First Command News & Media
FOR IMMEDIATE RELEASE — Feb. 27, 2015
Cuts To Military Pay And Benefits Threaten Family Finances, First Command Reports
The First Command Financial Behaviors Index® reveals four out of five middle-class military families expect to be financially affected by cuts to defense spending
FORT WORTH, Texas — Sequestration-driven cuts to military pay and benefits are threatening the frugal financial behaviors of America’s career servicemembers.
The latest results of the First Command Financial Behaviors Index® reveal that 81 percent of middle-class military families (commissioned officers and senior NCOs in pay grades E-6 and above with household incomes of at least $50,000) said they expect to be financially impacted by DoD budget cuts.
Concerns are particularly high regarding the effects of a smaller-than-expected 1 percent pay raise approved for 2015 as part of the National Defense Authorization Act. Some lawmakers had pressed for a 1.8 percent raise to keep military pay in line with growth in average private-sector paychecks, but the lower raise was approved as a way to keep personnel costs in check as part of the budget sequester and defense downsizing. The Index reveals that 40 percent of respondents anticipate being impacted by reductions in annual pay increases, making it one of their top sequestration concerns for January.
Servicemembers also expressed concerns over healthcare and housing. The National Defense Authorization Act includes changes to pharmacy fees and policies in the military's TRICARE health care system and a 1 percent reduction in the basic allowance for housing.
The Index reveals that 40 percent of respondents say they expect to shoulder increased responsibility for healthcare costs. That’s up five points from the previous month and represents the highest monthly total since the question was added to the survey in fall 2012. Also, 32 percent anticipate being impacted by reductions in personal expense benefits, a broad category that includes housing.
“These latest cuts to military pay and benefits represent a heightened threat to the financial readiness of middle-class servicemembers and their families,” said Scott Spiker, CEO of First Command Financial Services, Inc. “This is the second consecutive 1 percent pay raise lawmakers have approved for servicemembers. Together, these raises represent the smallest annual increases in the 40-year-plus history of the all-volunteer force. For several years now our men and women in uniform have responded to sequestration and defense downsizing with a determined commitment to spend less, save more and cut debt. It has never been more important for our nation to take the necessary steps to fairly and adequately compensate our career military members so they can effectively pursue long-term financial security for themselves and their families.”
About First Command Financial Behaviors Index®
Compiled by Sentient Decision Science, Inc., the First Command Financial Behaviors Index® assesses trends among the American public’s financial behaviors, attitudes and intentions through a monthly survey of approximately 530 U.S. consumers aged 25 to 70 with annual household incomes of at least $50,000. Results are reported quarterly. The margin of error is +/- 4.3 percent with a 95 percent level of confidence. Financial Behaviors Index
About Sentient Decision Science, Inc.
Sentient Decision Science was commissioned by First Command to compile the Financial Behaviors Index®. SDS is a behavioral science and consumer psychology consulting firm with special vertical expertise within the financial services industry. SDS specializes in advanced research methods and statistical analysis of behavioral and attitudinal data.
About First Command
First Command Financial Services and its subsidiaries, including First Command Bank and First Command Financial Planning, assist American families in their efforts to build wealth, reduce debt and pursue their lifetime financial goals and dreams—focusing on consumer behavior as the first and most powerful determinant of results. Through knowledgeable advice and coaching of the financial behaviors conducive to success, First Command Financial Advisors have built trustworthy, lasting relationships with hundreds of thousands of client families since 1958.