How Personal Debt Can Threaten Your Military Career (and How to Avoid It)

Young military recruit meets with counselor.

The article discusses how personal debt can impact a military career, including reasons for military members accumulating debt, potential consequences within the military, and offers tips for financial responsibility, along with a list of resources for debt management and counseling.

During Gabriel Grant’s military career, he worried his debts could affect his ability to grow professionally and move up within his career. He knew that different kinds of assignments, positions, and security clearances could prompt an assessment of his finances. “Financial responsibility is often evaluated as a factor in determining an individual's trustworthiness and overall reliability,” said Grant, an MMI peer advocate and former military service member.

Grant’s struggles with debt, mostly in the form of credit card debt, came to a head when he and his fiancé became financially overextended during the construction of their home. The cost far exceeded their budget, and they relied heavily on credit cards to cover other expenses, putting them even further into debt. Grant felt shame, regret, and guilt – emotions many people in debt go experience. But once he found help, he started feeling better.

What may surprise new service members about a career in the military are the associated costs that are your responsibility. Read on to learn more about common issues and how to avoid them.

Top Reasons Military Members Have Personal Debt

Just like civilians, military members can accrue personal debt due to poor financial management or lifestyle creep. Other reasons for accruing debt may be specific to being a military member. Here are six common sources of personal debt.

  • Living expenses. The cost of living can vary widely depending on your duty station. High-cost areas can increase your housing, transportation, and daily living expenses, even when you have a basic allowance for housing.
  • Relocation costs. Permanent Change of Station (PCS) moves can be frequent for military personnel. That means dealing with moving costs, temporary lodging expenses, and the expense of establishing a new household, beyond the partial reimbursement you’re entitled to.
  • Dependents. Supporting your family, if you have a spouse or children, can increase your financial responsibilities and expenses.
  • Lifestyle creep. An increase in income due to promotions or bonuses can sometimes lead to spending more on lifestyle upgrades, which, in turn, can lead to higher expenses and debt. For former MMI client Demetrius Thrasher it was the allure of all the luxury brands he found while deployed by the Navy in Europe that put him deeply in debt. 
  • Poor money management. Using credit cards or taking out loans for non-essential purchases can lead to accumulating consumer debt if you’re not managing it responsibly.
  • Misuse of allotments. Military personnel can set up allotments to automatically direct a portion of their pay to specific accounts. If mismanaged, these allotments can lead to overspending in other areas.

How Personal Debt Can Lead to Disciplinary Action or Discharge

Owing money to an institution doesn’t automatically lead to military disciplinary action. However, certain circumstances related to debt can raise concerns for military leadership, depending on the severity of the situation and the policies of the specific military branch.

The military places a strong emphasis on financial readiness and responsibility. Service members are expected to manage their finances effectively to ensure their ability to perform their duties and maintain security clearances. Here’s why some financial situations could invite disciplinary action:

Your debts affect security clearance

Some military positions require security clearances, which can be affected by significant financial issues. Excessive debt, especially if it's tied to risky behaviors or poor financial management, could potentially affect your eligibility for or maintenance of a security clearance.

You’re not meeting your financial obligations

If your personal debt leads to financial irresponsibility or misconduct, such as not meeting your financial obligations or ignoring court orders related to debt, it could result in disciplinary action under the Uniform Code of Military Justice (UCMJ).

Your debts affect your ability to perform your duties

If extreme financial mismanagement or chronic debt issues affect your duties or ability to maintain readiness, discharge from the military might be considered.

In some cases, you might be required to attend financial counseling or education programs to address debt issues and learn better financial management practices. Decisions about disciplinary action or discharge usually vary according to the judgment of the chain of command. Commanders have some discretion to determine how to address financial issues on a case-by-case basis.

How to Balance Military Life’s Unique Challenges and Financial Responsibilities

Getting a handle on your finances early sets you up for personal and professional success. If our peer advocate Grant could go back in time, he said would suggest to his younger self to learn early about financial planning and budgeting to handle finances effectively and find money to save with the help of financial education resources. He would also tell himself to reach out for help earlier. “It’s a proactive step that can lead to real solutions and peace of mind,” Grant says.

Don’t be afraid to use the financial resources the military offers to its members (more on those below). Use these 8 guidelines to get ahead of financial pitfalls.

Set clear financial goals and create a detailed budget

Create financial stability for yourself by building an emergency fund, paying off debt, and saving for retirement. Prioritizing these goals guides your financial decisions and budget. Your budget should take into account your military income, allowances, and expenses. Include categories for essential needs, savings, debt repayment, and discretionary spending.

Lean on financial education

Even if you feel confident about your ability to budget, take advantage of the financial counseling and educational programs your military branch offers. These resources are tailored to the unique financial challenges of military life.

Build an emergency fund

Maintain an emergency fund to cover unexpected expenses that might arise from military-related changes or personal emergencies.

Plan for moving expenses

Military members relocate often. Sketch out costs for moving expenses in advance and research housing options that align with your budget if you know your new location.

Involve your family in decision-making

If you have a family, include them in your financial discussions and decisions. Ensuring everyone is on the same page can help manage expectations and avoid conflicts.

Anticipate deployments

Ensure your dependents are financially well-supported during any deployments. Set up automatic bill payments and establish a system for communication and financial management. Also, during your deployments, consider allocating a portion of your extra income to pay off debt, build savings, or invest if budget allows.

Plan early for civilian life

If you plan to transition back to civilian life, start planning early to avoid unexpected surprises. Understand how your military benefits will change and work on developing civilian job skills so you can rejoin the workforce quickly.

As your circumstances change, revisit your financial plan to ensure it remains aligned with your goals and military life changes.

Resources for Financial Counseling and Debt Management

Each branch of the military provides financial counseling services to help military personnel and their families with budgeting, debt management, savings strategies, and retirement planning. These counselors are trained to understand the unique financial challenges faced by service members. Here are some additional resources:

  • Personal financial management programs: Many military installations offer personal financial management programs that provide workshops, classes, and one-on-one counseling sessions to help military personnel improve their financial literacy, create budgets, and manage debt.
  • Military aid societies: Each branch of the military has its own aid society that provides financial assistance, grants, and loans to military personnel facing emergency financial situations.
  • Military OneSource: This service offers free financial counseling services to active-duty, Guard, and Reserve members, as well as their families. The service includes personalized support from certified financial counselors.
  • Consumer Financial Protection Bureau (CFPB) military resources: The CFPB offers resources specifically tailored to military personnel, including information on managing debt, avoiding scams, and making informed financial decisions.
  • Military Reconnect: MMI's counselors and educators provide guidance and assistance to military families in need of financial help, including the money-saving debt management plan.

If you’re struggling to manage your debt, don’t hesitate to get in touch. Let one of our experts help you find a solution. Counseling is free and available 24/7, online and over the phone.

Tagged in Military familes, Debt strategies

Tara Alderete.

Tara Alderete is Director of Education and Community Relations at MMI, where she oversees a team of educators, creates MMI’s online and in-person education programs, and facilitates community workshops and webinars.

  • Better Business Bureau A+ rating Better Business Bureau
    MMI is proud to have achieved an A+ rating from the Better Business Bureau (BBB), a nonprofit organization focused on promoting and improving marketplace trust. The BBB investigates charges of fraud against both consumers and businesses, sets standards for truthfulness in advertising, and evaluates the trustworthiness of businesses and charities, providing a score from A+ (highest) to F (lowest).
  • Financial Counseling Association of America Financial Counseling Association of America
    MMI is a proud member of the Financial Counseling Association of America (FCAA), a national association representing financial counseling companies that provide consumer credit counseling, housing counseling, student loan counseling, bankruptcy counseling, debt management, and various financial education services.
  • Trustpilot Trustpilot
    MMI is rated as “Excellent” (4.9/5) by reviewers on Trustpilot, a global, online consumer review platform dedicated to openness and transparency. Since 2007, Trustpilot has received over 116 million customer reviews for nearly 500,000 different websites and businesses. See what others are saying about the work we do.
  • Department of Housing and Urban Development - Equal Housing Opportunity Department of Housing and Urban Development
    MMI is certified by the U.S. Department of Housing and Urban Development (HUD) to provide consumer housing counseling. The mission of HUD is to create strong, sustainable, inclusive communities and quality affordable homes for all. HUD provides support services directly and through approved, local agencies like MMI.
  • Council on Accreditation Council On Accreditation
    MMI is proudly accredited by the Council on Accreditation (COA), an international, independent, nonprofit, human service accrediting organization. COA’s thorough, peer-reviewed accreditation process is designed to ensure that organizations like MMI are providing the highest standard of service and support for clients and employees alike.
  • National Foundation for Credit Counseling National Foundation for Credit Counseling
    MMI is a longstanding member of the National Foundation for Credit Counseling® (NFCC®), the nation’s largest nonprofit financial counseling organization. Founded in 1951, the NFCC’s mission is to promote financially responsible behavior and help member organizations like MMI deliver the highest-quality financial education and counseling services.