No system is perfect. Especially complex systems managing hundreds of thousands of unique inputs and outputs on a biweekly basis. Inputs and outputs that frequently change based on dozens of different factors that can change at a moment’s notice. Of course, the system I’m referring to is the military pay system. I’m sure you guessed that by the title of this article.
Unfortunately, the military pay system isn’t perfect. Errors can and do happen. And that’s not good when people need their paychecks to pay for basic living essentials such as food, housing, transportation, utilities, etc.
In most cases, military paycheck errors are minor, and quickly rectified. I served on active duty for 6.5 years, and personally experienced a couple small pay issues – an overpayment on an advance for a TDY was one such occasion. I didn’t want the advance, I was forced to take it, I was overpaid, then I had to write a check to pay back the government (or they could have withheld it from future paychecks; I preferred getting it over with right away). No long-term damage was done, but it took a couple hours out of my day and took me away from work.
But some problems are much worse. I know people who were underpaid, not paid at all, grossly overpaid and had their pay docked for the next several checks, etc. These pay problems can quickly cause a lot of damage. So let’s take a look at what you can do to help survive a military paycheck problem.
What to Do When the Military Messes Up Your Paycheck
The first step is to assess the situation. What happened? Were you not paid at all? Underpaid? Overpaid? Contact your finance department, explain the situation, and see if you can sit down with them and walk through the problem and find a solution. Many military pay problems are small, and can be resolved over the phone, or with a a quick meeting. But if your problem is bigger, you will need to do a little more work to find a resolution.
Resolving an Overpayment
Being overpaid can be almost as bad as being underpaid, because you will need to repay the excess amount of pay you received. As I previously mentioned, I was overpaid for a deployment when I was forced to take a cash advance I didn’t even want. The solution for me was easy – simply write a check to the US Treasury Department for the amount I was overpaid (I think it was in the $400 range; which was not an insubstantial sum when I was an E-3 with a take home pay of about $600 per pay period).
In other situations, you may be forced to repay more than you can write a check for in one fell swoop. In that case, your paycheck may be garnished by a certain amount each check until you have repaid the debt you now owe. This can be a big problem if you are living paycheck to paycheck, or you regularly spend your entire paycheck each month. In most cases, you can work with the finance department to spread out the overpayment over several checks. But if you were grossly overpaid, you may need to figure out some form of payment plan that doesn’t take away too much of your paycheck.
Resolving an Underpayment
Being underpaid is rough. You need to keep paying for your living expenses, even if your paycheck is light, or if it doesn’t even show up. Not being paid is rare, but not unheard of. Non-payments are most common when you are changing status (being activated, deactivated, separating from the service, receiving separation pay, or receiving an enlistment or reenlistment bonus).
Underpayments can happen for a variety of reasons, including being deployed, going through a PCS, receiving a promotion, change in status, adding dependents, change in BAH rates, becoming eligible for additional pays and bonuses, etc.
Resolving an underpayment starts with contacting your finance department, explaining the situation, and waiting for them to rectify the situation. In many cases, your pay will be resolved in one or two pay periods. But in some cases, it can take longer. Situations that may take longer are often things like bonuses, separation pay, and similar payments.
Unraveling the Impact of Paycheck Problems
Thankfully, most pay problems are small. But not all. And even small problems can quickly become big problems if they aren’t resolved quickly. And the problem with paycheck errors is the initial problem can lead to further problems, such as missing payments, adding debt, incurring finance problems, and worse. So let’s run through a few common problems and what can be done about them.
Dip into Emergency Savings. Everyone should have an emergency fund. How much you should have is up to you. But it’s best to start with at least $1,000. As a rule of thumb, I recommend everyone have at least one to three months of living expenses. That will help you manage most emergencies that pop up. If you don’t have one yet, make it your resolution to start an emergency fund. Be sure to top up your emergency fund once you have the situation resolved.
Speak to Your First Sergeant or Contact Your Service Aid Society. Your First Sergeant is your first line of defense and can help point you to resources on base, or in the local community. This can include a financial counselor or other specialist. Each branch of the service also has an aid foundation that helps their servicemembers through tough times. Here is a top-level list:
- Air Force Aid Society.
- Army Emergency Relief.
- Coast Guard Mutual Assistance.
- Navy-Marine Corps Relief Society.
In most cases, these foundations will offer interest free, or low-interest loans to help you bridge the gap. Some may also offer a small cash grant or other aid.
Work with Your Creditors. If your paycheck problems cause you to run low on cash, you need to get proactive. That means contacting your lenders and creditors. Explain the situation and ask if they will be willing to work with you. Some lenders may be willing to let you skip a payment, or may be willing to waive late charges or finance fees for your first missed payment. The key is keeping lines of communication open. They can’t and won’t work with you if they don’t know about the situation.
Military Banking is a great way to go. Many military banking institutions will work with you on things like credit card payments, auto loans, etc. if you get them on the phone and let them know what is happening. Some of them also offer temporary loans that can help you bridge the gap. NFCU, PenFed, USAA, and other military banks are often willing to work with servicemembers in situations such as these.
Raise Cash. There are many ways to raise cash quickly, so you’ll need to be creative. This can include things such as selling items on Craigslist or Ebay, having a yard sale, taking on a part time job, doing a side job for cash, etc. Your situation will be unique, so go with what you know and what you can do.
Credit Cards May Be an Option. Another option, though less attractive, is using credit cards. I don’t normally recommend using credit cards to pay for normal living expenses, but it’s a different story when it is for an emergency. And credit cards are almost always a better option than taking out a short term loan from a pay day lender, title loan company, or other company that offers high-interest short term loans. If at all possible, try to pay off your credit card as soon as possible. Here are some featured military credit cards.
Tap into Your Home Equity Line of Credit. I don’t like this option very much, because you would be taking out a loan against your home to pay for living expenses. The only time this is a good option is if you know you can (and will) repay the loan quickly. Otherwise, it’s better to look at other options.
Payday Loans and Title Loans – The Worst Options. Perhaps the worst thing you can do is get a pay day loan, title loan, or other high interest loan. They are a quick way to digging a deeper hole and can be difficult to get out of. Interest rates on those loans don’t appear to be too bad at first-glance, but they are usually represented as a percentage for the short-term duration of the loan. So what appears to be a 20% loan is actually a 20% interest rate for a week or two. But it can be over 300% for a full year! To put that in perspective, you might borrow $1,000 and repay over $3,000. There are better options available!
Plan for the future. Once this situation is resolved, it’s a good idea to plan for something like this possibly happening again. It would be a good idea to use the separation pay and bonus to get current on any missed bills, and then save a little in an emergency fund for a rainy day. This will help you and your family avoid any potential financial surprises.