Military Family Financial Planning
Military life is different and so are your finances. There are deployments, postings, you might not have family close by and you might have businesses willing to give you a “great” deal. Let’s examine financial planning from a military perspective.
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Special Guest
Suzie Fines is a financial planner with SISIP at CFB Esquimalt. She has over 15 years experience in the financial services industry. She works exclusively with serving and released Canadian Armed Forces members and their families.
Highlights
- How postings and deployments factor into financial planning.
- 7:31 Military provides some terrific financial benefits.
- 13:01 Advice for someone just starting out in the military.
- Stay away from car dealerships.
- 20:03 The benefits of the military lifestyle.
- The importance of communication.
- Education is so important.
Quotes
“A failure to plan is a plan to fail. So the sooner you start working on a plan, and getting an idea of what the future can look like, then understand what it is you need to do to close the gap.” – Suzie Fines
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Thank you
- This podcast is made possible by funding from True Patriot Love Foundation.
- Thank you to Organized Sound Productions for their help bringing this podcast to life.
Transcript by Otter.ai
Intro
This podcast is made possible by funding from True Patriot Love Foundation.
Michelle
I’m Acting Sub Lieutenant Michelle Scott. I’m a public affairs officer for the Navy. As a supervisor, I’ve experienced it myself. But when you are, you know, in your late teens, you’re 19, or you’re 20. And you join the military and it feels like you’re making a ton of money. Suddenly, people have the tendency to go out and spend it like crazy, especially on deployments or you’re getting tax free or what other benefits, people end up wasting a lot of money on things that they don’t need. And I’m certainly guilty of that. But I would just say, to be a bit cautious to start because a lot of people will get those first couple paychecks and think. Okay, this is dependable money and making way more money than I’m used to. I’m going to go out and buy this super fancy expensive car. They don’t realize that they’re locked into that car and that payment for quite a long time. Maybe trying to look a little more long term and at those financial aspects that they’re setting themselves up for, because I think, just as young people, that’s not something we naturally want to do. And I know I’ve, I’ve seen that with my friends and even myself.
Intro
The military lifestyle is all encompassing. It’s difficult, but rewarding, dynamic, very, very dynamic. Unpredictable. You are in the Canadian Armed Forces, or a family member connected to the military. You know, the lifestyle can be a challenge. The military lifestyle is always changing. In this podcast, we explore the world of deployments, postings, and transitions. This is the military lifestyle. Here’s your host, Jon Chabun.
Jon
Military life is different. So are your finances. Deployments, postings, you might not have family close by, and you might have businesses willing to give you a “great” deal. Yeah. Suzie Fines has over 15 years experience in the financial services industry. She spent the past few years working with serving and released Canadian Armed Forces members and their families.
So today, we’re here to talk a little bit about financial planning with Suzie Fines that Suzie is from SISIP, which stands for Servicemen’s Income Security Insurance Plan. And that’s why I think we like acronyms here in the military. Military Family Resource Center or Esquimalt Military Family Resource Centre. Which is 13 syllables if you were wondering. That’s why we call it the MFRC. Welcome Suzie. Thank you.
Suzie
Thank you very much, Jon.
Jon
So when it comes to financial planning. It’s important for everyone. Civilians, military members and their families. But how are the needs of military families different from civilians?
Suzie
It’s a very unique lifestyle to the military life that means postings and deployment. And with both of these come risk and opportunity. With postings, the risks are change to household incomes, as a spouse may have to change jobs. So building a cushion of savings in advance and not taking on more debt is good planning. It’s important to understand where the household income goes each month, find a process that works well for you. It’s no good building a spreadsheet if you don’t use it. And I often hear of families that have built a spreadsheet, they’ve started to do something but they sort of lose the momentum, the enthusiasm, the motivation, and they don’t go back to keep it up to date and not keeping a line of sight to their finances. The good news is there’s some really good apps out there that can help members and their families track their expenses, see where their money goes each month. By virtue of doing that you can find areas that you can trim back and take control and start to build savings not only for the future, but also for unexpected costs. So this will provide peace of mind and help reduce financial stress when you know you have a posting coming up, when you know there’s a potential for the spouse’s income to drop, decrease, or perhaps even stop for a period of time until they can find alternative employment. The other thing is to when making major purchases through financing. It’s also very important not to use allowances when calculating how much you can afford, as these allowances can change with your posting. And by virtue of that in the future, you could potentially put your family finances under pressure. So I talked about the risks there associated from a financial perspective for military families as a little bit different to civilians, but there’s also opportunity. When we look at deployment, for example, there’s an increase in pay with deployments. Having a plan and having to use this extra money. What’s the priority for the family? It could be a combination of paying down some debt, and saving. And some deployments also provide tax free income. So I highly recommend members of their family take advantage of this and plan ahead. What I don’t recommend and for an example, because I do see this is the spending of sea pay in advance. And I’ve seen members make these nice to have purchases which aren’t essential. They’re just things they want to treat or reward themselves because they know they have an upcoming deployment, and they spend their sea pay before they’ve even earned it. So they basically spend it in advance charge it to the credit card, expecting to pay that off when the sea pay comes in. But I can tell you spending money you don’t have is not the path to financial success.
Jon
And you spoke of apps, maybe websites to help people manage their money. Personally, I use something called Mint. Are you familiar with that one?
Suzie
I am familiar with Mint.
Jon
Is anything else you’d recommend?
Suzie
Most banks, major banks on the street now provide their own tracking you can download on your phone to see where expenses go. You know, one thing to keep in mind with Mint. Mint is actually a third party application to a bank. If any reason the Mint application was compromised via your mobile application, and then in turn compromised your bank accounts, the banks sometimes will throw their hands up and say there’s nothing they can do to protect you because you used the third party application. So you want to again, always be cautious of how you use and protect your passwords. And make sure you understand how some of these financial applications work alongside the information you’re sharing with your bank and ensuring you’re covered should there be any fraudulent activity.
Jon
So I should change my password from 123Hello. Is that right? Is that a bad idea?
Suzie
Yeah. 123Hello, password is another, 1066 is another popular one, the Battle of Hastings. Okay, that’s a popular one, I think in Britain. But absolutely you should be changing a password on a regular basis.
Jon
There just so many passwords. So I have so many passwords. I don’t know how to do it. So what does the military take care of and what do families need to look out for?
Suzie
So from financial point of view, the military provides some terrific financial benefits. Health and dental plan. Members enroll in a health and dental coverage when they join, which can save family’s a lot of money. In addition to this members participate in a defined benefit pension plan. In the private sector, there are now very few corporations that offer this kind of pension plan. And also, at the same time, the military offers or provides to the members supplementary death benefit, which is equal to two times the base salary. So there’s some real basic financial benefits that are provided from health care coverage, pension, as well as a supplementary death benefit, which is really good baseline coming in when you join the forces, and they’re in turn to provide support and protect your family. But areas that family need to look out for is — is that insurance enough? One thing I’d really encourage families to do is take a look at the level of insurance you currently have in place today, because insurance is there not only to perhaps pay out and protect the largest asset, for example, the home or mortgage, it is also disperse liabilities, but insurance is also to replace income for the long term. That income that potentially has been lost would have helped provide, you know, the cost for children’s post secondary education. Any other financial goals are important to the family. So I really encourage, you know, military families to come out to gather to a SISIP Financial office and have an insurance needs analysis conducted. Well, we can establish just how much insurance you really do need for your family because everybody’s situation is unique. We take in consideration for supplementary death benefit that’s currently in place through the forces and ensure that the military families are properly protected.
Jon
Do you find that people things like Long Term Disability, critical illness insurance? Do you have a lot of clients purchasing those?
Suzie
We certainly do for those I think, who are informed and educated and understand the benefits of them. I mean, critical illness, for example, if you look at the list of illnesses that can be covered through the critical illness policy, you know, you go back 20 plus years, some of those illnesses potentially would have actually killed you, which the life insurance would have stepped in and taken care of the family at a time, but we’re now actually surviving these illnesses. We’re actually living longer and we’re also living longer with critical illness, so with the advancement of medication, you know, we’re hearing more and more people being touched by some illnesses like cancer, etc, and surviving, which is terrific news. But that’s what a critical illness policy is, it’s really giving that extra boost of, of capital to help a family during that time, where there is perhaps hardship by virtue of medical circumstances, or maybe adjustments of a home by virtue an illness being suffered. So it’s well worth exploring to see if those benefits and coverage would basically protect the family. So I’d encourage you to come out to a SISIP office and understand some of the other programs we have in place to protect the families.
Jon
I guess, other side is looking at post career income, obviously, they’ll be able to draw upon a pension at some point, but what is your perspective there when it comes to income.
Suzie
So really, again, it’s planning ahead, Jon. really taking a look at you know where you are today, if you took a financial snapshot, you know what your monthly expenses are, you should determine what your essential expenses are, your fixed expenses, which could be, you know, rent, mortgage, car payment, because it’s a commitment or payment, you have to make car insurance, gas, food, etc. So there’s some expenses that aren’t going to change. There’s going to be discretionary expenses. But it’s really understanding, you know, how much income do you need post release. One of the things to consider definitely for those who are perhaps in PMQs is the change in rental costs. Once you leave the forces and transition that could immediately put an increase to your monthly expenses. So again, when you’re preparing for release coming up, it’s planning ahead is making having a good understanding of how much money you you need today, you know, where you can cut back on discretionary expenses, which will then give you an idea in your next career, how much income you need, you know, to sustain your current lifestyle.
Jon
Do you find that military members post release need more money than a regular civilian would?
Suzie
It’s unique circumstance for each member in their family to what their disciplines have been from the very beginning rate of pay, etc, how much debt accumulated. So it’s, it’s really unique to each family. But I would definitely say, you know, a failure to plan is a plan to fail. So the sooner you start working on a plan, and getting an idea of what the future can look like, then understand what it is you need to do to close the gap. So if you’ve got a lot of debt, while you’re still earning a regular paycheck through the armed forces, and you know exactly what your income is, develop a strategy and try and get some of that debt paid down. So there’s less pressure post release as you seek alternative employment.
Jon
So if somebody was just starting out in the military, what financial advice would you give? Fresh slate.
Suzie
If they’re just starting out in the military, I would say pay yourself first. Don’t kick the can down the road. Just do it. I have too many members come in my office today that their first words are Suzie I should have should shoulda shoulda, shoulda woulda coulda. So I would say save early and get the benefits of compound growth over time. It’s better to do a little now, then come 20-30 years when you’re sort of 45 thinking I need to do something and then have to try and save a lot and not have time on your side. I can tell you right now, if you just don’t procrastinate. If you’re waiting to do a training session, you just come on board, you got time on your hands, get down to the SISIP Financial office. Open the CAF savings plan that is provided to members of the Canadian Armed Forces and their spouses. You can start for as little as $25 a month. There are five investment portfolios you can choose from. They are professionally managed, they are low cost, and the beauty of it, it’s on autopilot, you have that savings go directly from your payroll. So you learn to live on your net. And that money gets put away for the future and that time and the compound growth over time, you will definitely come back, your future self will thank you for doing that. That’s for sure. There’s no doubt about it. And again, too many times I see people procrastinating for whatever reason, and they don’t do it. My second piece of advice is to stay away from the car dealer forecourts. The depreciation on new vehicle is approximately 10%. As soon as you drive it off the forecourt and within 12 months, the vehicles basically depreciate by 20% Why not find a reliable use vehicle they can get you safely around and instead of making a car payment each month, put what would have been that car payment, let’s say five hundred dollars put $500 a month away in a tax free savings account. So you don’t have to pay any tax on the money that you’re saving over five years with a 5% return, you will save over $34,000. And at that point, you can choose to go and buy that in cash and not have a monthly payment to make. Or you now have a nice lump sum towards a down payment on a property. But I’d have to say I see too many young members hindered by large monthly vehicle payments, that basically they are buying on emotion. And I can tell you it’s so important that when you’re making major decisions like this regarding a purchase that you’re looking to finance, you really need to step away ,go home and think about it. The salesman on these card dealers forecourts they are trained in the psychology of selling. They know exactly what questions to ask, how to manipulate you and their goal is to make sure you don’t step off that forecourt without signing a contract. But I’ll tell you, there are plenty of vehicles for sale in your hometown. So before you sign on the dotted line, go home and think about it. Think to yourself for a moment, does this make financial sense based on your personal situation and the financial goals you have in mind over the next five years? Because once you commit to that payment, you’re pretty much set. When I see members get into financial distress, they can’t even sell the vehicle to pay off the car loan because the vehicles depreciate so much. So again, that’s usually one of the first major purchases I see. I really encourage members to really think hard before making that purchase.
Jon
Post deployment. Sometimes you see a surge of people buying vehicles and I heard someone say that there was, you buy a truck for $70,000. I thought what, really? Wow, that’s a lot of money to spend on a truck and do you really need that truck? Who knows? Yeah.
Suzie
I don’t know, you know what, we all have our passions and our pursuits. But you know, you can be car rich and cash poor to a certain extent. But even let’s take an example. A $70,000 truck. Wow, what a set of wheels, what a set of wheels, it’s costing you “x” about a month to carry, yes, you’re always going to have vehicle costs, but you potentially have higher insurance costs because of the value of the vehicle. And what a shame to paying all those costs when he potentially could be deployed for six months, you’re paying to have it parked on the street for six months. I mean, there’s always things to consider regarding the usage of your vehicle, storage costs, etc.
Jon
Everything else you’d mentioned to somebody who’s new to the military?
Suzie
Really is just understanding all the resources and benefits that are available to you within the military community. You know, there are lots of places you can go to get advice, you know, to get support, and really become familiar with your military community as soon as possible.
Jon
You spoke a little bit at the beginning, what are some of the challenges that the military lifestyle presents financially to families?
Suzie
Yeah. And to really recap on what I mentioned there at the beginning, Jon, it can be a bumpy road for the military spouse employment and therefore can disrupt the household income. There’s also the reliance on allowances that can change and the families choose to include an income when seeking to borrow money that potentially overextend themselves, creating a path to financial stress in the future. We’re currently in a period of low interest rates. And, by the looks of things, these low interest rates could stick around now longer than was originally thought. However, when those interest rates do start to climb, there’s no doubt about it, but those families with high levels of debt will start to feel the squeeze. So you need to protect your credit, pay your bills on time. Know where your money goes each month, develop a budget. Now most people don’t like the B word. So I usually say develop a spending plan, sounds way more fun, identify, you know where your services are that you can turn around and pay down debt and start to build some reserves for emergency purposes. So you’re not using credit cards for unforeseen expenses. And ask yourself, you know, do you control your money? Or do you feel that your money is controlling you? Don’t ignore it. If you feel it’s getting out of control, then I really encourage you, again, you know, financial stress is building come on down to your local SISIP financial office and asked to speak with a financial counselor. So, you know, we can take a line of sight to what’s going on and see what we can do to help you better manage that and really take control to get the stress out of your life.
Jon
Some of those specific military lifestyle challenges, things like you’re talking about spousal income, the uncertainty over that, and obviously dealing with postings and whatnot. That can be huge, but there are some benefits to the lifestyle as well. Right?
Suzie
Absolutely.
Jon
What are some of the things you would mention to people about that?
Suzie
Purely from a financial point of view. You know, the benefits of military lifestyle is there’s a recession proof regular paycheck. I mean, in this day and age, it’s something we need to look at. You’ve got a best in class pension plan, great health and dental coverage. And through the Canadian Forces, morale and welfare service, you have access to an exclusive financial services arm which is SISIP Financial, we only serve those who serve and have served, you have the opportunity to come in and meet with professionals. Most of us are highly accredited with long tenure within the financial services sector. And we really understand the nuances of military lifestyle. We can understand the acronyms, the jargon, the pension paperwork, we see that on a regular basis. And the nice thing about it is we’re with military personnel right through their careers from enrollment to various postings, promotions where they have the opportunity to save the increase to pay right through to their release. You know, with other releases, also medical release, you know, we’re there to provide financial guidance and support ahead of time. So the well prepared, and we can plan accordingly and even into retirement and post retirement because we’ll continue to work with our members, even after they’ve released but we’re not open to the general public. So again, no, a great benefit of the military lifestyle to have a dedicated service with professionals right there on the base.
Jon
What do you recommend to families when it comes to financial planning, like well, what are some of your big things that you like to hammer home?
Suzie
Communication. It’s absolutely essential that there’s financial transparency. It is no good hiding credit card statements, feeling guilty and all those emotions that get built up, always be honest and open with each other. It’s also proven that women still lag men when it comes to financial literacy. Yet statistically women will outlive men, and potentially will have to manage those assets on their own later in life. The men tend to be the chief financial officers of the home. And so I really encourage them to start to include their spouses in financial decisions and help build up a financial education. Because initially, they may not understand so they don’t want to know but really encourage them to take an interest. And once they start to grasp it and better understand it, that’s a win-win for everybody. And also include your children, financial literacy for children will give them some great life skills down the road where they can make good decisions early on, and perhaps in some instances, not repeat mistakes, you know, that we may have made as parents. So you know, let’s provide some good guidance for our families as well.
Jon
Some advice I would give just, me myself, I would say emergency fund. Build one, contribute to it. You never know when you’ll need it. It’s a huge huge thing.
Suzie
That’s true I mean life happens and you know whipping out the credit card really isn’t the answer. It’s convenient and, at that point in time, then you should really have the funds to pay that bill off. Always before you know it the interest compounds your back to a minimum payment and it almost on a never never plan. Another thing I was going to mention to overall here is estate planning, which just to cover off with members when they first joined the forces you have a there’s a basic will that is provided by the military but it’s very basic. So you know as a family expands, or perhaps it might get more complex, you know, by virtue of you know, families coming together with children from previous marriages, etc. You always want to take a look at the will and make sure it’s constructed properly reflects your wishes and reflects your current family. So as this changes, you know, as children arrive, or unfortunately as events happen, whether it’s divorce, that’s usually a flag to say to yourself hmm who are the beneficiaries on my insurance policies? Who are the beneficiaries and my register plans my RSVP or my tax free savings account? You know, how is my will currently constructed? Should I be making changes to that? So, because the military will is very basic, you know, I would encourage, you know, families to employ the resources of a lawyer or a notary and have them not only draft up a will but also draft up in general power of attorney, which also create some flexibility when there are positions with that has to be made or contract signed, when I members deployed, the family can still get that done.
Jon
Definitely. I think that’s super important. If you know you’re going to be away for work related reasons, and gather information like things like financial obligations, account numbers, contact information. Sometimes people can have it spread over many different areas. Communicate, great idea on your part. And yeah, reviewing and updating insurance policies. Whenever somebody new enters your life, you have a child update, information, update your will. Definitely I think that’s huge.
Suzie
And I think having a place where everybody knows where it is, that’s very good when it comes to you know, pension or pension benefits or survivor benefits, copy of the will, general power of attorney, everything should really be in one location. If something did happen, and a surviving spouse needed to quickly find information, he or she would know exactly where they go and everything they need to be in one area so that they can quickly reach out to the various departments to make sure they’re taken care of in an expedited manner. But it’s finding all this information as quickly as possible. When it comes to the will, there is a lawyer that speaks at the local SCAN here and he always says you know the best place to keep a will and, you know few people put up what I thought were very good educated responses like a safety deposit of the bank or leave it with the lawyers office, but he said actually if you have a home the best place to keep it is in your freezer.
Jon
Yeah, that’s what my parents did.
Suzie
Basically saying I think that was something a recommendation from the fire department don’t quote me, I’m not making this recommendation myself. But he’s basically saying you know, the fridge freezer itself is not fireproof, but it’s probably the last thing to smolder.
Jon
I’d be going, I be digging through there looking for ice cream or something. Right. Have some food and what are these documents doing in my? Yeah, so definitely. Is there anything else you would mention before we sign off here?
Suzie
Oh, I think you know, when it comes to finances, education, Jon is so important. And there are plenty of resources out there. You know, whether it’s a podcast you dial into to get tips some tricks, you know, whatever medium resonates with your best, but go out there, whether it’s reading a book, doing it online, coming out to a seminar, maybe put on by system financial coming out to workshops put on by the Military Family Resource Centre, but get yourself educated because when you’re educated, you’re informed. And when you’re informed, you make the right decisions, and you make the decisions with confidence. And when it comes to financial education, you know, really make sure that the women in our lives are very much included in that journey. And again, I encourage you to share that with your children.
Jon
Yes, definitely. Don’t just do it, but make sure you communicate it. I think that’s great advice. Thank you very much, Suzie.
Suzie
You are very welcome.
Jon
There are 24 SISIP locations in Canada by my count, if you trust my math. SISIP.com is the website they can also be reached 1-800-267-6681. Or you can do it yourself, just make sure that you do it.
Extro
Thank you for listening to this episode of The Military Lifestyle. To learn more about this episode, and to check out our other resources, like the deployment app, go to EsquimaltMFRC.com. A special thanks to True Patriot Love Foundation for funding season one of this podcast and to Organized Sound Productions for bringing our idea to life. Please share this podcast with your military family or with someone living the lifestyle. Subscribe to the military lifestyle on your favorite podcast app. Your support is greatly appreciated. Thank you for listening.
