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First Command Reports: Cuts to compensation leave military families feeling financially stressed

The First Command Financial Behaviors Index® reveals two thirds of career service members feel financially stretched month to month

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FORT WORTH, Texas – Defense budget cuts involving service member pay and compensation are taking a toll on the day-to-day fiscal confidence of America’s career military families, with almost two thirds expressing concern about the state of their near-term finances.

The latest results of the First Command Financial Behaviors Index® reveal that 65 percent of middle-class military families (commissioned officers and senior NCOs in pay grades E-5 and above with household incomes of at least $50,000) feel financially stretched month to month. That’s 11 points higher than in the general population.

Many service members identify sluggish wage growth as a big issue for their family finances. Four out of five survey respondents say they are affected by this year’s 1.3 percent pay raise – the third consecutive year that the annual military pay raise fell below expected civilian wage growth. The top actions they expect to take in response to the lower-than-expected raise are:

  • Putting off household maintenance (38 percent)
  • Delaying a major purchase, such as an automobile (35 percent)
  • Reducing debt repayments or taking longer to repay debts (35 percent)
  • Reducing the amount they put into savings or Thrift Savings Plan accounts (28 percent)

Pay raise caps were approved as a way to keep personnel costs in check as part of the budget sequester and defense downsizing. Military households are continuing to report more anxiety about these and other cuts to defense spending than general population households. Sixty-nine percent of military respondents say they feel anxiety about cuts to defense spending – significantly more than the 40 percent of civilian families.

Seventy-four percent of military families anticipate being financially impacted by cuts to defense spending. About one out of three say they expect to be “extremely or very” affected. Near-term worries include continued employment, with 48 percent expressing concern about their job security in the coming months. That compares to just 31 percent of the general population.

“While lawmakers avoided automatic cuts through sequestration for fiscal 2016, many of our career service member families continue to worry about how existing cuts to pay and benefits impact their near-term finances,” said Scott Spiker, CEO of First Command Financial Services, Inc. “We are particularly concerned that 28 percent of military families say they will respond to slowing pay growth by cutting back on saving for their long-term security, namely by reducing the dollars they put into the Thrift Savings Plan. Our survey results have consistently revealed that service member families save more for retirement and feel more confident in their ability to retire comfortably than their civilian counterparts. Looking ahead, America’s career military families will need to continue to find ways to live on less than they earn today so they can successfully invest for tomorrow.”

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.


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