. Your financial future is your responsibility.

The truth is, financial readiness is a crucial aspect of military service, yet it’s often overlooked. By avoiding these common mistakes, active duty personnel and veterans can set themselves up for a more secure and prosperous future. For example, did you know you could slash debt and unlock hidden VA benefits?

Disagreement With Conventional Wisdom

Here’s where I part ways with some common financial advice given to active military members: the idea that you should aggressively pay down all debt, no matter the interest rate. While being debt-free is a worthy goal, it’s not always the most financially sound strategy, especially given the unique benefits available to service members.

For example, if you have a low-interest mortgage (say, below 4%) and you’re eligible for the SDP earning 10%, it might make more sense to invest in the SDP and earn the higher return, rather than aggressively paying down the mortgage. The same logic applies to other low-interest debts. It’s about maximizing your overall financial position, not just blindly eliminating debt.

The key is to carefully analyze your individual situation and weigh the costs and benefits of each option. Don’t just follow conventional wisdom without considering your own circumstances and the unique opportunities available to you as a service member.

Don’t just passively accept the financial status quo. Take control of your finances by leveraging available resources and making informed decisions. Begin by reviewing your TSP contributions and exploring whether the Savings Deposit Program is right for you. You may also want to learn how to unlock home loan benefits.