Military Finance Report: July 2014

Sunday, July 20, 2014

The Four Letter Word Killing Your Finances...Fees

In 2013, banks charged over $30 billion dollars in overdraft fees and were caught posting the highest charges first, to expedite the overdraft situation.[1] While overdraft fees can be controlled by closely monitoring the balance in your bank, what about other fees? Every January and July you should go through your financial statements and see if you’re being charged any fees you might not know about. Eliminating fees and maximizing rewards, where you can, should be a semi-annual task for your finances. Here are some common fees to look for.

  • Overdraft fees – Overdraft fees are the worst. You inherently don’t have money and then you have to pay even more money if you were to find yourself in that situation. The fees can be over $30 regardless of the amount overdrawn. Imagine if it were an interest rate. You could have to pay $30 for a $3 charge leaving you with an instant 1000% interest rate. The best way to avoid these fees is to monitor your bank account daily or weekly. You don’t have to balance to the penny, but checking your online account daily can be very helpful to make sure you don’t overdraw your account.
  • Minimum balance fees – Ever since the financial crisis of 2008, these fees have become rare. But a lot of times people won’t read the fee breakdown or the bank simply won’t make it easy to find the fees. Reviewing your statements monthly can help you identify the fees. If your bank is currently charging you those minimum balance fees, then change banks immediately. Most banks no longer charge those types of fees, so finding a new one shouldn’t be a problem.
  • ATM fees –USAA doesn’t charge a bank fee for using other ATMs and will refund you up to $15 a month in ATM fees (USAA serves military members and their dependents). A lot of people may be getting double charged and may not know it. If you use a non-bank ATM, the ATM may be charging you a fee and then your bank may be charging you a fee also. Some people can be losing $4-$7 each time they take out $20. This will quietly, yet quickly, drain your account and you may find yourself with overdraft or minimum balance fees because you weren’t tracking the ATM fees. To avoid these fees, find banks that don’t charge these fees or try to utilize your bank as much as possible to avoid the fees.
  • Statement fees – In an effort to do the right thing and “go green” many banks will charge upwards of $3 to send out paper statements. It’s marketed as a positive initiative, but I assure you, it is a money-making scheme. You may have to go paperless with your bank to avoid these fees.
  • Annual fees – These are common with credit card companies. Some credit cards offer fantastic rewards while charging an annual fee. You’ll have to do the math to determine if you’re making a profit with the rewards after the annual fee. If not, then switch credit cards to avoid those annual fees. That being said, I pay more in annual fees because I have the Air Force Club card which donates money to the Morale, Welfare and Recreation Fund. Also, when I first joined the Air Force, it was considered a professional courtesy for NCOs and Officers to be club members. But generally speaking, you should try and find a credit card without an annual fee.

There are many types of fees you should avoid. A quick search through your financial statements can help you identify these fees and then eliminate them. I helped one Airman (E2) recapture $25 a month by reducing all the fees. This was several years before the 2008 financial crisis, so hopefully everyone saw a decrease in the fees they were paying.


Thursday, July 10, 2014

Started from The Bottom, Now We’re Here…

Time is the most valuable commodity in our life. For your financial success, starting early is the best decision you can make. Regardless of your age, it’s always a good time to start planning for financial success. For those young 17/18 year olds just entering the military, the future is limitless. Here are some quick steps to start right now (complete in order listed).
·         Establish an emergency savings account. $1K-10K depending on how much bills you have (no more than 6 months’ worth of bills saved)
·         Reduce/eliminate debt. Reducing or eliminating debt is the bed rock of financial success.
·         Max out available tax-sheltered investments. Start an IRA and max it out. If you have additional funds, consider starting your Thrift Savings Plan (TSP). I usually don’t recommend saving all your money in retirement savings because you should have short- and medium-term goals you will need to save for.
·         After the IRA is maxed out, then start saving more in a taxable accounts or max out your TSP. Start investing in everything after you have an emergency savings account established, your debt is reduced/eliminated, and you’ve started saving for retirement. Buy stocks, mutual funds, gold and houses.
I enlisted in the military at 17 with no prior financial knowledge, absolutely no money and only two or three pairs of clothes. In the beginning, there weren’t as many resources available for me to learn from and I paid a lot of fees. But the banking industry has changed and information is available 24/7 and fees have been significantly reduced. After 15 years in the military, and following the steps above, I now have zero debt and have a significant amount of money saved up. I started from the bottom and now I’m here. At my 10-year mark, I crossed over to the “dark side” and became an officer. I hope to retire when I’m 40-years old. I’m not going to lie and say it was easy, but it’s worth it. It’s hard to see your friends spending all their money right away and having nice clothes, nice cars and a big house. But time can be just as cruel and it can be rewarding and after 15 years, I’ve seen time catch up to the big spenders and take everything away.
While blogging, I’ve met a junior enlisted, military-finance blogger, who’s well on his way to becoming financially secure. His investing style is focused on dividends. At the end of his military career and all the reinvested dividends, he will have no problems in the retirement years. Like his blog title states, he’s starting from bottom and he’ll soon be here. Go check out his blog and watch his net worth sky rocket:
There’s no reason you can’t do the same. Start today!