Top Ten Financial Bad Habits (And Three Good Habits)

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Welcome to Military Saves Week, part of the annual America Saves campaign!

Military Saves is part of DoD’s financial readiness campaign, and if your military base is participating then you’re probably already tired of the publicity.  But let’s get a glimpse of how tired your future could be if you’re not paying attention to your finances.

The campaign theme is “Set a goal. Make a plan. Save automatically.” The goal of Military Saves Week is reaching financial independence one small step at a time. Do a little thinking up front, decide how you’re going to implement your plan, and then put it into autopilot. Humans have limited capacity for making decisions (even when they’re good decisions) and even more limited willpower for carrying them out. (How’s that New Year’s resolution doing?) By focusing on your goal and putting your savings on autopilot, you’re much more likely to succeed.

While you’re at it, you could subscribe to a support group. If you take the Military Saves pledge then you have a free subscription to the monthly e-mail, a free myFICO credit score, and quarterly newsletters from America Saves. They’re small doses of knowledge that will make you feel good about your goal and your plan– or else they’ll nag you into action.

If you’ve been procrastinating or overspending, then you’re certainly not alone. The Allianz Life Insurance poll of American’s bad financial habits reports:

  • Only 24% said they had no bad financial habits.  Fewer than one person out of four felt they were financially healthy.
  • 30% said they are guilty of “not saving any money,”
  • 30% indicated they “spend too much money on things I don’t need.”

I wonder if those last two answers are related to each other…

The other eight of the top ten responses:

  • 24%: Save some money, but not as much as I could
  • 18%: Don’t have a household budget
  • 18%: Spend more than I make
  • 15%: Don’t educate myself about financial planning
  • 12%: Pay bills late
  • 10%: Only make the minimum payment on credit cards
  • 9%: Play the lottery or gamble
  • 9%: Don’t seek professional help with my finances

Only 5% reported that their worst financial habit was “not contributing to my employer-sponsored retirement plan.

Compare those statistics to the success stories from Military Saves.

What should you do next? Here are three suggestions:

  1. Track your spending
  2. Make a budget
  3. Sign up for the Thrift Savings Plan.

Already doing those things? Great! Take a look at the next steps:  do you have an emergency fund? How’s your 2013 IRA contribution doing?

Browse the additional links below for more ideas.

Related articles:
Military retirement spending: how much will I need?
Saving base pay and promotion raises
How many years does it take to become financially independent?
Tailor your investments to your military pay and your pension
Where to put your savings while you’re in the military
Simple ways to start saving
Start saving early
America Saves week is coming! (2012)
Bogleheads wiki on military finances
Success story: military retirement with low savings

WHAT I DO: I help you reach financial independence. For free. I retired in 2002 after 20 years in the Navy's submarine force. I wrote "The Military Guide to Financial Independence and Retirement" to share the stories of over 50 other financially independent servicemembers, veterans, and families. All of my writing revenue is donated to military-friendly charities.

  1. Nords, I’m still selling short my retirement accounts for the sake of my 5-10 year accounts. I’m pretty sure that makes sense in my case, though I’d love to be able to do both! Something about my really poor TSP returns so far drives this as well.

    • Mike, that’s a tough call because you’re attempting to forecast cashflow after you retire from the service. But you’re absolutely right– if you’re going to need that cash in less than a decade then you don’t want it to be stuck waiting for a TSP fund to recover. However you guys seem to be playing excellent defense on your spending, so you might not need much from those 5-10 year accounts.

      If you’re skipping TSP contributions then another option would be to continue to max out both your Roth IRAs so that the money’s compounding for you. If you needed the Roth IRA contributions then you’d be able to withdraw them anytime penalty-free.

      By the time you retire I suspect you’ll be another Ryan Guina of blogging, and your online income will exceed your pension income. You’d also have total flexibility over other employment options. So for you the real challenge would be not kicking yourself over 20-20- hindsight if the TSP goes on a 10-year bull market run.

      But I agree with you that it’s more financially prudent to fund the 5-10 year accounts for the known expense rather than to speculate on the TSP returns.

      I have a bias for the TSP because of its low expenses– and because it wasn’t around for most of my career. The TSP came along six months before I retired, and my spouse only had a little Reserve income to contribute to her TSP account. After a decade of retirement (and two recessions) we didn’t need it– and I wish we’d been able to contribute more. Now the challenge is finding the room in our 15% income tax bracket to convert the TSP to a Roth IRA before her Reserve pension, Social Security, and RMDs kick in. But I guess that’s a separate topic for another blog post!

    Comment? Question? What's on your mind?