USA — Confront Financial Issues Early, Expert Advises

WASHINGTON — Tough eco­nom­ic times have tak­en their toll on Amer­i­cans in recent years, leav­ing many buried under debt or sad­dled with a now-unaf­ford­able dream house that’s plum­met­ed too far in val­ue to sell.
While it may be tempt­ing to ignore debt-relat­ed issues and toss unopened mort­gage state­ments and bills into a neglect­ed pile, con­fronting the issue head-on offers a much bet­ter option, a defense finan­cial expert not­ed.

“Finan­cial prob­lems aren’t like a fine wine; they don’t get bet­ter with age,” said Dave Julian, the Pentagon’s per­son­al finance direc­tor. “Peo­ple should act soon­er rather than lat­er to get their finances under con­trol.”

Ser­vice­mem­bers and their fam­i­lies have a pletho­ra of free resources at their fin­ger­tips to help, he not­ed, whether it’s Mil­i­tary One­Source con­sul­tants or on-base per­son­al finan­cial man­agers. Both resources can help peo­ple devise a bud­get, iden­ti­fy spend­ing pit­falls, man­age debt and set up short- and long-term finan­cial plans, he added.

“It’s impor­tant to be on a plan, to live with­in your means and save for emer­gen­cies and long-term goals,” Julian said. “Finan­cial coun­sel­ing can help you do that.”

Peo­ple also can turn to pri­vate-sec­tor resources, such as non­prof­it cred­it coun­sel­ing agen­cies, but should do so cau­tious­ly, Julian warned. “It def­i­nite­ly pays, because of the poten­tial of increas­ing your finan­cial hard­ship rather than help­ing it, to do the research,” he said.

Peo­ple who are swim­ming in debt may be tempt­ed to turn to a debt con­sol­i­da­tion or set­tle­ment ser­vice, but this path also can lead them deep­er into debt, Julian not­ed.

Debt con­sol­i­da­tion or set­tle­ment com­pa­nies look at debt, in some cas­es nego­ti­ate low­er inter­est rates, and then work out a pay­ment plan, or they can bar­gain with cred­i­tors for a low­er pay­back amount. While attrac­tive to peo­ple mired in debt, these com­pa­nies are a large­ly unreg­u­lat­ed indus­try, Julian not­ed, and some prey on debtors fueled by des­per­a­tion.

“Peo­ple should be very con­cerned and very care­ful,” he said. “With the eco­nom­ic con­di­tions that have arisen in the last year and a half, two years, a lot of these orga­ni­za­tions have sprout­ed up and not all of these have been the best actors.”

He not­ed that while it’s com­mon to require up-front fees, some com­pa­nies may just take the mon­ey and run. “There have been cas­es in the news where mem­bers have paid their up-front fees and expect­ed the debt set­tle­ment com­pa­ny to nego­ti­ate on their behalf with their cred­i­tors,” he said. “But then a month, two months go by, and they’ve been pay­ing their fees and find out the unrep­utable com­pa­nies are gone.”

Julian rec­om­mends peo­ple first con­sult with their instal­la­tion per­son­al finan­cial man­ag­er or a Mil­i­tary One­Source con­sul­tant, who can do the research leg­work and help to steer them toward rep­utable com­pa­nies. The Bet­ter Busi­ness Bureau also can be a help­ful resource to see which com­pa­nies have favor­able rat­ings, he added.

Even if they use a rep­utable com­pa­ny, peo­ple who pay back a less­er amount than they orig­i­nal­ly owed may find their cred­it rat­ing affect­ed, Julian said. “Any time you can pay back the full amount you owe, it is much bet­ter by cred­it report­ing agen­cies, and is just a lot eas­i­er to do,” he said.

But ide­al­ly, he added, peo­ple will avoid the prob­lem in the first place or seek help at the first sign of trou­ble. “It’s best to try to man­age your finances as best you can or ask for help ear­ly on,” he said.

Anoth­er poten­tial pit­fall is mort­gage restruc­tur­ing com­pa­nies that offer to make mort­gage pay­ments more afford­able. Julian recalled meet­ing a sailor who was about to pay a hefty fee the next day to have his loan restruc­tured, some­thing the sailor could have researched him­self and done for free. The Navy inter­vened and the sailor kept his cash, but many oth­ers have lost mon­ey along the way.

As with debt con­sol­i­da­tion com­pa­nies, peo­ple should do their research first before hand­ing mon­ey over to any com­pa­ny that is claim­ing to save them a lot of cash. In many cas­es, peo­ple can work with lenders to adjust pay­ment plans or inter­est rates to make mort­gage pay­ments more afford­able, all free of charge.

Above all, when behind in pay­ments, it’s impor­tant to speak up, Julian said.

“Near­ly 58 per­cent of folks that lost homes due to fore­clo­sure in 2007 nev­er con­tact­ed their lender,” he said. “Banks real­ly don’t want your house. They want your pay­ments. If you can work out a pay­ment plan with your lender, that’s the best sce­nario.”

The Ser­vice­mem­bers Civ­il Relief Act pro­vides a wide range of pro­tec­tions for ser­vice­mem­bers fac­ing mort­gage issues. The act is intend­ed to post­pone or sus­pend cer­tain civ­il oblig­a­tions so ser­vice­mem­bers can devote full atten­tion to duty and relieve stress on them­selves and their fam­i­lies, accord­ing to a Mil­i­tary One­Source fact sheet. For instance, ser­vice­mem­bers who antic­i­pate they may fall behind in their mort­gage pay­ments may be able to go into court to ask for antic­i­pa­to­ry relief under the act.

Ser­vice­mem­bers can find out more about the act from their local legal assis­tance attor­ney.

The gov­ern­ment also has sev­er­al hous­ing pro­grams, some for first-time buy­ers and oth­ers for mort­gage and fore­clo­sure assis­tance. Peo­ple can research these pro­grams online through sites such as the Depart­ment of Hous­ing and Urban Devel­op­ment, Julian sug­gest­ed.

The first line of defense in deal­ing with finan­cial issues is edu­ca­tion, Julian said, not­ing that all the mil­i­tary ser­vices offer some type of basic finan­cial class­es. This can be espe­cial­ly help­ful for young ser­vice­mem­bers, he added, who may have entered the mil­i­tary with up to $12,000 of unse­cured debt.

Julian urged ser­vice­mem­bers to take advan­tage of the military’s Thrift Sav­ings Plan or Sav­ings Deposit Pro­gram. The Sav­ings Deposit Pro­gram offers deployed ser­vice­mem­bers the oppor­tu­ni­ty to invest up to $10,000 and receive 10 per­cent on their return annu­al­ly.

“About half of our force is 25 and under,” he said. “They are young, and time is their friend for sav­ings and invest­ment plans. Small con­tri­bu­tions now can yield big returns in the future.”

No mat­ter how great the debt, Julian said, peo­ple should­n’t give up hope, and he urged those with finan­cial prob­lems to take advan­tage of the help that’s avail­able to them.

“It won’t be easy, but you can get there,” he said. “Folks do it every day.”

U.S. Depart­ment of Defense
Office of the Assis­tant Sec­re­tary of Defense (Pub­lic Affairs)