A Matter of Debt: Service Members Need to Take Advantage of the Personal Financial Services That Defense Credit Unions Are Providing.

If you're familiar at all with the world of personal finance, then you've probably heard the saying, "People don't plan to fail...they simply fail to plan." Nowhere is this saying uttered more than in the office of a credit union financial counselor.

On a day-to-day basis, my office will see from three to five cases involving mainly military personnel or family members in serious financial distress, mostly due to poor financial management skills and lack of financial education. I often hear the client remark upon the close of our initial meeting together, "If only I would have known about this service a year ago, I wouldn't be in the position I'm in today."

A press release issued on January 13, 1998, by Virginia Tech offers alarming insight into the stare of our military service members' financial condition. That release stated: "The Department of Defense (DoD) spends close to $1 billion annually on service members experiencing personal financial management difficulties," according to Dr. E. Thomas Garman, Professor Emeritus at Virginia Tech's College of Human Resources and Education and Distinguished Scholar at the InCharge Institute of America.

The press release revealed the following factors concerning the $1 billion cost estimate for DoD:

* An estimated $117 million is spent for the direct cost to handle administratively the consequences of service members' financial mismanagement. Letters of indebtedness (LOIs), bad checks, wage garnishments, bankruptcies, retention, and military service assistance are just a few of the situations in which the DoD must intervene.

* $560 million to $840 million is spent for indirect costs, such as lost productivity due to the personal financial difficulties of service members.

The DoD cost estimate was based on data collected in a study conducted by the Military Family Institute (MFI), for which Garman was a researcher.

The MFI study found a series of situations, which are indicative of the problems that many service members face. This portion of the research focused on the Navy; however, similar statistics are available for the entire military establishment. For the two-year period of 1997 to 1998:

* 99,000 bad checks were written on the Navy Exchange System

* 35,000 garnishment actions were processed against Navy personnel

* 43 percent of those seeking counseling reported problems in paying their monthly bills

Navy-Marine Corps Relief Society (NMCRS) provided $48 million in direct aid for 91,000 financial assistance cases.

Garman added that "these calculations may, in fact, be extremely conservative because there are indications that a much higher percentage of service members may be experiencing serious personal financial management difficulties."

So how can Defense credit unions assist in reducing the preceding numbers? The answer lies in providing well-rounded, quality personal financial services and, most importantly, communicating to our military members and their families that financial counseling and education are available, usually at no cost. "Well-rounded" means doing more than occasionally helping the member to balance his or her checkbook or referring the person to the nearest credit repair agency for help with credit questions. I am talking about "taking care of our own" through in-house financial education, budget counseling, money management, and (if available) debt management.

For example, ABNB Federal Credit Union's Financial Counseling Department has approximately 275 credit union members enrolled in our in-house Debt Management Program, 80 percent of which are military A good alternative to bankruptcy, debt management assists members to resolve their credit card debt through credit union brokered renegotiations with creditors (steps such as lowering the interest rate and/or monthly payment amount or waiving late fees while on the program). In return, the member agrees to commit to a cash-only lifestyle for the length of the program, which ranges from 6 weeks to 60 months.

Throughout the duration of the program, the counselors also help the member to relearn basic financial management and budgeting skills so that he or she can see how to avoid financial pitfalls encountered in the past. Upon program completion, the members are sent on to the in-house financial planner at no cost, where they learn how to make the most of their money through wealth-building.

Our records indicate that members completing the in-house Debt Management Program are coming out with significantly improved credit scores that, in turn, enable them to qualify for new loans and/or other services within the credit union. This experience fosters increased member loyalty and satisfaction.

Once a service member is introduced to the many excellent services that his or her Defense credit union offers (such as extremely competitive loan interest rates, competitive interest rates on sayings accounts, and no-cost checking), the credit union can take it one step further: reaching the individual how to use those services to his or her advantage.

I believe that preventing debt problems before they start is the goal of most military financial counselors and educators. Establishing contact with young service members who have little or no credit (or debt) and who are willing to listen gives us perhaps the best audience to educate about the real world of finance.

It's also important to know that Defense credit union employees are trained and educated on all of the personal financial services that the credit union offers. By being familiar with the various services, Defense credit union employees are more confident in recommending those services to members. Members thus can be assured that in-house financial services recommended by a credit union employee will be appropriately tailored to their situation. This is the case whether it be referring a member for some in-house remedial financial counseling clue to a denied loan or setting up an appointment with the in-house financial planner to learn more about wealth-building or investment basics.

Military credit unions and the personal financial services they provide continue to be one of the most widely available, yet largely untapped, resources for our members...DoD military and civilian personnel! With recent technological advances (such as personal credit union home banking or electronic billpaying), it is becoming easier to remain loyal to one's primary credit union, even while changing duty stations multiple times throughout a service career.

Resource managers at all levels should make a concerted effort to ensure that all officers, senior enlisted personnel, and command budget counselors are aware of the quality personal financial services that credit unions provide to the young men and women in their commands. In a world of instant gratification, if they don't act immediately on attracting the younger generation's attention, they'll go elsewhere and, often times, "elsewhere" leads to those institutions that create financial problems.

Many Defense credit unions both on and off military installations have been providing quality financial services to their members for years, yet some remain the military's "best-kept secret in fighting the war against personal financial insolvency "The ultimate business secret," says Dr. Garman, "is to enhance the personal financial wellness of Service members."

Defense credit unions are committed to that vision; they are ready to help commanders, resource managers, and other base officials to enhance the personal financial readiness of all assigned personnel. Whether it be financial counseling, financial planning, or other services, base leaders need to look only as far as their on-base military credit union for assistance in these and many other areas. So, accept the challenge and see the advantage!

Acknowledgments

The author thanks Dr. E. Thomas Garman for his contributions to this article. Dr. Garman currently is a Distinguished Scholar with the InCharge Institute of America, 1768 Parke Center Drive, Suite 280, Orlando, FL 32835. Telephone: [phone]; e-mail: [e-mail]. For a detailed biography of Dr. Garman and his numerous accomplishments in the world of personal finance, please access the following Web site: http://www.chre.vt.edu/NearEnvironments/ResourceManagement/garmanbio1 .html.

The author also thanks Sandy Broughton (author) and Jan Elliott of Virginia Polytechnic Institute and State University for authorizing references to the January 13, 1998, press release titled "Service Members' Financial Problems Cost the Department of Defense Big Bucks."

Jill Lisinski has been a financial counselor with ABNB Federal Credit Union, Virginia Beach, Virginia, for over 3 years. She is a graduate of Ball State University in Muncie, Indiana, where she received her bachelor of science degree in psychology in 1994. Jill currently is working toward her Accredited Financial Counselor designation through the Institute for Personal Finance (IPF) and is a member of IPF's parent foundation, the Association for financial Counselling and Planning Education (AFCPF). ABNB is a member of the Defense Credit Union Council, and the Council is a corporate member of ASMC.