By Laura Royer.
The COVID-19 pandemic has caused many military families to feel a financial crunch. As a Personal Finance Managers (PFMs) working with military families that are experiencing a financial setback, here are things that your clients can do to navigate a “financial storm.”
Assess Their Net Worth
Have your client conduct a net worth assessment to see what he or she has to work with financially. A net worth assessment is a calculation of the household’s assets (what they own) minus their liabilities (what they owe).
Preparing a net worth statement will help your client get a clearer understanding of their available financial resources and it will be useful in making decisions about how to best use the funds during a crisis.
The net worth assessment should identify the following:
- Liquid Assets – Cash or items owned that can be easily converted to cash. Be mindful of any assets that could charge fees for early withdrawals.
- Marketable Assets – Any asset that can be cashed in or sold for their current market value. Prices will fluctuate with market conditions.
- Additional Personal Assets – Personal property or real estate that can be sold but are not as liquid as cash assets. For example, a home, vehicle, furniture, and appliances. Also, the household should be aware that some of these assets may have depreciated in value so they will not receive as much money for them as what they spent when purchased.
- Non-Marketable Assets – Assets that are either difficult to turn into cash or cannot be sold at all.
It is important to note that withdrawing money from a retirement plan before age 59 1/2 usually involves a substantial penalty. Be sure your client speaks with an investment fund manager before pulling any money out of these types of accounts.
Create a Crisis Spending Plan
Next, help your client create a crisis spending plan. A crisis spending plan is different from a normal, everyday spending plan. In a crisis spending plan, a client minimizes all expenses and only leaves in expenses that are absolutely necessary or that they have an obligation to pay. The idea is to cut out all unnecessary spending temporarily while the client is facing financial hardship. For example, a family may decide not to eat out or cut the cable temporarily until they get back in a financially steady situation.
Prioritize Expenses
Part of creating a realistic crisis spending plan is for the household to prioritize all bills or expenses. Help your client determine how much money is needed to cover essential monthly living expenses and determine if enough income is coming in to cover those expenses. If not, having expenses prioritized in order of priority will help the client make difficult, yet important, decisions about which bills or expenses to cover first, second, third, and so on.
Free Up Money from Services
After your client has prioritized expenses, have them assess their bills and look for ways to minimize costs by freeing up services they do not use or need.
Examples of bills to review and look for ways to stretch dollars include:
- Cell phone service – look at minutes or data used, extra lines that may not be needed, tablets that do not need to be on data plans, etc.
- Utilities – identify ways to save on water or electric bills.
- Insurance costs – review all insurance policies to see if any adjustments can be made to lower premium costs.
- Monthly subscriptions – cut out all unnecessary memberships like gym, movie packages, mobile apps, deliveries, etc.
Identify Ways to Generate Extra Income
When experiencing a financial setback, a military family may have other ways to generate extra income. He or she could:
- Sell unwanted stuff from around the house on Facebook Marketplace, eBay, or other online stores.
- Offer freelance services such as writing blogs, photography, online or in-person tutoring, lesson plans for homeschooling, dog walking, editing documents, video, or audio. Have your client search on the internet for great websites to list their freelancing services.
- Rent out stuff such as lawn equipment, an extra room, storage space, boats, jet skis, etc.
Look for Assistance Programs that Will Help
If someone in your client’s family has lost their job and has not done so yet, help your client apply for unemployment benefits if they qualify. It may take a while for the application to be processed, but if they are approved the money will be retroactive.
Based on the situation, have the military family apply for local assistance programs such as help with their utility bills through LIHEAP or SNAP for grocery assistance. If they rent their home, there may be programs locally that will help pay their rent. If they need help with a mortgage, they may qualify for mortgage payment forbearance if they have a federally-backed mortgage. You can help clients find a HUD-approved counselor that can examine their options by finding a local office here.
The CARES Act has many relief programs available to families impacted by COVID-19. Read more about the available assistance here.
For assistance specifically for military families, check out:
- Army Emergency Relief – https://www.armyemergencyrelief.org/assistance/
- Coast Guard Mutual Assistance – https://www.cgmahq.org/assistance/introduction.html
- Air Force Aid Society – https://afas.org/
- Navy-Marine Corps Relief Society – https://www.nmcrs.org/
- Operation We Are Here – http://www.operationwearehere.com/FinancialAssistance.html
- USA Cares – https://usacares.org/
- VFW Assistance – https://www.vfw.org/assistance
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