Thousands of Armed forces personnel leave the service and move to civilian life every year. Many of them find this transition to be very difficult. The support structure that they have been used to suddenly disappears and these ex-servicemen have to make numerous adjustments in their individual, family and social life. Most of the ex-servicemen join the services post school and are used to decisions being made for them. Most of the finance related decisions are made for them or regimental. They also enjoy the benefits of subsidies provided to them by the armed forces. Post Retirement they can potentially find it tough to manage money and their personal finance.
Personal Finance is one such aspect of life that they need to show more importance to. Some of the areas of concern are:
Expense Management :
Lack of proper money management and discipline post retirement often results in cash-flow crunch and leads to become debt ridden. It is important to assess the income and the expenses of the family and to make adjustments to ensure that one does not go beyond their means. Post retirement civilian life, most of the times they experience that their expenses spiraling out of control. It would be prudent to ensure that following measures are taken into account :
a. Put a monthly Budget and follow it in letter and spirit
b. Identify committed and non-committed expenses and ensure that non-committed expenses are not too
c. Ensure that monthly/yearly surplus post expenses is at least 25% of your post Tax income
d. Plan for the entire year at the beginning of the financial year
Most of the Armed Forces Personnel do not get Life Insurance when they are in service. A prudent thing to do post retirement is to get a Term Life Insurance, particularly if you belong to the Short Service Commission, since ECHS (Employee Contributory Health Scheme) does not cover officers who fall under the SSC. This would ensure Risk mitigation. Depending on the retirement age the cost of such insurance could vary. If retirement age is more than 55 years, one can choose to ignore this. Though Health care needs of Ex-Servicemen are met by the Government through various schemes, a private health cover might be useful for any critical illnesses or in case of sudden emergency for Ex-servicemen who fall under SSC.
A Defense Pension is a stable source of income for all Ex-Servicemen post retirement. Many Ex-servicemen augment this income by taking up jobs in corporates. It is important that the income be used to create Wealth to meet future needs. They should avoid investing in Primary & Secondary markets directly. It would be wise to take professional help to create a diversified portfolio with a long term vision. Also, try to get professional help in managing the investments.
Ex-servicemen have to deal with various aspects of personal finance. Their lack of exposure to Personal Finance can be detrimental to their money management abilities. Applying themselves and learning about personal finance is one sure way of overcoming the potential pitfalls. Taking the help of a qualified Financial Advisor, either online or offline would go a long way in avoiding some of these pitfalls.
Written By Arthayantra