By Michelle Singletary
Sunday, February 17, 2008
Tarek and Evibeth Bathiche are a young military couple in a heap of debt.
They are 24-year-old Army sergeants stationed at Fort Meade, and together they owe $27,600 on six credit cards. They need a drill sergeant to force them to shape up their financial lives, and I'm going to be as tough as I can be.
The Bathiches are one of three couples participating in this year's Color of Money Military Challenge. All three bravely agreed to let me report on their financial situations. They've promised to follow the individual plans I've developed to help them get out of debt.
Putting your personal business out there for people to scrutinize and criticize isn't easy. But all participants said they hope their stories, struggles and triumphs will inspire other military personnel to improve their own financial lives. The point of my challenge is not to judge or second-guess people's choices. I hope to help them change the behavior that led them into a financial quagmire.
Poor financial planning among military families is well documented, and it can have serious consequences. Service members with severe financial problems can lose their security clearances, face sanctions or impair career advancement. Bad money moves could also result in a discharge.
Personal finance issues are so troubling to some members of the armed forces that they can affect U.S. military readiness, according to studies by the Defense Department and the Government Accountability Office.
Members of the military use payday loans three times as often as civilians, a Defense Department study found. With a payday loan, you borrow against a future paycheck. Congress was so concerned about payday loans for military personnel that it capped the annual percentage rate for them at 36 percent. On an annualized basis, the fee charged on these loans can top out at a crippling 400 to 1,000 percent.
In a 2002 report to Congress, the Navy identified an estimated $250 million in productivity and salary losses due to service members' poor financial management. Another report cited by the GAO said 20 percent of junior enlisted soldiers reported that they struggled to make ends meet and another 4 percent described themselves as "in over their heads" with respect to their finances.
The military has created personal financial management programs to provide service members with financial literacy training and counseling to help them avoid or fix their money problems. The Defense Department also helped design "Military Saves" ( http://www.militarysaves.org) to encourage service members to reduce their debts and become better money managers. The Military Saves program, part of a national initiative called "America Saves," is kicking off a nationwide campaign Feb. 24 to March 2.
Unfortunately, many personnel don't take advantage of these military-sponsored services, fearing that word of their troubles may affect their careers, the GAO has reported.
The last thing any soldier should want is to be deployed in a hazardous zone and have to be worried about creditor calls back home.
Tarek Bathiche said he had never really thought about the impact his financial worries might have on his work performance. He said he's ready to shed his hefty credit card debt. The couple together earn about $65,000 a year. They have a 2-year-old son, Anthony, and Evibeth is expecting their second child in June.
The desire to have it all landed Kim and George Col¿n in trouble. Kim, 43, is a senior master sergeant in the Air Force. She's been in the military for almost 20 years. George is 52 and served 22 years in the Army. He now works as a contract manager for a security company. The Col¿ns were married in August.
Despite an income of $191,000, which includes George's Army pension, they have amassed a great deal of debt. They owe a little more than $30,000 on eight credit accounts. Kim owes $40,000 in student loans. They have just $1,000 saved for emergencies. After I had them reexamine their budget, they realized they had a monthly deficit of $557, meaning they were spending more than their net pay.
Then there are the Holmeses, Amber, 37, and Trenton, 38. They too have accumulated a lot of credit card debt.
The couple have been married for three years and live in the District with Amber's 16-year-old son. Trenton is an aircraft mechanic and tech sergeant with the Air Force. Amber is a paralegal specialist with the federal government. Together they earn about $135,000.
The Holmeses are spending about $400 more a month than they bring home.
"We both are frustrated with the amount of money that is spent on what seems like nothing," Amber said, adding that a lot of her spending happens when Trenton, or Trent as she calls him, is deployed.
"I will spend more time shopping to fill the void of Trent's absence," she said.
The first major step for all of these couples is to cut their ties to credit. At least for the next year or until they pay off their consumer debt, they have promised to eliminate all use of credit.
"We have tried to save before, but I always thought, what's the point, if we still have debt?" Tarek Bathiche wrote in asking to participate in the challenge. "Please help us out and teach us to be better money managers. Soon we will have two kids running around. In the job my wife and I are in, you never know if you will come back, so we would love to have everything figured out and lined up for them."
What all the couples need to bring to this challenge is the same discipline they adhere to in the military. If they follow my rules, they will end this year in great financial shape and better able to serve our country.
¿ On the air: Michelle Singletary discusses personal finance Tuesdays on NPR's "Day to Day" program and online athttp://www.npr.org.
¿ By mail: Readers can write to her at The Washington Post, 1150 15th St. NW, Washington, D.C. 20071.
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