Despite anxiety over sequestration, military families are more confident about their financial security than they have been in some time. The First Command Financial Behaviors Index reached 140 for the first quarter of 2015, an increase of 17 points and a record high.
The index, which is reported quarterly, found that as of May, 72% of middle-class military families believe their financial situation will improve in the next year, and 69% are more confident about their ability to retire.
Both of those measures have improved by 23 points since January.
Short-term confidence is moving up, as well. Fifty-three percent of respondents said they feel more comfortable financially from month to month, up 17 points since January and nearly matching the August 2012 high of 54%.
“This upsurge in financial confidence among our men and women in uniform is a remarkable development as it comes at a time of continued anxiety about how cuts to defense spending and military pay and benefits may affect their family finances,” Scott Spiker, CEO of First Command Financial Services, said in a statement. He added that about three-quarters of respondents expect sequestration to affect them financially.
He attributed the rise in confidence to servicemembers’ “frugal living.” He noted, “Almost half say they are increasing the amount they are saving, and two out of five are cutting back on everyday spending. These are the types of positive money behaviors that can boost financial confidence in times both good and bad. They serve as an effective agent for counteracting feelings of financial uncertainty and worries.”
In addition to conservative financial behavior, financial advisors are also helping servicemembers feel more confident. The index for respondents with an advisor reached 149, while those who are saving on their own scored 98.
The index found 91% of respondents who work with an advisor were saving for retirement, compared with 71% of those saving on their own. Furthermore, those advised servicemembers are putting away a lot more—a median $500 a month, compared with $300 from non-advised respondents.
Advised respondents had a smaller debt burden, too. Both groups were paying a median $500 a month to pay down short-term debt, but the advised group was more likely to be making payments: 86% versus 78%. Although the non-advised group had a higher median contribution to paying down long-term debt — $1,146 versus $900 — more than 80% of advised servicemembers were making payments, compared with 65% of non-advised respondents.
“These findings underscore the importance of knowledgeable and trustworthy guidance in helping servicemembers improve their own money behaviors,” Spiker said. “Financial coaching through face-to-face support is a proven way to help career military families learn to cut consumer debt and discretionary spending in order to carve out a few extra dollars every month to save for the future.”
Spiker said he expects to see more military families using professional financial advice to help them gain control of their financial future. “Those who work with a financial advisor are making the most of their government benefits by taking responsibility for and successfully pursuing their own path to retirement security,” he said.
— Check out Advisors Who Serve(d) Tell Their Stories: Memorial Day, 2015 on ThinkAdvisor.