American humorist Will Rodgers once said, "A vision without a plan is just a hallucination." Most families have a vision for their future. It might include buying a home, starting a new career after military service, sending the kids to college and retiring comfortably. But how many of us have a comprehensive plan for how we will achieve our vision? Having a financial plan is an important undertaking during each phase of a family's life to make sure visions turn into reality. This is especially the case for families that have a member with a disability, who may need support in adulthood.
Financial planning basics
Military families are no different than other families when it comes to planning for the future. Most families make sacrifices to accomplish goals for a secure financial future. A comprehensive financial plan is a framework to organize all the pieces of your financial life (income, assets, liabilities, etc.) In a way that brings your goals and the choices you will have to make to achieve them into sharp focus. In with military life, relocating to another duty station is always included in the plan for financial stability. The earlier you start to plan for your financial future, the fewer difficult choices you may have to make. A good financial plan will:
- Provide a clear picture of your current financial situation
- Establish and prioritize your financial goals and the timeframes for achieving them
- Identify strategies you will use to address weaknesses in your financial situation and build on its strengths
- Identify the financial products or services you will use to help you achieve your goals
Financial planning does not end once your plan has been created. Because life happens, you can expect to modify your plan as new or unforeseen circumstances affect your family's financial situation - an extended illness, birth of a child or job loss, for example. Maybe your goals and time horizons change, or perhaps fluctuations in the economy or tax laws make a positive or negative impact on your resources. It's a good idea to review your financial plan each year to make sure it continues to support your vision and goals.
Common financial planning areas
The typical financial plan will address several broad areas that encompass most families' specific goals for the future they envision. Military OneSource has information and resources to help you plan and refine your goals, so be sure to check out the links included with each of these planning areas.
- Reducing debt - It is much more difficult to put your financial plan to work if you have or continue to accumulate debt from credit cards or other high-interest loans. Your first priority should be to reduce and eventually eliminate this debt so that more of your income can be applied to saving and investing for the future. See the article, Reducing Your Dependency on Debt, for specific actions you can take.
- Building an emergency fund - Many financial advisors recommend having three to six months of your normal income in an account that's safe and liquid. This account should only be used to cover unforeseen financial emergencies and as a place to save for planned major expenses. Taking advantage of the Savings Deposit Program while you're deployed is one way to get a head start on building your emergency fund and other goals as well.
- Saving and investing for college - If you envision paying for college in the future, it's important to have a good understanding of the cost and the ways you can lower expenses, such as beginning a 529 college savings plan. Financing a college education is a goal you can start planning for as soon as a child is born.
- Saving and investing for retirement - A comprehensive financial plan should address retirement, even when it seems very far off. Service members can participate in one or both of the Thrift Savings Plan options (traditional or Roth TSP), which make saving for retirement easy. Many military spouses work for employers that match contributions to a 401(k) plan. Any employer-sponsored retirement program that offers tax advantages or matching contributions is a smart way to invest in having a comfortable retirement.
- Providing for your family in the event of death - As a service member or veteran, you have the benefit of low-cost group life insurance through the government. For all of your family's insurance requirements at each stage of life, your planning task will be to select the amount of coverage that best meets your needs for the least cost.
Financial planning when a family member has special needs
Families with a member who has special needs may also require special financial planning, depending on the type and degree of the family member's disability. Your special-needs financial plan might address:
- Making sure you're taking full advantage of tax benefits and strategies that can offset the costs associated with your family member's care
- Working with your teenage or young adult family member to plan a course of action that will lead to the greatest degree of independent living
- Making potentially complex arrangements for the long-term care and quality of life of a family member in a way that does not put his or her eligibility for government benefits in jeopardy
Military OneSource has information in each of these areas. The article, Financial Planning for Parents of Children with Special Needs will give you an overview of tax benefits and estate planning. If you have a child with a disability who is approaching the age of adulthood, be sure to learn about person-centered planning. And if you'll be planning for the future care of a family member with special needs over his or her lifetime, you'll want to know about guardianships and conservatorships and special needs trusts. You can find articles and online tutorials about all of these topics and more on the special needs financial planning page.
Financial planning consultation
As you learn more about financial planning, you may realize that you need some professional expertise to help you plan. At your installation, the Personal Financial Management Program has classes and counseling sessions to help with all aspects of financial planning. The Exceptional Family Member Program can provide you with information and resources that may help you decide what to include in your planning for special needs. And the legal assistance office can help you with information and advice related to your estate planning. Contact information for these installation programs is available through MilitaryINSTALLATIONS.