The Securities and Exchange Commission issued an investor bulletin last week with suggestions designed to help military personnel and their families make better investments and avoid fraud.
Action items such as paying off high-interest debt and investing with a long-term perspective are good ideas for anyone, military or otherwise.
But like a very large portion of the population, members of the military seem to be ill-prepared when it comes to dollars and cents.
“There has never been a more important time for military families to be diligently tracking their finances. Military budget cuts, sequestration and defense downsizing are threatening to impact family finances,” said Scott Spiker, CEO of First Command Financial Services.
A survey by the company finds 92 percent of middle-class military families are actively reviewing their credit card and bank statements as well as reviewing their investment portfolios and credit scores.
Organizations such as the San Diego Financial Literacy Center offer programs to teach these families and others the skills necessary to manage their money. The group will offer a free workshop, “Military Financial Literacy,” Oct. 24 at the Marine Corps Air Station Miramar. Details are available at www.sdflc.org.
The Center also runs a program called “Boost for Our Heroes,” an education and assistance program for military members and their families. In addition to classes and training, the program each quarter will provide a $3,000 financial boost to one military family showing a true financial hardship and participating in a literacy program.
The SEC report also encourages members of the military to take advantage of the Thrift Savings Plan, a government-defined contribution plan similar to a 401(k) for civilian workers.
“Contributions are automatically deducted from salary and either tax-deferred or tax-exempt depending upon the type of pay the contributions come from,” according to the report.
However, one of the most important elements of the SEC is a warning about affinity fraud targeted at the military. It cites a situation in which a former Marine raised $1.8 million from investors, many active duty or retired members of the military.
The SEC said Clayton Cohn allegedly lured unsophisticated investors, including friends, family members and fellow veterans, to invest in his hedge fund, promising huge gains.
Timothy Warren of the SEC said Cohn “portrayed himself as a successful trader who generated massive returns for his investors. But Cohn’s hedge fund investors didn’t have a chance to make a profit since he never invested most of their money and promptly lost the portion he did invest.”
Instead, he used the money for “personal expenses as a Hollywood mansion, luxury automobiles and extravagant tabs at high-end nightclubs.”
Perhaps most insulting about the purported scam was the creation of a so-called charity, Veterans Financial Education Network, to teach veterans how to understand and manage their money while he was using the money to support his lifestyle.
Bottom line, whether you are military or civilian, the best policy is caution. Education from legitimate organizations is the first line of defense and will maintain the preparedness of the men and women who serve this country.