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Use A Grocery Price Book To Save Money At The Grocery Store

Every month, I play my favorite golf course near the local Air Force Base. And, every time I play, I step onto the number five tee box which is a little par three that is an in between club for me, I’m never quite sure whether I should hit my six iron or my seven iron. I mentally kick myself because I wish I had written down what club I had used last month to hit that perfect shot. It would have been so easy to hit the next one, but I couldn’t remember what I had used before. Now I understand why golfers carry around those little books in their back pockets. You can do the same thing in the grocery store or commissary by using a grocery price book to ensure that you get the best deals on all the items you purchase most frequently.

What Is A Grocery Price Book?

A grocery price book is a running list of the items that you buy week in and week out at the grocery store with their regular prices written beside them in the entry, and it’s one of my favorite ways to save money. Make sure that you also list which store that you find the best deals in for that item. While you may have to go to different stores throughout the week when shopping, the extra effort will more than make up for the hassle when you realize all of the extra savings on your monthly grocery bill.

How To Use A Grocery Price Book

Keep a little notebook with your and record the prices of things you buy at the grocery store or commissary. Start with the items that you buy every week and the brands that you know and constantly patronize. Make sure that you write down the item exactly so you can later compare apples to apples instead of oranges in case you find a good deal somewhere. If I am caught without a pen and paper on me, I often write a note in the notes app of my smart phone or even keep notes on deals in the Evernote app which can be synched to your smart phone, home computer, iPad, or iPod. It is a great tool for productivity and note taking on the go.

An Example Of A Grocery Price Book In Use

Here’s an example that I hope is a little better than my golf game. I am addicted to coffee. I’m actually addicted to the sugar that goes into my coffee, but over the past few years I have been able to switch from sugar to Splenda. I buy Splenda in a box of 400 individual packets, that way I know exactly how much I am putting in each cup of coffee. At my local commissary, a box of 400 packets of Splenda sells for $8.99 or often more. But, then I noticed that the local warehouse club sold Splenda in a giant box of 1,000 packets for $21. Because I had previously written the price of my favorite sweetener down in my grocery price book, I was able to snatch up that deal with no reservations.

Everyone knows that they should compare prices of their favorite items in order to score the best deal, but hardly anyone actually does it. When we are at the grocery store or commissary, no one can remember what the price of that item was at Wal-Mart. That is where your grocery price book comes in. By continuously updating your notebook or note taking device with the latest deals and their locations, you will quickly be on your way to saving a bundle on your grocery bill every month.

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Many People Take Debt With Them Into Retirement

One of your biggest financial goals should be to not only to reach retirement with enough money saved to live out your dreams, but also to retire debt free. You would think that would be the goal for the majority of people and that debt in retirement would not be an issue. But far too many Americans are retiring today with balances on their credit cards, hindering their ability to retire comfortably. Credit card debt is hard enough to handle when you are in the prime of your working life, but it can be a nightmare to manage when you finally hang it all up and retire.

Retirement With Debt Can Lead To Bankruptcy

There is a bigger issue to retiring with debt than just having an extra bill or two to pay every month to Visa or MasterCard. More than 20% of all the bankruptcies in America this year are from people ages 55 or older. That is almost a 100% increase from the number of bankruptcies that were reported in 2001 from the same age group. In fact, older Americans have almost 50% more debt than younger people according to studies conducted by CESI Debt Solutions (source).

Do Not Retire With Credit Card Debt

The CESI Debt Solutions study found that 56% of all retirees had outstanding debt when they finally quit working. Most financial planners recommend that retirees have enough retirement funds, assets, or pensions to generate 80% of their pre-retirement income for their Golden Years. So, for example, a person earning $60,000 the year they retire needs an investment portfolio that will produce an income of approximately $48,000 per year or $4,000 per month. Retirees would need a little over a $1 million a nest egg to produce that amount of income in today’s dollars. For many people, crunching the retirement numbers can be a daunting task, and still having credit card debt can stretch that already thin budget almost to the breaking point.

Delay Retirement Until You Are Debt Free

Very few retirees in the CESI Debt Solutions study said that they would delay retirement until they paid off their credit card and other debt. But, that is exactly what they should do. Working one extra year in order to pay off the debt can be the solution that helps set you up for success. Like most big life changes, it is the first six to twelve months that really make or break your transition. Delaying retirement even just a little while until you have all of your debts paid off can make all of the difference in the world to setting you up for success.

It seems that having debt when a person stops working should not be an issue that needs to be discussed. At first glance, retiring with debt seems ironic and irresponsible, but studies have shown that it does happen. And, it has been happening in greater numbers over the past decade, not less. But, career does not have to end in a sea of debt, bankruptcy, and ruin. Delaying retirement even for a short time can help you start off your retired life on the right foot without credit card debt.

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Roth IRA Qualifications

Opening an Roth IRA is easy, but you have to meet certain requirements in order to eligible for a Roth IRA. For example, you must have earned income, meet specified income limits, contribution deadlines, and open your IRA through an approved IRA custodian, generally a financial institution such as a bank or brokerage firm, or through an authorized IRA custodian (many independent financial advisors meet this qualification). There are many Roth IRA rules to follow – so let’s take a look and see if you are qualified to open a Roth IRA.

Earned Income Requirements for Roth IRA Contributions

Earned income generally includes all income from your salary, wages, services provided, professional fees, tips, commissions, profit sharing, and bonuses. Forms of income that don’t qualify as earned income include interest, dividends, royalties, rental income, capital gains, disability, social security income, or income from annuities. The general rule is that if you worked to generate the income, it qualifies as earned income; income that you receive which doesn’t require work often doesn’t count as earned income.

There is an exception to this rule for military members. Many military members earn tax free combat pay while deployed. This income is not generally considered earned income because it is tax free. However, the HEROES Act allows military members to contribute to an IRA even if they have no earned income due to tax free pay.

Income Limits for Roth IRA Contributions

In addition to meeting the requirement of having earned income, you must qualify for the income limits. If you earn above a certain threshold, then you will not be eligible to contribute directly to a Roth IRA. However, you may be able to do a Roth IRA conversion, which is where you first contribute to a traditional or non-deductible IRA, then convert it to a Roth IRA. Here is more information about Roth IRA conversions.

Income limits are based on the Modified Adjusted Gross Income (MAGI), which is found on your IRS Form 1040. Roth IRA income limits are as follows:

  • Income limit phase out begins at $105,000 and ends at $120,000 for individuals filing as single, head of household, or married filing separately.
  • Income limit phase out begins at $166,000 and ends at$176,000 for married individuals that file joint taxes.

What is a phase out? That means the tax payer is only able to contribute a portion of the maximum contribution at the beginning of the phaseout, then nothing once they reach the income limit.

Contribution Limits and Deadlines

Contribution Limits. If you are under age 50, you can contribute$5,000 to your Roth IRA, and persons age 50 and over can make a catch-up contribution of an additional $1,000, for a total of $6,000. This is an annual limit and you cannot make up for lost time and make additional contributions if you didn’t make them in previous years.

Contribution deadlines. The contribution deadline for Roth IRAs is the same as the tax filing deadline, April 15th. You can contribute to a Roth IRA as soon as the calendar year changes, and you have until April 15th of the following year (or perhaps a day or two later if the tax deadline falls on a weekend or national holiday). You can not extend the IRA contribution deadline if you need to file a tax extension.

Open Roth IRA at an Approved Institution

The final element to qualifying for a Roth IRA is to open it at an approved financial institution. Basically, the IRS offers special tax benefits for opening a Roth IRA and they want to ensure they are properly coded, managed, and tracked for tax reasons. So you aren’t able to open it and keep it in your home. But the good news is that you can open a Roth IRA in many locations. For example, many brokerages, banks, credit unions, savings and loan associations, financial planners and most FDIC insured financial institutions qualify as an IRS-approved financial institution. The forms are easy to fill out and you can literally open an IRA in 10-15 minutes if you already have an account with the financial institution in place – if you don’t have an account you can add another 15 minutes to the process. Here are some top Roth IRA companies.

Compare IRA Providers. If you are looking for another place to compare IRA plans, then visit the Mint.com IRA Center for more insight into different IRA plans. Click here to get started.

What to do if You Don’t Qualify for a Roth IRA

If you don’t qualify for a Roth IRA you may still be eligible to contribute to another IRA, then later convert it to a Roth IRA. For example, if you meet all of the Roth IRA qualifications with the exception of the income limits, then you may be able to contribute to a non-deductible IRA, which is a Traditional IRA that isn’t tax deductible. Then you can convert your Roth IRA and re-characterize your non-deductible IRA as a Roth IRA. Just keep in mind there may be some requirements, such as accounting for any gains.

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The Dangers Of Only Using A Joint Bank Account

Joint bank accounts provide a simple and convenient means of sharing money with your spouse. They can also help ease the trouble associated when dealing with an account while your spouse is deployed. But, there are also several risks involved when married couples operate their household budget solely out of a joint checking account. Before you give your spouse access to everything in a joint account, you should be aware of some of the potential consequences of that decision.

The Risk Of Only Using A Joint Bank Account

Joint Bank Accounts Provide Unlimited Access

Either spouse listed as an owner on a joint bank account has the right to make unlimited withdrawals from that account no matter who deposited the money into the joint bank account. Each joint can deposit and withdraw money from the account freely without permission or even notification of the other owner. While we all like to think that our spouses have our best interests at heart, many can quickly take advantage of the ease of access to a joint account in times of marital trouble.

Joint Bank Accounts Make You Vulnerable To Lawsuits

A joint bank account makes your money in the account vulnerable to lawsuits from creditors that your spouse did not pay. If your spouse is sued and found at fault or liable for damages, your joint bank account may be used for settlement of the debt even though you may have had nothing to do with the reason for the legal action. It is guilt by association, and the courts will not separate what you think may be yours and what is the spouses in a joint account before seizing it.

Both Parties Are Held Liable For Any Debt On Joint Accounts

The creditors or banks that lent money against a joint bank account do not make a distinction between which party the bank account belongs to. They view a joint bank account as equal to an individual bank account and will try to reclaim the money that they are owed. This can be especially tricky if you or your spouse have an overdraft protection on that account, and it is used. Even if it used without the other spouse’s knowledge, both parties are responsible for the debt despite who actually incurred it. This can also lead to damaging the innocent spouse’s credit score as well. If the debt against the joint bank account is not paid, then negative marks are placed on both party’s credit report.

Joint bank accounts provide military and civilian couples the easy and convenience of having access to money when one of the parties is not available. But, having a joint account opens both individuals up for several different types of risk to their financial help. While most people assume that they will not have difficulties with their spouse properly using a joint account, many find that is simply not the case unfortunately.

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Types of Military Discharges

Many civilians commonly assume that people “retire” from the military when they leave the service, which isn’t always the case. Receiving a discharge, or separation, is not the same thing as military retirement.  A military discharge is simply defined as a military member being released from their obligation to continue service in the armed forces. A discharge relieves the veteran from any future military service obligations where as a retired reserve individual may be called back to active duty.  A separation from the military can be voluntary or involuntary, and may leave additional unfulfilled military service obligation that will need to be carried out in the Individual Ready Reserve. It’s important to note that there are several types of military discharges, and these can have a profound impact on a veteran’s ability to receive veterans benefits, serve in government employment, reenlist in the military, and more.

Types of Military Discharges

Military discharge rating - types of military dischargesThe type of military discharge a veteran receives will be listed on his or her DD-214 Military Discharge Paperwork. The following are a list of various types of military discharges:

Honorable Discharge

If a military service member received a good or excellent rating for their service time, by exceeding standards for performance and personal conduct, they will be discharged from the military honorably. An honorable military discharge is a form of administrative discharge.

General Discharge

If a service member’s performance is satisfactory but the individual failed to meet all expectations of conduct for military members, the discharge is considered a general discharge.  To receive a general discharge from the military there has to be some form of nonjudicial punishment to correct unacceptable military behavior. A general military discharge is a form of administrative discharge.

Other Than Honorable Conditions Discharge

The most severe type of military administrative discharge is the Other Than Honorable Conditions.  Some examples of actions that could lead to an Other Than Honorable Discharge include security violations,  use of violence, conviction by a civilian court with a sentence including prison time, or being found guilty of adultery in a divorce hearing (this list is not a definitive list; these are only examples).  In most cases, veterans who receive an Other Than Honorable Discharge cannot re-enlist in the Armed Forces or reserves, except under very rare circumstances.  Veteran’s benefits are not usually available to those discharged through this type of discharge.

Bad Conduct Discharge (BCD)

The Bad Conduct Discharge is only passed on to enlisted military members and is given by a court-martial due to punishment for bad conduct.  A Bad Conduct discharge is often preceded by time in military prison.  Virtually all veteran’s benefits are forfeited if discharged due to Bad Conduct.

Dishonorable Discharge

If the military considers a service members actions to be reprehensible, the general court-martial can determine a dishonorable discharge is in order.  Murder and sexual assault are examples of situations which would result in a dishonorable discharge.  If someone is dishonorably discharged from the military they are not allowed to own firearms according to US federal law. Military members who receive a Dishonorable Discharge forfeit all military and veterans benefits and may have a difficult time finding work in the civilian sector.

Officer Discharge

Commissioned officers cannot receive bad conduct discharges or a dishonorable discharge, nor can they be reduced in rank by a court-martial. If an officer is discharged by a general court-martial, they receive a Dismissal notice which is the same as a dishonorable discharge.

Entry Level Separation (ELS)

If an individual leaves the military before completing at least 180 days of service, they receive an entry level separation status.  This type of military discharge can happen for a variety of reasons (medical, administrative, etc.) and is neither good or bad, though in many cases, service of less than 180 may prevent some people from being classified as a veteran for state and federal military benefits.

How Military Discharge Information Should Be Used for Job Interviews

This information should be used as a reference only – especially if you are an employer researching a job applicant. Due to legal issues surrounding Equal Employment Opportunities and related laws, one should be careful in the interview process. It is generally illegal to ask which type of discharge a military veteran received, unless it is to ask whether or not an applicant received an Honorable or General Discharge if you are ascertaining whether or not the applicant qualifies for veteran’s preference. Read more about illegal job interview questions.

However, even if the veteran did not receive one of these types of discharges, it doesn’t necessarily mean they were discharged for bad conduct, as the reason could have been a medical discharge or other administrative discharge. It is usually best to keep the line of questioning centered around the job applicant’s experience and qualifications. For example, you can ask them if they have military service,the period of their service, rank at time of separation, type of training, leadership, and work experience, qualifications and certifications, and anything else relevant to the specific position for which they are applying. See your Human Resources office for more information.

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Pros and Cons of Reverse Mortgages

A reverse mortgage is just what it sounds like – it is a lien on a home that works in reverse to a traditional mortgage. Instead of borrowing money to purchase a home, a homeowner starts off owning the home and takes out a reverse mortgage in order to release the equity from their property in the form of payments or as a lump sum payment.  Due to the way a reverse mortgage works, they are only available to seniors.

The obligation of the homeowner to pay back their mortgage is deferred until the owner dies, sells the home, or moves to a nursing home or assisted living facility. Reverse mortgage lending limits are $625,500, regardless of how much the home is worth and the maximum amount that can be charged for a loan origination fee is $6,000.

Pros and Cons of Reverse Mortgages

Who Qualifies for Reverse Mortgage?

In the United States, only borrowers who are 62 years or older qualify for reverse mortgages.  Unlike other mortgage products, it doesn’t matter which credit score range you are in and there are no credit or minimum income requirements.  If you have an existing mortgage when you apply for a reverse mortgage, you must pay it off with proceeds from a reverse mortgage.  Not all homes will qualify for a reverse mortgage.  Mobile homes qualify if they meet certain criteria, like having a permanent foundation and being built after 1976.

Anyone looking to get a reverse mortgage must first attend third party financial counseling by a provider who is approved by the Department of Housing and Urban Development (HUD).  During the counseling, borrowers will learn exactly what a reverse mortgage is and how to obtain one before proceeding with the process.  The counseling sessions cost around $125, although there are federal agencies which provide grants to enable people to attend counseling for free.

Advantages of Reverse Mortgages

Many people automatically assume a reverse mortgage seems “too good to be true,” but in the right circumstances a reverse mortgage creates a valuable financial resource for individuals during their retirement.  Benefits and advantages of a reverse mortgage include:

  • No default. Where as you can lose your home if you fail to make payments on a home equity loan, reverse home mortgage lenders do not have claim over your assets or income.
  • Cannot be “upside down.” You will never owe more than the value of your home, even if the price of the home declines after you secure a reverse mortgage.
  • Use the money how you want. There are no restrictions for what you use money from a reverse mortgage for.  You can use it to travel, purchase long term care insurance, pay for your children or grandchildren educational expenses, get a new car – anything goes.
  • Tax free money. when a homeowner receives money from a reverse mortgage, it’s actually a loan.  So the money is not taxable.
  • Choose how you get the money. You can receive money from a reverse mortgage in a single lump sum, a credit line, annuity, or a combination of payment options.
  • Remain homeowner. You remain the homeowner and have the ability to stay in your home with a reverse mortgage – for as long as you want.

Disadvantages of Reverse Mortgages

Like everything in life, there are also disadvantages involved with reverse mortgages.  The following circumstances may render a reverse mortgage a poor choice for you:

  • Eligible for Low-income assistance. If you receive low-income assistance from the government (such as Medicaid) keep in mind that getting a reverse mortgage may disqualify you from receiving the benefits.
  • Planning to move soon. You owe the reverse home mortgage loan back to the lender if you decide to move from your primary residence.  If you plan to move in a short period of time after obtaining a reverse mortgage, it’s not in your best interest to get one.  Closing costs on reverse mortgages are higher than conventional mortgages, and this will be a costly move.
  • Leaving house to heirs. If you intend to leave your home to your heirs, a reverse mortgage may not be a good option.  It decreases equity in your home and affects the value of the estate.  If you do a reverse mortgage, you can still leave the home to heirs who can choose to refinance, pay off the mortgage, or sell the home.

Reverse Mortgages Can Be Useful

Reverse mortgages can be useful when used in the right situation – but they aren’t for everyone. If you qualify for a reverse mortgage and find yourself needing income, then a reverse mortgage may be a good way to tap into your home equity. Just keep in mind the situations in which a reverse mortgage is due: when the owner dies, sells the home, or moves to a nursing home or assisted living facility.

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Is The Military Homeowner’s Assistance Program Taxable?

The military’s Homeowner’s Assistance Program (HAP) has been in place for decades to help homeowners who have trouble selling their homes because of a Base Realignment and Closure (BRAC) initiative. The latest round of BRAC closures happened to coincide with the recent housing market crisis in America. A new addition to HAP was added in 2009 as part of the American Economic Recovery Act and includes protection to members of the military who are forced to move because of a permanent change of station or PCS move and lost value on the price of their home. The old and new versions of the law provide some monetary relief to eligible members of the military and federal employees who suffered a financial loss on the sale of their primary residence when they were not able to sell their homes under reasonable terms or conditions.

There Are Two Versions Of The Homeowner’s Assistance Program

There are two versions of the Homeowners Assistance Program: conventional and expanded. The conventional HAP was established by Congress in1966. It is only available for members of the military when the services conduct a round of base closures. The HAP is a special relief program that must be approved to start, and then it provides financial assistance to homeowners who are not able to sell their homes under reasonable terms because an announced closure that adversely affects the real estate market of a local area. The Army Corps of Engineers runs HAP on behalf of all the military branches. The expanded HAP is exactly like the conventional version, but it has been modified recently to include wounded service members, surviving spouses of military members who are killed in combat, and other members of the military who receive permanent change of station (PCS) orders.

Conventional Homeowner’s Assistance Program Is Taxable

The conventional HAP benefits payments are taxable. Members of the military owe taxes on support they receive when the support is above 95% of the prior fair market value (PFMV) of his or her home. For more information on the Conventional Homeowner’s Assistance Program, you should view the HAP website and the Army Corps of Engineers’ FAQ page.

Expanded Homeowner’s Assistance Program Is Not Taxable

Originally, the Expanded Homeowner’s Assistance Program and specifically the PCS clause was not tax exempt. President Obama signed HR 3548 which is the Unemployment Compensation Extension Act of 2009. He signed the bill into law which also included a new exception for Expanded HAP benefit payments from federal taxes. Payments to military members are also not subject to social security or Medicare taxes. Although HAP is exempt from Federal taxes, there may be state taxes that military members may have to pay. Applicants who had taxes withheld prior to the President signing the law change should receive a W2c which is a corrected Wage and Tax Statement from the Internal Revenue Service.

As with any complicated tax situation, HAP applicants should seek legal and tax assistance if there are any specific questions about the tax implications of HAP benefit payments. The military’s Homeowner’s Assistance Program (HAP) is a viable option for members of the Armed Forces who have had trouble selling their homes during the recent housing crisis. View the eligibility requirements and how to file for benefits at the Homeowner’s Assistance Program (HAP) website.

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The SMART Way To Accomplishing Your Goals

Now that the New Year is upon us, everyone has goals and New Year’s Resolutions that they have made. Some people want to get out of debt, and others want to exercise more and lose weight. No matter what your goals are, they will not be easily accomplished if you do not have a plan to stick with them. For decades, scholars and productivity researchers have been praising the SMART goal setting method. Robert Pagliarini even reminded readers in his book, “The Other 8 Hours”, that goals need to follow the SMART acronym. Goals need to be specific, measurable, attainable, realistic, and timely in order for you to have a chance in seeing them through.

Creating SMART Goals

Your Goals Have To Be Specific

Your goal needs to be as specific as possible. You should not have a goal or New Year’s Resolution to just “lose weight in 2011.” You should tell yourself that you are going to lose fifty pounds over the course of the next year or one pound a week and a set number of inches off your waist.

Your Goals Need To Be Measurable

You have to be able to know where you started, where you want to go in the end, and how you are doing along the way. So, for example, if you goal is to lose weight, it is easily measurable by getting on a scale in your bathroom every morning or night. You should not set a goal that is stated in a way that is immeasurable. For example, your goal should not be to find more happiness in your life. While that is an admirable goal, you need to quantify exactly what makes you happy and how to increase that metric.

Your Goals Must Be Attainable

I am a big fan a stretch goals. Goals need to be tough to reach, but they need to be reachable nevertheless. If a goal is totally unattainable, it will be easy for you to drop it without a second thought. I want to play professional baseball when I was a little kid, but my mother did not have the heart to tell me that it was unattainable since I could even hit another twelve year-old’s curveball.

Your Goals Have To Be Realistic

Writing a best-selling novel may not be very realistic if you have not been honing the craft of writing. If you want to keep your New Year’s Resolution or a goal, you have to be realistic. Are you going to wipe out $100,000 in credit card and other consumer debt in one year? Most likely not, and you need to be realistic so you do not get discouraged with your goals. Repaying $100,000 in debt is completely doable through programs like Dave Ramsey’s Debt Snowball, but it takes time.

And, Your Goals Should Be Timely

Timely, realistic, and attainable goals seem to go hand in hand almost. Your goals need to have a time frame for completion. If you want to lose weight or write the great American novel, you should have an end date in mind and preferably the shorter, the better. You should breakdown your goals into short-term, mid, and long range goals. This will help you focus your energy on the close targets, and your short-term goals can help provide you with baby steps that lead to your large long-term goal.

Like most members of the military, service men and women thrive on acronyms to help them remember ideas and concepts. Using the SMART acronym for goal setting can help you stick to your goals and even try to help you manage to buck the trend and keep your New Year’s Resolutions.

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Military Will See Their Basic Allowance For Housing BAH Drop In 2011

The average Basic Allowance for Housing, or BAH, rates across the nation will fall slightly in 2011 for the first time in the past two decades. Effective January 1st, 2011, BAH rates will drop by an average of 0.6%. The military is adjusting the rates it provides for members living off of the nation’s bases, and in most cases, the BAH rates are falling across the country. The adjustments reflect the nationwide housing market as it continues to suffer after the past recession and housing slump. See Official DoD BAH calculator for your BAH rates.

Military Basic Allowance for Housing (BAH) Drops in 2011

Some Military Communities Are Hit More Than Most With BAH Drop

Like the country as a whole, military communities in the hardest hit areas of the United States have always been the ones to see the largest reduction in Basic Allowance for Housing. The major military area showing the biggest decrease in BAH is Fort Bragg and Pope Air Force Base in North Carolina which dropped by an average of 7.5%. For example, an O-4 with dependents previously received $1,707 per month in BAH, but new Majors at Ft. Bragg will only receive $1,548 in 2011 which is a 9.3% decrease. Other areas hardest hit by the BAH drop are Nellis Air Force Base, Nevada, Seymour Johnson Air Force Base and Marine Corps Air Station Cherry Point in North Carolina, and Whiteman Air Force Base, Missouri.

The BAH Drop Could Hurt Those Already Struggling

The military has quickly reduced the BAH rates in response to falling home prices and the subsequent reduction in rent being charged Soldier, Sailors, Airmen, and Marines who live off post or off base. But, those members of the military who still own those houses, many with the same mortgage rates reflected in the previous BAH rates, are the ones stuck holding the bag. Reduction in the BAH rate will most likely result in a reduction in rental income which make hamper some homeowners from covering their mortgage payment requirements.

BAH Drop Will Not Affect Service Members Until They PCS

There is a policy in effect called the individual rate protection policy. Members of the military who are currently on assignment at a duty station will not see their BAH rates decrease until they PCS or move to a new assignment. The problem with this measure is that it does not take into account the many Troops who cannot sell their homes when the time to move on to the next assignment comes along and are then subsequently turned into reluctant landlords. Many members of the military will still be stuck holding mortgages at a higher payment than what they will be able to receive renting the home for because the new service member will be only qualify for the lower BAH. Thanks to the laws of supply and demand, the new landlord will in turn eventually be require to match the new BAH rate and reduce the rent to keep up.

For once, the military finance officials have moved very fast to keep pace with the changes in the financial landscape and the tough housing market that still faces America. While the new BAH rates will reflect the true cost of new homeownership and new rental agreements near American military bases, the previous owners who cannot sell their homes to cover their mortgages will be left with tenants requiring a lower rent thanks to changes in the Basic Allowance for Housing.

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