More than 5,000 security clearances were revoked in 2006–2010 because of financial indebtedness. Senior enlisted leaders must understand the importance of financial indebtedness and the impact it has on their sailors, their command, and on the military. This essay will discuss the problem with financial indebtedness in the military, provide a discussion on the negative effects, and deliver recommendations on how to mitigate financial indebtedness in the future. 

Problem

Military personnel continue to be in significant financial debt despite the multitude of resources available to them, including command financial specialists, fleet and family service center counselors, individual banking institutions, and command leadership to name a few. There is no mandatory program to ensure leadership is actively involved in a sailor’s financial health; therefore, many of them are unaware of their sailors’ financial situation.

The convenient access to predatory lenders and the false sense of trust and belief that predatory lenders are military friendly contribute to a sailor’s entrapment in financial debt. Studies have shown that “payday lenders, used car dealers, check cashing stores and the like tend to set up shop within a few miles of the base. Many use signs and billboards touting some military affiliation—a picture of someone resembling a soldier in uniform or a mascot or symbol of the armed services.” Military members often stop at these places because the establishments are close to base and the members have a preconceived notion that the businesses are military friendly. In addition, service members often live beyond their financial means, whether it’s to buy the newest electronic device, or paying for daycare, food, and clothing with credit cards that are often at high interest rates, putting them in a vicious cycle of debt.

The military offers many financial counseling and services; however, there is no program that requires consistent and periodic financial counseling for service members. Personal financial management continues to plague sailors due to their lack of basic consumer and financial management skills.[1] There are myriad factors that contribute to their difficulty in managing finances, including high cost of living, predatory lenders and the ability to easily obtain credit, high-pressure sales schemes, misleading advertisement tactics, and undisciplined purchasing.[2]

The Navy’s Personal Financial Management program has three elements: financial education and training; financial information and referral; and financial counseling.[3] Yet none of those are done on a cyclic or mandatory basis, often leaving commands and leadership to determine if and when a sailor needs those services during periodic career development boards, overseas screening, and letters of indebtedness. The Personal Financial Management instruction states that screenings are conducted “as needed,” but who determines that need if sailors are not forthcoming?[4] Financial counseling services should be proactive, rather than reactive.

Effect of Financial Indebtedness

Financial indebtedness can have a negative impact on a sailor’s career (i.e. security clearance, overseas assignments, administrative discharges) and the safety and security of the military (espionage). Financial counseling is required for sailors with the rank of E4 and below who are selected for overseas assignments. If their debt-to-income ratio is greater than 30 percent, they are ineligible to transfer to an overseas assignment. Capturing those sailors during the orders process is too late; it has a negative impact on billet selection, which could potentially leave an overseas billet gap due to unsuitability of that sailor and having to find a new qualified sailor to fill that vacancy.

In addition, military members struggling with financial difficulties are at a higher risk of selling secret information to spies than those who are financially secure and responsible. Army Specialist William Colton Millay received a 16-year prison sentence and was awarded a dishonorable discharge for attempting to sell military secrets to an FBI agent, who was undercover as a Russian spy. Incidents like that happen too often, to include large-scale incidents such as the Fat Leonard scandal, which pose a risk and a detriment to the safety and security of our nation.

Recommendation

The Navy has an excellent physical readiness program to assess the physical health of Navy personnel twice a year. The semi-annual physical fitness assessment includes a “medical screen, a body composition assessment and physical readiness test.” Having a semi-annual program allows leaders to capture sailors’ deficiencies early and to enroll them in a mandated Fitness Enhancement Program, potentially saving their career, improving mission readiness, and providing an environment of health and wellness.

Having a financial readiness program similar to the physical readiness program would allow leadership and sailors to participate in a semi-annual financial readiness assessment. It should be completed and tracked through a formal program much like the Fitness Enhancement Program on BUPERS online. This program would provide periodic financial counseling and training at specific intervals (upon check-in to a new command and biannually), and allow leadership to capture financial problems early and/or to act on existing problems before they become unmanageable. The financial readiness program would allow senior enlisted leaders the opportunity to gather financial data and take a more proactive approach on a sailors financial readiness needs, ensuring they are deployable worldwide, reducing the risk of criminal acts such as espionage, and mitigating the need to administratively separate sailors due to financial indebtedness.

Senior enlisted leaders must understand the problem of financial indebtedness in the military because it has a direct impact on the health and readiness of the service member, their command, and the mission. According to the Department of Defense, “nearly half of the armed services (46 percent) are 25 years old or younger. Often, they are inexperienced in managing their money and personal finances.” Do you know the financial health of your sailors?

Endnotes

[1] United States Navy Personal Financial Management Education, Training, and Counseling Program, OPNAVINST 1740.5b Change Transmittal 2, 6 August 2010, (Washington, D.C.: Department of the Navy), 2.

[2] United States Navy Personal Financial Management Education, Training, and Counseling Program, OPNAVINST 1740.5b Change Transmittal 2, 6 August 2010, (Washington, D.C.: Department of the Navy), 2–3.

[3] United States Navy Personal Financial Management Education, Training, and Counseling Program, OPNAVINST 1740.5b Change Transmittal 2, 6 August 2010, (Washington, D.C.: Department of the Navy), 4.

[4] United States Navy Personal Financial Management Education, Training, and Counseling Program, OPNAVINST 1740.5b Change Transmittal 2, 6 August 2010, (Washington, D.C.: Department of the Navy), 13.