We’re making your financial health our mission every week with our personal finance podcast, MakingCents. Join us as we explore ways to help you stay in control of your wallet and make sense of your money.
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EMILY BIGHAM: Welcome back to MakingCents, the podcast brought to you by Navy Federal Credit Union. I'm Emily Bigham. Thank you again for tuning in, and remember that you can subscribe to this podcast wherever you get your podcasts.
This week, we're going to be talking about mortgages, specifically VA loans. Service members and veterans often hear about VA loans, but they can be pretty difficult to grasp. And so today, we're going to try to simplify those for you so you can understand and also take advantage of their true value.
So today, we have an expert on VA loans, Kevin Parker. Kevin is the VP of field mortgage here and Navy Federal, which means that he manages the team of loan officers. They're member-facing, they're actually on the ground talking to members and, I guess, get a lot of these hard questions. Welcome, Kevin. Thanks for being here.
KEVIN PARKER: Thanks, good to be here.
EMILY BIGHAM: So I have a little bit of a question to throw you off today, just to start the day. Now that we've been working from home for a little over seven months, how was your morning routine changed?
KEVIN PARKER: Much different. So, I do not have the hour and 50 minute commute that I used to have. So that time, I found that I was spending a lot more time laying in bed.
I also have two little girls, a 9 and 12-year-old. So they're in school. So I'm finding myself to be a breakfast chef, and--
EMILY BIGHAM: Nice.
KEVIN PARKER: --trying to get them ready for school as well too. So it's definite changed a bit, but, you know, we've all been able to basically manage through and still add value. Whether it's being a part time father or a professional or working in my pajamas at home.
EMILY BIGHAM: Nice. Well, next time I'll have to have you bring me breakfast.
KEVIN PARKER: Ah, sounds good.
EMILY BIGHAM: [LAUGHS]
KEVIN PARKER: Sounds good.
EMILY BIGHAM: So VA loans. I hear a lot about VA loans. In fact, my mother-- shout out to Patty Bigham-- she texted me the other day and she was asking me questions about VA loans. And I was like, first of all, mom, that's not my area of expertise. I'm going to kick you over to the experts in Kevin's department. But, you know, it led me to realize just how complicated they can be. Because my parents have had a few mortgages in their lifetime, and to still be asking questions about VA loans and their benefits just made me realize how confusing they are. So why do you think that there's this perception?
KEVIN PARKER: Yeah, it's a great question. And I think that's a great topic because we're always out there trying to dispel the myth of VA loans and them being confusing or harder and the perception. The reason the perception is out there is because the purpose of a VA loan is to help members get into a property that's viable, a property that's going to hold value. But also, a product that's going to be beneficial to their specific needs.
And by specific needs, I mean more times than not, a lot of our military members maybe can take advantage of not putting down as much money as what a typical non-service member. And by that, we mean, there are a lot more low down payment options when getting a VA loan. So that right there is an instant benefit, meaning more cash. That's cash that you can use towards buying furniture or fixing up the property, things of that sort.
But the overarching point of VA loan is, that loan is there to protect service members and make sure that they're getting into a financial product that can be beneficial to them, specifically.
EMILY BIGHAM: So when you talk about less of a down payment, you know, there are a lot of mortgages out there that don't require a down payment or a large payment. And so if you had to boil it down to the best benefit of a VA loan, what would that be?
KEVIN PARKER: The interest rate.
EMILY BIGHAM: The interest rate. OK.
KEVIN PARKER: Right.
EMILY BIGHAM: Even in a low rate environment like we're in today?
KEVIN PARKER: Even at the low rate. So I should say, lower interest rate.
EMILY BIGHAM: OK.
KEVIN PARKER: Lower than typically your conventional loan, which in layman's terms means, less money, meaning your monthly mortgage payment is going to be a little bit lower than it typically would for other products. So that's a huge benefit.
Two, right behind it, as I just mentioned, the low down payment, meaning that's a lot less cash that you have to put down. And let's kind of touch on that for a moment, just in terms of just the cash aspect of it. When we provide loans to consumers, the more equity you have in the home, the less risk it is for the institution.
EMILY BIGHAM: The more equity.
KEVIN PARKER: Right. And by that I mean, let's say the home was worth $100,000. And you do a loan for $80,000. So the difference of $80 to the $100, that's the equity in the home, meaning cash, liquid in the home. Worst case scenario, that extra $20,000 is there as a cushion in case the lender has to get their money back. So that's the whole thing about why is it such a big deal putting down cash versus not? And for a VA loan, the VA comes in and helps us, basically securitize our loans. Which means that, if anything goes wrong, the VA is going to be there to back up that loan. That's really the benefit of where the Veterans Administration comes into place.
EMILY BIGHAM: And so that's why the lender is able to give a lower interest rate?
KEVIN PARKER: Correct.
EMILY BIGHAM: Got it. OK.
KEVIN PARKER: Because the VA is backing half that loan for us.
EMILY BIGHAM: So is it more difficult to get a VA loan then because you're going through the lender and then also the VA?
KEVIN PARKER: So ironically, it's not. So you would think so. That's a great question. But that's where the benefit of the Veterans Administration comes into place-- that, not only will we secure half that loan for you, but they're also going to give you a better interest rate. So you're kind of get a double benefit of being able to not put down as much money, keep more cash, and have a lower interest rate, keep even more cash.
EMILY BIGHAM: Sounds good to me.
KEVIN PARKER: Yeah.
EMILY BIGHAM: So then, I guess my question goes back to, then why is there such a perception that they're so difficult to understand? Is that where the eligibility question comes in or what's that perception?
KEVIN PARKER: Yeah, eligibility. And then also, one of the main purpose for the VA loan, once again, is to make sure that we are lending a house that's viable. And by viable, I mean, it's structurally sound, it's not a lemon, you're going to keep that property for a long term.
And so by that specifically, the VA has very specific requirements when they do appraisals, when they do home inspections. And so that's why you're going to get maybe some of the more-- what seemingly can be restrictions around VA loan is because sometimes the VA might require some additional inspections. Or not inspections, but some additional improvements done to the home based off the home inspection. That's where the perception comes from that it may be a little bit harder. But the key--
EMILY BIGHAM: Just because the--
KEVIN PARKER: --thing is--
EMILY BIGHAM: I'm sorry to interrupt.
KEVIN PARKER: No, no. No, no. Not at all. I'll say, but the key thing is working with the lender that's very familiar with the type of appraisals, type of home inspections. Because for us, like Navy Federal, we're specialists when it comes to VA. So we're very used to working with our members and working with the appraisers if anything needs to be done on a property. But more times than not, it's a common appraisal like any other conventional product.
EMILY BIGHAM: So how many times can you take advantage of the VA loan?
KEVIN PARKER: Great question. So the VA allows some flexibility in terms of what you call VA eligibility and we also call subsequent use, meaning you can use it multiple times. But it's really based upon your specific situation.
For example, some will want to get a VA loan for the purpose of an investment property or for a second home. Some would want to get a VA loan-- most want to get it for the purpose of a primary property. And so it really depends upon that person's unique needs, which is why they make you go through the Veterans Administration to actually find out what your eligibility is. And we help our members with that process early, before they even apply.
EMILY BIGHAM: So even if you're eligible for a VA loan, is there ever a right or a wrong time?
KEVIN PARKER: No, I wouldn't say they're the wrong time, because the VA is such a good product. I mean, we really believe in it and think it's a very, very beneficial product. So I wouldn't say there's a wrong time. More times than not, more veterans are going to use it for primary purpose. So that's your overwhelming, I would say, the purpose of getting a VA loan, for primary resident.
EMILY BIGHAM: What are some of the other options that you guys recommend if they're not going to take advantage of the VA loan?
KEVIN PARKER: Yeah, so--
Now fortunately, we're lucky. From the standpoint of, we are a portfolio lender, which means that we keep some of the loans that we issue on our books, meaning we don't sell them to Fannie Mae. And what I mean sell them, Fannie Mae buys loans to help securitize loans. Well, for Navy Federal, we keep some of our loans on books, which means that we have a bit more flexibility, which means that we can create products very specific for unique needs.
For example, we have a program called Military Choice. It's almost very close to what a VA loan is. The only difference is you're not using your VA eligibility. So if we have a member who does not want to use their eligibility for whatever reason, well, we have a different option of our Military Choice program in which the rates-- almost just as good, it's not quite the same. But it's almost just as good as a VA loan.
EMILY BIGHAM: So to me, that kind of makes sense. You know, you want to have options, especially because military members are moving quite often. And sometimes they don't know if they're going to relocate or if they're going to go overseas. Does going overseas or being here in the United States, does that change anything about the VA loans or eligibility?
KEVIN PARKER: No, because it's based off what the property is. So we lend in all 50 states. So regardless of where the member is, the reasons for their mortgage could change. But as long as it's in the 50 states, it doesn't matter where they are.
EMILY BIGHAM: And can you refinance a VA loan?
KEVIN PARKER: Absolutely. So that's was a great question. So there's a pro product called Interest Rate Reduction Loan, and that's a special program. Because every time you do financing, it cost money. All right? There is an appraisal fee, you have to do title, you have to do title work. And all those are different fees of cost associate with the loan. Well, with the Interest Rate Reduction Loan, those costs are reduced because you're not going to have to do an appraisal, in essence, we're saving money on the expense to do your loan. And it's a much faster process. And so we actually have a dedicated channel just to handle our Interest Rate Reduction Loan for our members.
EMILY BIGHAM: So I'm going to switch gears a little bit and kind of talk about what's going on right now. We're in a recession, but the environment's very different from that 2008 housing bubble recession. Have you seen any change in consumer, I guess, member behavior when it comes to home buying?
KEVIN PARKER: Yeah. So ironically, not as much as you would think. So right around March when COVID really hit, we did see a touch of a decline in terms of homes listed for sale. If you think about it, people didn't necessarily want to sell their-- list their home because they didn't want people maybe walking through and doing inspections. And on the other side as well, people buy homes-- they're a bit hesitant of going out there and shopping for new homes, et cetera.
But after March, we started to see home purchases kind of trend back up to normal levels. If you look today, even the same purchase trend is about the same that historically has been. So we haven't seen a huge shift in behavior. Our production from a Navy Federal perspective, still gonna be on target pre-COVID that what we thought. So no, I mean, honestly you haven't seen a big change.
EMILY BIGHAM: So I assume probably with the low interest rates, you guys are getting a lot of refinancing applications.
KEVIN PARKER: Absolutely.
EMILY BIGHAM: Yeah.
Well, that's good.
KEVIN PARKER: A huge number.
EMILY BIGHAM: That's smart, right? That's what you want members and consumers to do.
KEVIN PARKER: Absolutely.
EMILY BIGHAM: Is take advantage, when they can, of what's happening. And so tell me about your first home.
KEVIN PARKER: Great question. So my first home was actually right out of college. So I went to Hampton University down in Virginia in the Tidewater areas. So as you can imagine, it's a lot of military members in that particular area. And at 23 years old, a buddy of mine, we wanted to buy an investment property.
And ironically, the person buying that property was a veteran. And they actually did a VA loan on their side. So I got to experience a VA loan as a seller, in which talking about the appraisal and talking about the inspection on the seller perspective. And so that was my very first opportunity of basically buying a home as an investor and then selling it to a VA member.
EMILY BIGHAM: So, you know, from a seller perspective, I assume that's a lot different from being a buyer. What are maybe some, like, old tips that you can-- or I guess things to know about being a seller on the VA side that members should be aware of.
KEVIN PARKER: Yeah. I think that's a great question. I think one of them is understanding, maybe, what some of the red flags might be for the property type or the type of property or just inspections in general, improvement just in general. More times than not, if the home is viable, once again, structurally sound you're gonna be able to sell it regardless of what type of loan that you do.
But there is some in regards to painting and plumbing that, I think, maybe if you're selling it to a VA buyer, it might be helpful to know. But in more times than not, that's going to be on the realtor. The realtors, that's what they there for. We work very closely with our realtors. A lot of voters are very experienced and they're familiar with VA loans.
But one thing we do recommend for our members, our buyers in general is, you want to work with professionals who are familiar with that specialty. And by that I mean, I use the analogy of, when I want a steak, I'm going to go to a steakhouse.
Same thing for if I want seafood, I'm going to go to the restaurant that specializes in seafood.
EMILY BIGHAM: [LAUGHS]
KEVIN PARKER: Certain lenders specialize in VA loans versus others. I think we take a lot of pride, Navy Federal, working very closely with our military members and their families that we are a VA specialists. More than half the loans that we originate are VA loan. So we're very experienced and we're very comfortable in helping our buyers, helping our members. But also, working with realtors, and working with title companies, working with appraisers and working with homes inspectors.
EMILY BIGHAM: There's a lot that goes into the mix.
KEVIN PARKER: Yeah. It's its own ecosystem. And so that's something that we're very comfortable and confident in working through that process for our members.
EMILY BIGHAM: And your loan officers are across the country, right? I mean, I assume everywhere there's Navy Federal branch, that you probably have loan officers. And does that get a little bit complicated, especially in this current environment, do you see the different markets kind of acting differently or do you feel like across the board things are shifting and trending in the same direction?
KEVIN PARKER: That's a great question. Yes, we do see things typically trend differently, different parts of the country. Whether it's the inclement weather, whether it's the market, whether it's the market prices in that area.
For example, in our San Diego market, we tend to see home values--
EMILY BIGHAM: Patty Bigham, are you listening?
KEVIN PARKER: [LAUGHS] There you go. We tend to see home value is a lot higher in that market versus other parts of the country, whether it's southern Texas or parts of the Carolina's in which the bang that you can get for your buck is actually phenomenal. And so, the trends are a lot different for us, because we also have to go by state laws and all of our loan officers have National Mortgage Listing Registration, meaning they have to be certified to be able to talk mortgages to members. And that's something that we do manage and we take very seriously in making sure that our loan officers are very skilled at really helping our members.
And the great thing about offering mortgages, every mortgage is not for every person. And for us, it's about teaching our members and educating our members. This is a personal finance product. And for us, that's about financial literacy. It's about making sure our members understand because we know at Navy Federal, this is a relationship. And we want them to come back in five years or 15 years and we want to be able to help them for whatever need that they have. And so we take a lot of pride in making sure our loan officers are very comfortable in understanding each member is very specific need.
EMILY BIGHAM: Yeah, and so, if a member moves from market to market, do they stay with the same loan officer or is it typically, you know, you want to talk to the expert in the area?
KEVIN PARKER: So they can. So we actually to give them a choice. We try to let our members interact with us. However they want. So if they want to do it digitally, we have what we call a Home Squad System in which they can apply online. If they want to call on the telephone, if they want to walk into a branch. We want to let them interact how they want interact. And if they want to stay with a loan officer from a different part of country, they can.
A lot of times they might want to work with a loan officer or see a loan officer in person in that market. And we can do it as well too.
EMILY BIGHAM: I'm sure that's shifted a lot too, just given current situation. [LAUGHS]
KEVIN PARKER: Very true. Very true.
EMILY BIGHAM: I don't even want to get into that because I don't even-- that's just a lot.
KEVIN PARKER: Well, the good thing about loan officers too, our loan officers, they'll FaceTime.
EMILY BIGHAM: Oh.
KEVIN PARKER: They'll text members. However members want to interact.
EMILY BIGHAM: Digital?
KEVIN PARKER: Digital, yeah. So we try to make it easy, because we realize we have our loan officers who are part-time teachers and part-time cooks, just as we are. So we try to make sure that we give them the flexibility, and they're able to work with our members, based on what their needs are.
EMILY BIGHAM: That's great. So I have a question back on eligibility. You know, military spouses, would they be in the mix for being eligible? Or how would that happen? Do they have to be on a mortgage with their spouse who is active duty or a veteran? Or can you get into a little bit about eligibility?
KEVIN PARKER: Yeah, so there's two ways to answer that. One, the eligibility is based off the military member, not the spouse, so the military member does need to be on the loan. And certain states require that the spouse is actually on the application. For example, California is a state that if you apply, even in your own name, that military spouse has to be on a loan.
And so it's really state-specific, so that's why it goes back to-- we like having loan officers in different parts of the country, who understand those state-specific requirements, and we can help our members walk through whatever their needs are in their specific state.
EMILY BIGHAM: All right, so we're about to wrap it up here. And I think we've given-- I mean, you've given me, at least, a lot of great information. Do you have any last tips or tricks you'd like to give the audience about VA loans?
KEVIN PARKER: Sure. One, your mom better call us.
Two, once again, go onto our website, whether it's our website, or you have other websites like the VA. You have the CFPB website. There's a lot of information out there to just help people consume and understand.
We realize that buying a home, refinancing a home, is a really, really big, probably one of the most, important transactions, and so for us, we try to be teachers. And there are a lot of calculators on our website, a lot of great tools that members can take advantage of to make sure that they learn as much as possible about the VA loan.
So when they do find their home, we're going to try to make it as frictionless as possible, so that they can enjoy the concept of, what school are their kids going to go to, and the new furniture.
EMILY BIGHAM: There's so many other things to worry about, too, when you're in the military and you're moving from state to state. I mean, I grew up as a Navy brat and even moving overseas, you have to send half of everything you own six months before you get there. The anxiety I felt as an 8-year-old. I can't imagine how would parents feel.
So I think you cleared up a lot of the perceptions, and, to me, I think action relieves anxiety, so I would say just call. Whatever lender you're working with, just call and talk to them about your options. And a VA loan sounds like a great benefit that everyone should be taking advantage of.
So thank you, Kevin, again, for being on today's podcast. And, for the listeners, please feel free to call if you have any questions, and, of course, subscribe to the podcast wherever you get your podcasts. And thanks again for tuning into Making Cents.
NAVY FEDERAL CREDIT UNION REPRESENTATIVE: Navy Federal Credit Union is federally insured by the National Credit Union Administration. This podcast is intended to provide general information, and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial professional for specific information on how certain laws may apply to your individual financial situation.
References to, or participation with, the military community does not constitute organizational endorsement. Navy Federal is an equal housing lender.
Navy Federal Credit Union. Our members are the mission.
Episode 3: Understanding the Value of VA Loans
VA loans are a great perk for servicemembers to take advantage of when buying or refinancing homes. In this episode, Navy Federal's Vice President of Field Mortgage, Kevin Parker, makes it clear what to expect when getting a VA loan, including understanding funding fees and navigating eligibility confirmation.
- a discussion of VA loans, funding fees and obtaining a Certificate of Eligibility
- tips on what you should be doing to make the most of a VA loan
GUEST: Kevin Parker is Navy Federal's Vice President of Field Mortgage. A long-time mortgage professional, he has helped Navy Federal members become homeowners for the last 7 years.
[MUSIC PLAYING] EMILY BIGHAM: Hi, and welcome to the podcast Making Cents, brought to you by Navy Federal Credit Union. I'm your host Emily Bigham, and each week, I'll be taking your questions to the experts to help you make sense of your money, pun intended.
Hello and welcome to the podcast. Today's guest is Angela Caban. She is the Director of Military Saves. April is a very special month for Angela and her organization. It's the month of Military Saves. And Angela, first of all, I want to welcome you to the podcast. Thanks so much for joining.
ANGELA CABAN: Hi, Emily. Thank you so much for having me.
EMILY BIGHAM: So I'm really excited about this topic and I love that you have extended your themes for Military Saves from four themes to five themes, and I want to get into that later. But first of all, can you tell me a little bit about your organization and what you do specifically for Military Saves?
ANGELA CABAN: Sure. So here as a director of Military Saves, I feel like I have my hands in everything that's going on. So more than just a month, we are a year round campaign. However, Military Saves Month is really important because it's a nationwide savings campaign that's recognized annually during the month of April and that aligns with Financial Capability Month.
So why have a whole entire month dedicated to savings is really important to us because we want to continue to motivate and to encourage the entire military community to use this as an opportunity to check in with their finances. So we always use the example of yearly-- one does go for their health check, so why not do a financial health check annually? Things are constantly changing in the military community, so it's really important to put some focus on that.
So a little bit about what we do during the month. We provide some resources, tools, and some really cool online events for savers to help them think more about their savings as well as their spending habits, which I know is a really big one for most of us.
And something that's really unique to our program is that we use the principles of behavioral economics, and a little bit about that is it really just makes you stop and think about what you do and why you're doing it when it comes to motivating that action for your savings and your spending behaviors, which could be a little scary for most with not realizing why.
So the very first step during Military Saves Month, we encourage everyone to please take the Military Saves pledge. And this really is that foundation and the start of making a promise to yourself, and that is to create and adjust a simple savings plan.
And once you're opted into the program, you're able to gain access to all of those tools and the resources, but also have us as an accountability check in, which is really great because I feel like everybody needs a reminder or a prompt every now and then to help stay on track and focus on their savings goals.
EMILY BIGHAM: Awesome. So I have two questions for you off the bat. Why April, and what is the end goal at the end of this campaign for the individual participants?
ANGELA CABAN: Sure. Great question. So April, for us, it's mainly because it is Financial Capability Month and that is something that is being recognized, I think, by the entire country. Specifically for the military community, it's really important to be able to have the opportunity to engage with some fantastic organizations, nonprofits, for-profits, government entities that are already hosting events and just really having this broader conversation about what is financial capability and how can we, together as a community, really support the military service member, the military spouse, the veteran. It's for everyone.
So that's why we decided to transition away from Military Saves Week. Not sure if you remember that. That's a couple of years ago. Into now what we call Military Saves Month. So I think the importance of participating in the month and what I would love everybody to take away from this program and this event, this month long campaign, is that it doesn't matter where you are in your savings journey.
You might have not even started or you might be ready to retire and you're set for the rest of your life, which is great. However, everybody's savings journey looks differently. We always say here that savings is a journey, not a destination. So it's never too late to start.
Little amounts do add up, so we really do hope that by engaging and encouraging those to take the pledge, you could really just take a step back and see where you are, whether you feel comfortable with it or not. We're going to be able to provide the resources for you and to help you on that navigating to the next step of your savings journey. So I think there's always something, no matter where you are in that savings journey.
EMILY BIGHAM: So you mentioned that a couple of years ago this was a savings week, right? You had one week dedicated to this campaign and then it grew to four, and now you're at five. From your perspective, obviously, this is a very important topic and it's grown so much that now you're able to fill five weeks with these themes. What have you seen over the years? Why did you decide to branch out into these five themes? And also, what are those five themes and what's the significance?
ANGELA CABAN: Yeah. So that's a great question because I think that having one day talking about this one theme, at least in my opinion, wasn't enough time. And what we've been able to do with these different five themes, being able to stretch them out into one entire week is not only just talk about that specific theme, but all the other underlying issues or components of that, which can be a lot.
So for each week of Military Saves Month, there is that theme. So, for instance, week one was save automatically, and that's our launch, which is really kind of like our overarching theme for the month because at Military Saves, we do believe that the most effective way of saving is by saving automatically, setting and forget it. It's through automatic allotments, through either your employer, or even your financial institution. There's some wonderful opportunity for you to start saving in that way.
And then we have week two, which is focused on saving for the unexpected. And in the military community, that's just a given. There's always something that's going to come up and I think especially with this past year with the pandemic, that was something that many of us were not expecting for all of us to be going through. So we touched on a lot of those different circumstances and the importance of having an emergency savings. And again, tying back in, saving automatically.
One that's one of my favorites is week three. It's save to retire. And I think this conversation-- and I almost feel like it's not even enough. I feel like we need more time than a week. But this conversation is something that needs to be had within all of the components in the military, and most importantly for us this year, because we are touching on military spouses, one thing we've been hearing when we're talking to a lot of our community members is spouses are relying on their service members TSP, or their retirement savings.
But it's important for us to explain that that is simply meant for the service member and it's most likely not going to be enough for two people to retire on. So we want to be having more conversations about what are some tools and resources that military spouses themselves can use and to ensure their own financial well-being later on in life.
Then we have week four. Again, another personal favorite of mine. It's the save by reducing debt. And I think that this concept is not really thought of that when you're saving-- not saving, but when you're reducing that debt, you are saving money. I think a lot of people get overwhelmed with either not being able to do both at the same time, and that's OK. You can focus on paying down that debt.
When you pay your debt down, you're saving yourself on interest, you're improving your credit score, which will then, again, in the future, help you by getting better rates when you're applying for certain things. So it's really important to, again, loop in some subject matter experts throughout all these different weeks to talk on these topics.
And then the very last theme for week five is save as a family. And this is brand new for this year's campaign, and again, a really important topic because when we're talking about finances, I think there's a taboo where you just don't talk about it with your family. It's nobody's business. It's very personal.
However, there are certain things that you should be engaging the entire family with when it comes to basic financial skills and savings. And this includes our children as well, our military children. It's Month of the Military Child as well in April, so it's going to be a really good opportunity for us to incorporate that messaging as well as providing some great tactics for those family members that might be a little bit uncomfortable talking about money.
EMILY BIGHAM: So I can tell that this is something that's very passionate for you, and me as well. I mean, the whole reason why I work at Navy Federal is because I love giving back to the military community, and this is just one way that you can do it without necessarily being in the military. So what is your relationship to the military?
ANGELA CABAN: So I am an Army National Guard spouse of 15 years. My husband recently transitioned a couple of years ago, so it's always been really interesting for my family specifically, because he's been both Army Active Duty, Army Reserve, and then Army National Guard is how he ended out his service. And we've seen a little bit of everything throughout each component.
And even though we haven't moved as a family in the military, we've seen a lot of different-- I should say different circumstances that affected us both personally as well as financially. We've lived the majority of our life together in a military-- I should say a nonmilitary community with lots of support from the civilian community.
However, we've had to find our own ways to navigate through a lot of those challenges. So as a military spouse, I really took it for myself, like, just jumping into a lot of resources within the military community. And part of my work here with Military Saves is to be able to support others who might have gone through similar situations that I had gone through in the past.
When my husband deployed for the very first time, we were not financially ready for that. We didn't have a savings account. We didn't have emergency savings. And we didn't realize that that was going to impact our finances. My husband took a $40,000 pay cut from his civilian job in order to deploy with the Army National Guard, and that really impacted our family.
So I think using a lot of those situations I personally went through in the work that I do through Military Saves is very personal and it's why I really love this campaign and the work that we're doing because it really does impact so many military families.
EMILY BIGHAM: Like, you said, each of these weeks, you could really break it down. I mean, you could have a whole year that could be dedicated to all the individual topics. But from your perspective, what are the big saving struggles or pitfalls that you're typically seeing from the military community?
ANGELA CABAN: Unfortunately, there's many, these pitfalls. A lot of the times what we'll see-- and from the perspective of the younger service member enlisting in the military, this is their first job. It's more money than they've ever had in their entire life, and at this point, they're not realizing how the decisions that they're making now are going to affect them later down when they're getting ready to either transition out of the military or, if they're staying in for a career, retire out.
So one of the things that we really focus on here having these conversations is putting the picture behind, well, what would it look like if you start investing now or if you started saving just a little bit of that pay each cycle, and what would that look like in five, 10, 20 years.
And you'd be surprised at, when you're making that visualization, that picture of what that looks like, how it hits them a little bit harder than them just sitting there talking and getting a briefing from their financial counselor, which is also very helpful.
However, if we could just take that and show them how it can affect them, to help them throughout their military career, it'll make such a big difference, especially for the military family when you now are married, whether you're young or you're a little bit older, because again, you can have money and just not know how to manage it and still be in the same situation of someone who's a really good saver, but doesn't make a whole lot of money. So we always like to mention that.
So it's really unfortunate that a lot of these situations could be something that they can prevent. However, it's OK. Part of the program is to talk to them about assessing where you are and not really dwelling on what you could have done in the past. Unfortunately, we can't go back and make things better for ourselves.
I've made plenty of those mistakes throughout my almost 17 years of marriage and we've learned from them. So it's about focusing on what you're doing now. So I think taking a lot of the negative and trying to put a positive spin on it is extremely helpful, and that goes back to the behavioral economics piece of our program as well.
EMILY BIGHAM: So going back to the transition from military to civilian. You guys-- there's a lot of different stages that you probably have to work through with these various military, active duty, or civilian people come to help with you.
And I'm trying to wrap my head around the question that I want to ask because I have, like, 50 on this topic. But number one, I mean, you've covered so much right now. How big is your organization? Do you have partnerships with other organizations that help you? What kind of stuff you guys do during the month to really-- what's the outreach look like or how can people find you? Like, what's that engagement with the military community and other supporting organizations?
ANGELA CABAN: Yeah. No, and that's a really great question because I don't think people realize that just aside from working directly with that saver community, and I use that word because that is someone who has taken the Military Saves pledge, we have an entire support network.
For Military Saves Month alone this year, we have over 500 participants, and that includes partnerships with Navy Federal, nonprofits, military installations, government entities. I always like to bring it back to the old saying, it takes a village, because that applies to a lot in our lives, especially when we're talking about financial readiness.
So in this space, we do rely on organizations to help spread the word about the campaign. And not just for Military Saves Month, but for 365 days of the year because that's something we should be talking about all the time, right?
But, however, with Military Saves Month, it is that opportunity to closely engage with these organizations that are already doing so much for the military. We're not trying to reinvent the wheel here. We're just really trying to align our mission and what we want to do with all the great work that others are already doing, you know?
Again, with Navy Federal, you guys have this podcast. You're reaching so many members within your community that perhaps have never heard of Military Saves. And it's all about just really being able to join the forces together because if I think of myself as, you know, recently married, 20 years old, my husband slapping deployment orders down on the table and me thinking, like, what does this mean for us?
You know, back then, I didn't think of the financial implications, what that strain would look like for my family. I'm much older now, so I'm a little bit more experienced. So knowing back then that these programs, and organizations, and the support, even from your financial institution, are there.
Back in 2019, our Military Saves Saver Survey did show that our savers go to their financial institutions for information and for that support and that guidance. So I think it's a lot about trusting that mission. So for us at Military Saves, it's very similar that we really do have to just work together as a military support community.
EMILY BIGHAM: So the military does a really wonderful job of taking care of service members and their families. I mean, they do. There are so many benefits. I've said this a million times, but my dad was in the military for 27 years. We've lived overseas on bases.
And what you mentioned at the beginning of the podcast was how you personally have never had to move overseas, but I'm sure you notice the difference between when you go on a military base and you know the community on there when you live on base. There are schools on base.
I went to an elementary school in Japan on base there and it was almost like it was our own little special community, and they really do take care of you and they teach you about the different currencies. And I wonder if-- there are so many benefits.
Like, do you see that when people come to you and they ask the questions, like, you really need to start with the basics because when your benefits are taken care of, when schools are taken care of, when your spouses are taken care of, all of those things are just-- you're able to kind of relax and focus on your job because those other things, mostly finances, are all kind of taken care of, like the set it and forget it benefits.
Do you see that people are coming to you for the most basic savings questions and what are those? Like, I'm kind of-- I want to be in the mindset of, like, who is the person who approaches you? Like, what was that person?
ANGELA CABAN: Yeah, so that's a couple different things there. Obviously, as a program, we're always using-- tapping into those resources and benefits that are already there, as you had said. You know, the military does such a great job at providing these resources for the service member and their families.
A lot of it is just knowing about it. You'd be surprised how many people will come to us and don't even realize that there's free financial counseling on their installation. Whether or not they want to utilize that, that's obviously a personal choice that they have to make for their family.
However, it's there and those counselors are more than happy to sit down, and they actually use the Military Saves program, so part of that is incorporating that messaging of savings, but it starts for them just really understanding basic savings and spending habits.
They don't even realize that just because they're making x amount of money, what is the appropriate amount to put towards savings or towards that debt for their monthly expenses. They're noticing that a lot more is going out than is coming in.
There's lots of different struggles and if we can touch just on the COVID-19 piece as well, because I think we've all, as a community, have seen the stress that COVID-19 has had, not even just on the military, but the entire community, but the military being a very vulnerable population because before COVID-19, as you mentioned, there's a lot of different challenges that we face.
Unfortunately, a lot of times when military families are PCSing, a lot of those expenses are not covered or it takes a really long time to get reimbursed. And if they don't have that money saved, they're looking elsewhere to help them with those expenses. So we also see military spouse unemployment, underemployment. We see education, child care, and most recently, food insecurity. That's a really big issue in the military community.
So I think COVID-19 has complicated these issues. But then there's this other side that we're seeing as an organization. So when you're asking me what we're hearing, we're hearing either the most basic not knowing what to do, where to start, but then we have what we call these super savers that, because of COVID-19, they've seen it as an opportunity to save more money than they have ever been able to save.
Like, almost actually hoarding it into savings accounts and then asking the questions of, well, what are the right ways of saving this? We don't really get into the specifics of investing and things like that. We have a lot of really great partnerships and subject matter experts that can give them that advice.
However, it's amazing to see this new community almost where they're taking the opportunity to pay off years and years of debt that they never thought they would get cleared off or just actually being able to put in a couple thousand dollars into a savings account. So that's us hearing that is amazing.
And we're getting ready to launch a survey after Military Saves Month in May. It's called the Military Saves Saver Survey. And we launch this every other year and one of the things that we're going to be analyzing other than the normal savings and spending behaviors that we normally would ask are some COVID-19-specific questions on how it's impacted their savings.
Were they able to save more? Did they have to deplete their savings? Just really get a little bit into what that look like for them. And I think we're going to be really impressed with the results that we see. Because again, we're just really seeing a lot of the community saying that they have more opportunities because of the stimulus checks, or we always say save the extra here at Military Saves, whether it's your tax refund, any money that you weren't expecting. If you don't have any debt or any immediate need or expenses, save it. It's an opportunity to really get that savings going.
EMILY BIGHAM: Do you think that there are any misconceptions about financial security?
ANGELA CABAN: No, I'm sure that there are. I mean, me personally, for my experience as a military spouse, I would say, yes, there are misconceptions. I think-- just a little personal story. Like, when I married my husband, for some reason, my family thought we had it all together.
You know, we're military. You put that uniform on and my husband's proudly serving his country. We shouldn't be struggling. I think that's a misconception a lot of America has with the military and I always like to say, you know, we're people just like everybody else and my husband said, I made this choice to put this uniform on and serve my country, and this is my job.
Just because we're military doesn't mean we're smart with money. Doesn't mean we're set for life. I think there's definitely a learning curve, especially when you're not used to the everyday active duty lifestyle. So for us as a National Guard family, we had to learn the hard way about how to prepare for those next life cycles, whether it's a deployment or whether my husband's on TDY, away for training.
What about me? I had to quit my full time corporate America job to stay home and find the work from home hustle's, and side gigs, and all these things that would bring some income into the house because he was always gone and child care was too expensive.
So yeah, I think there's definitely a lot of misconceptions and I hope that through the Military Saves program and my work here and my team, which I should mention, we're all military spouses and our senior program manager is not only an accredited financial counselor, but she's also a veteran. She has a lot of insight and personal perspective on what that looks like. So yeah, I hope that the messaging and the work that we do here really can resonate with that military service member no matter where they are currently.
EMILY BIGHAM: OK. So tell me about the fun stuff. So what are you guys doing this month that-- tell me about all of the fun things that you have going on because I know that they're there, and you and I got really serious because that's always kind of how I-- I love to dig into this stuff and you've been so wonderful talking about all the different things that you guys do and the struggles and pitfalls that you help with. But what's the fun stuff?
ANGELA CABAN: Yeah. So with the themes that I had mentioned earlier, we have a Facebook Live event every week that will have those subject matter experts from different organizations come on and touch on the different themes.
Really fun for us is some Facebook giveaways, which is new again for us this year. So if you tune in and you just mention your favorite takeaway from that event, take the Military Saves pledge, of course, you are entered into a $50 gift card giveaway and that's a gift card to anywhere that you want. You just tell us where you want it and we'll purchase it for you.
So that's really fun for us this year. We have a couple of different guests this year, which we're really excited, from different organizations, touching on different topics that, perhaps, we as an organization have never spoken on. One of them is Wounded Warrior Project, because there's a lot of unexpected expenses that come with that lifestyle, which we're really excited to be able to talk about.
Another thing that we're doing too, working closely with other organizations, for instance, Navy Fed. You have an embeddable pledge form over on your website, which is really great to be able to reach members as well as those who might not really be familiar with the Military Saves the program and everything that we're really featuring.
Something else that we do is our text messaging platform. And we've noticed that everybody has their phone on them, right? What is the preferred method of receiving information? It's usually your cell phone. We do have email marketing, which works fantastic, and our social media. But we've noticed that military spouses specifically really love getting those tips, and those prompts, and those reminders. And we usually send those a couple days before payday. We have some really fun polls on there.
And then another really fun thing for this year is we're doing a $500 sweepstakes at the end of the month, and there's three ways to enter that. You take the Military Saves pledge, you join our Facebook group, and then you share your savings goal with us to let us know what you're saving for, why you took the Military Saves pledge, and then you're entered into this $500 giveaway which could be a great jumpstart to someone's savings.
EMILY BIGHAM: Absolutely. So the text message platform, how do you get enrolled in it? Do you guys have a specific number that we would text or--
ANGELA CABAN: Yeah, absolutely. So Navy Fed actually has its own keyword. So if you're a Navy Fed member, you would text the keyword power up savings to 877877. And that's a really great way to not only opt into the Military Saves program, but again, it's kind of like an accountability buddy. Everybody kind of needs that person to remind them of their goals.
And I should mention too that, based on the pledge that you're taking to yourself, we have different goals that you can sign up for. So one person might need to be saving up for retirement while another person wants to save up for that vacation that they probably haven't been able to go on in quite some time.
So there's different goals on there. There's also general savings if you just want to learn some really simple strategies to get that started. So yeah, I think that that's definitely-- one of my preferred methods of receiving communications is that texting.
EMILY BIGHAM: So the text message platform, just to reiterate, to join in on all the fun, you would text power up savings to 877877, just right from your phone?
ANGELA CABAN: Correct.
EMILY BIGHAM: That's awesome. And then to get involved in the Facebook Live, would you just go on Facebook, search Military Saves, like the page, and do you have a schedule of the different live events or--
ANGELA CABAN: Yeah. If you head on over to militarysaves.org, you'll see it right there on our homepage. It's our featured blog post and we have every single event for the entire month. We also are trying to feature some of the different events that our partners and organizations are featuring as well. So any time that we have that, we'll be sure to share it over on our Facebook page, which is Military Saves, or you can join our Facebook group called Military Savers.
EMILY BIGHAM: Great. So militarysaves.org for more information and also to take the pledge. For the Facebook Live program, what are some of the top things that you guys will be discussing?
ANGELA CABAN: So for Facebook Live, for instance, this next one that we're doing this week, actually, since it's week two, save for the unexpected, we're going to be talking about some of those unexpected circumstances in the military.
And I had mentioned Wounded Warrior Project is going to be one of our guests and we're also going to have FEMA come on and talk about some of the emergencies that a military family member might experience. They sound like really heavy, heavy topics, but we do add some fun twists to that because, again, we know that in the military, we're always just kind of waiting for that next something to happen.
So we're definitely going to be talking about the pandemic, how it's affected us, but also some different situations that, whether you're currently serving or maybe you've transitioned out, and how we could really put the emphasis of emergency savings on that because I think that always ties back to if you're prepared for that emergency, and unfortunately, a lot of the community is not. So we're going to definitely be talking about some really great strategies to help them get prepared for that.
EMILY BIGHAM: You mentioned that these are kind of heavy topics, but they're really important topics. And these are a lot of topics that add a lot of stress and strain and potentially unnecessary stress and strain. And so you guys are creating a community where people feel safe to talk about these kinds of problems and ask for advice, and they know that they can trust you and the organizations you partner with, so I think it's absolutely wonderful.
And I love that there are a million different ways that the community can reach you guys and I assume that, on these Facebook Live events, you can also ask questions and kind of engage more with what's actually happening on the Facebook Live event, right? Is that kind of the purpose of the events?
ANGELA CABAN: Absolutely. And that's-- they're very laid back, conversational. It's not-- while we have these subject matter experts, they're also a part of the military community, so they're going to be sharing their personal experiences. And we encourage engagement on there. We'll be answering questions. That's also kind of part of our give away.
But please engage. Let us know what your thoughts are, your experiences are. We would love to feature those stories too. So I should also mention that when you do come over to Military Saves and you share your savings journey or your saver story with us, you have an opportunity to also get $50 for your savings account and we will feature you on our website, militarysaves.org.
So it's also a really good way to share with the community, right? Your experiences and what you've been through as a military family, which I think is-- like you said, it's important to have those conversations knowing that you're not alone, and we're all human and we make those money mistakes, you know?
EMILY BIGHAM: Right. Absolutely. And that there's always a light at the end of the tunnel. And so if you happen to miss the Facebook Live event, will you be sharing the recordings on your website?
ANGELA CABAN: Absolutely. Another thing too, when you are opted into Military Saves with the Military Saves pledge, you're going to receive a recap of all of the events for the entire month. I know a lot of people are busy. It's usually during the workday, so everything will also be on our YouTube channel, which is Military Saves. So feel free to check it out after the event.
EMILY BIGHAM: Awesome. Well, this has been just a spectacular conversation and I can honestly go on forever talking to you about this because I'm passionate about military and I'm passionate about savings and all the different things that you guys are doing. I just-- I think it's wonderful. But before we wrap up here, is there anything else that you want to mention that we haven't talked about?
ANGELA CABAN: No. I mean, just a really big thanks to Navy Federal. You guys have been a really great supporter of the Military Saves program, so we're just so excited for this podcast. And to get more information about Military Saves and the work, as well as any events that we have going on, just please visit militarysaves.org and feel free to check out our social channels as well.
EMILY BIGHAM: Great. Well, I will let you get back to your probably very, very busy day, seeing as though it is the month of Military Saves. But I just want to thank you again, not only for coming on today, but also for all of the work that you do for the military. It is such a special thing that you do, honestly.
I mean, you've sacrificed a lot. Your husband as well. Thank him for serving, but our military spouses also sacrifice a lot and it's great that you guys are providing support for them as well. So thank you again and good luck with the rest of the month, and I look forward to talking and seeing you again.
ANGELA CABAN: Thank you, Emily. I appreciate it.
NARRATOR: Navy Federal Credit Union is federally insured by the National Credit Union Administration. This podcast is intended to provide general information and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial professional for specific information on how certain laws may apply to your individual financial situation.
References to and participation with the military community does not constitute organizational endorsement. Navy Federal is an equal housing lender. Navy Federal Credit Union, our members are the mission.
Episode 7: Military Saves: The Month, the Pledge and Super Savers
In this episode, we’re joined by Angela Caban, Director of Military Saves at the Consumer Federation of America, and a military spouse herself. She shares info about Military Saves Month, including what the month means, how to take the pledge and how the organization partners with Navy Federal. Expect conversation around the work Military Saves does to help servicemembers and vets commit to better savings habits, savings misconceptions in the military and more.
[THEME MUSIC] [MUSIC PLAYING]
EMILY BIGHAM: Hi, and welcome to the podcast, MakingCents, brought to you by Navy Federal Credit Union. I'm your host, Emily Bigham. And each week, I'll be taking your questions to the experts to help you make sense of your money-- pun intended.
Hi, and welcome back to my conversation with Kevin Driscoll, Vice President of Advisory Services at Navy Federal Financial Group. In part one, we discussed retirement planning. And now, we'll get into investing in today's world.
Job security is a big deal because you can't even think about an investment until you've had job security.
KEVIN DRISCOLL: Yeah, I think you're exactly right on that. Job security during a pandemic, job security during any of the internet bubbles, or any-- the Great Recession, it's always a concern. Your employment-- you have to feel comfortable in your employment.
As a business owner, that's a double-edged sword because you're also a business owner, and you're an employee of that business as well. So you may have established a retirement plan for both you and your employees. And you're going to have to make some decisions in some tough markets. Maybe you forego-- No, I--
EMILY BIGHAM: Sorry.
KEVIN DRISCOLL: It's OK. Maybe forego a contributing--
EMILY BIGHAM: No, this is an emotional topic for people, so I'm really trying to-- I know that we do have a lot of military members. But for people who don't, this is probably even more important. And putting your eggs all in one basket, we were talking about this earlier, do not rely on your job as your only source of income and your only thing that you have going. Make sure that you diversify.
And if you don't have money besides your job, what are some steps that members can do? And I know that is a tough question. It's very situational, and that's why I'm kind of encouraging it. Because that's when you probably do need to go seek help the most, is when you're in that sort of--
People who already have the investments, already have the house, already have the stocks, I'm not sure that they need a ton of help. They definitely need guidance, and they're taking big risks. But what about for people who-- they lost their job, and they don't have the balanced portfolio?
KEVIN DRISCOLL: One of the very first things people should start doing when they get their first job, get employed is have an emergency fund. And the bigger you can build an emergency fund, the more you're able to react to events like the pandemic. You know--
EMILY BIGHAM: The rainy day fund sort of thing? Or is that a little bit different?
KEVIN DRISCOLL: That's a little bit different. The rainy day fund may be something that is used by many people during the Christmas time, you know? It's, OK, I'm going to-- people feel like they can jump into the rainy day fund and pull money out of it. But if you name it the emergency fund, that's a little different story.
EMILY BIGHAM: Right, it's like the happy cash fund.
KEVIN DRISCOLL: That's right. So just the terminology of what you're calling these accounts can make a difference in what you're going to use it for.
EMILY BIGHAM: Are they in different places? Because I would imagine that it's probably a good idea that when you're setting aside money, you don't necessarily have to set it aside in a Roth IRA. You can have different accounts where this is my rainy day fund, or my whatever, and this is my emergency fund.
Is there a difference between one that's just sitting there waiting for you and you don't get any penalties for when you actually take it out, versus I feel like an emergency fund? Is that almost like a-- You know, we have a lot of different accounts here at Navy Federal, and a lot of different things that you can put cash into.
So is an emergency fund maybe something that potentially, if you take anything out of it, you get docked for it? Is the difference just in the name, or is it in the place that you keep it?
KEVIN DRISCOLL: So there's a couple of rules of thumb. And many people don't like rules of thumb. I like rules of thumb.
EMILY BIGHAM: I like rules, makes it easy. I come from a military family, though, so I'm very-- I need rules.
KEVIN DRISCOLL: Yeah.
EMILY BIGHAM: Tell me what to do.
KEVIN DRISCOLL: Right. So the period of time that you might need that money, the shorter that period of time, the fewer penalties you want to erode that. As an example, if I put $1,000 into a savings account at Navy Federal, if I take that out, there are no penalties. If I put $1,000 into a five-year certificate of deposit, there is a penalty for taking that $1,000 out, but you're only going to lose some of the interest that had accrued. You're not going to be below your $1,000. So as you--
EMILY BIGHAM: But what does that mean?
KEVIN DRISCOLL: As you prioritize your buckets-- it's really good, actually, to have penalties on long-term money. So if you invested in Tesla--
EMILY BIGHAM: Whoa, whoa-- it's good to have penalties-- whoa, whoa, whoa. OK, so what does that mean?
KEVIN DRISCOLL: So you talked about Apple. You talked about Tesla. Some of those Google, Facebook-- if I'm invested in those for retirement, the penalty of taking money out is actually lack of growth. If I take money out of Apple today, 10 years from now, it may be worth twice what it is today. So the penalty on taking money out today is really hurting my future use of that money that I put into Apple.
EMILY BIGHAM: So if you own stock right now and you sell it later, it doesn't really matter-- so OK, hold on. I'm trying to think about it at a really, really high level. So if you own stock today and then it grows, if you take the money out now, then when you say penalty, you mean the amount that you get taxed on it? Sorry, I'm--
KEVIN DRISCOLL: So from a investment perspective, you can use the word penalty and attribute it to many things. There could be literally-- you look up in the conditions and terms of the account, and it says penalty, $50 for transferring your account. That's a penalty.
But you can also say that a penalty is by taking money out prematurely, because then it's not growing. So you're penalizing yourself from not keeping it in there and allowing it to grow. So if I put $5,000 away for my retirement that will double to $10,000, will double to $20,000, $40,000, $80,000, if I take that money out before it has a chance to double and double, I just penalized myself.
EMILY BIGHAM: So you have to wait-- OK, I know I have so many questions about this. But I have kind of been trying to balance my portfolio. And so you know, I have a little money in stocks, and I have a certificate that I actually got here at Navy Federal-- I think, actually, Martin, I think it was a project you worked on. It was the 10 year, 3%-- whatever, I don't even know.
See, that's the problem-- I don't even know. I just put money there. And you know, when somebody gets a marketing promotion and it seems like a really good deal, how do you know if it's a good deal? And then to your point-- I promise it does connect back to what you were talking about.
But when we talk about penalties and all of those types of-- the language that we use here when we're working versus people who are reading about it, what are the keywords to look for, and where can you go to-- do you have to go to a disclosure or disclaimer? Or how-- is it going to be very obvious? And is this specific to Navy Federal, or anywhere that you get a product? That was like, 50 questions. If you want to read the fine print, where can you go?
KEVIN DRISCOLL: I think today, that there's more transparency today than there's ever been. You think about your 401(k)s and the fees that are paid on 401(k), that the transparency of those fees is far greater today than it's ever been. The transparency of what are the penalties if you were to-- have to break your certificate before maturity, that's right on the credit union's website.
Everything is there for the consumer today to find out if there is a penalty to that investment imposed by the financial institution. So don't hesitate to look for it if you're thinking about money for a rainy day, if you're thinking about money for an emergency, if you're thinking about taking money out to help put kids through college, or whatever it may be. You really need to go to that website of that financial institution. And nine times out of 10, it's going to be easy to find. Transparency is really important in today's market.
EMILY BIGHAM: All right, yeah-- that was a good answer to my 50 questions about what if you're confused, and you don't know. But I do want to go back to the question about a credit union versus a bank. Are there differences in the products that are available and the penalties? Or is the penalties specific to what type of investment regardless of where you get?
KEVIN DRISCOLL: Well, the huge difference, I think, from a credit union to a bank is member first. For the credit union, it's always thinking about the member-- you know, how will this affect the member? Versus the bank, its shareholders. So we always have to improve the share price of the stock. We have to make sure that the investors of that bank are taken care of.
So it's really important from a credit union's perspective, especially Navy Federal, when we talk about specials, certificate specials that you may have taken advantage of that Martin told you about--
EMILY BIGHAM: Yes, thank you, thank you to both of you.
KEVIN DRISCOLL: Yeah, it's really--
EMILY BIGHAM: I don't know what they do, but I trust you guys, so. I guess that's the point, right-- trust?
KEVIN DRISCOLL: Exactly. So the credit union really is giving back to the member. They're giving back to the member in higher certificate rates and lower lending rates. So if you have to use a credit card, chances are the interest rates that you're paying on revolving balances are lower at a credit union than they are at a bank. May not be true 100% of the time, but as a guide, that's what I believe, is that you'll find member-centric products at Navy Federal Credit Union.
EMILY BIGHAM: Yeah, I mean-- and this has been a really great conversation for me personally. I really try to put myself in the member's shoes. And sometimes, when we're talking about all these really big-picture things, it's good for a certain audience. And then I have to remember like, wait, but I have questions. And I'm sure other people have these questions.
So I really appreciate you coming online today and chatting with me. And is there anything else that you want to talk about? I'm here.
KEVIN DRISCOLL: I do want to go back to a comment you made, because I think that's a misnomer, kind of what people think. Have I accumulated enough money to go talk to somebody? And I think that's-- I think you need to talk to anybody, whatever situation you're in. Having a financial advisor, having that conversation with a financial advisor just because you just got started, or you're 10 years from retirement, don't think about the amount of money you've accumulated.
Because you're 100% right, that is going to-- say, you know what, I really haven't accumulated enough. I'm going to go talk to somebody. And it's going to look like I don't have a lot of money.
And in your situation, it may be that you have a lot of money because you want to retire at a different level than your neighbor. You want to retire differently. You want to have priorities of travel. You want to have priorities of visiting grandkids. So don't think about the money.
Don't think about, do I have enough money? If you have any amount of money that you've accumulated, it's a good time to go talk to a financial advisor.
EMILY BIGHAM: Mm-hmm. Well, it's always a good time, right?
KEVIN DRISCOLL: Absolutely, don't be intimidated by others.
EMILY BIGHAM: A strategy that I've used, or something that I've kind of realized is if you feel like you're wasting money, and you're like, you know, I really don't need-- But then again, you don't really have anything else to spend the money on. so you're just kind of like, eh, you don't have to think about it too hard-- that's when I feel like it's really good to have one of those set-it-and-forget-it type of accounts, or where part of your paycheck goes in.
When you think about an investment, sometimes, I think people think saving, which means holding on to money. But it could also mean going and purchasing that car that you want, and that you've been waiting for. But you know what, just go ahead and do it if you have the money. And then you'll be more concerned about the money that you have left. And it will help you think more about what are you spending this money on.
Does that make sense? I don't know--
KEVIN DRISCOLL: Absolutely.
EMILY BIGHAM: I feel like that's probably a mid-career--
KEVIN DRISCOLL: I think-- and I talk to my kids. I have grown children, and--
EMILY BIGHAM: What does that mean? Am I grown? Am I a grown child?
KEVIN DRISCOLL: They're in their 30s, and are married, and have families. I talk to them about the pressures, just like you talked about. Sometimes, it's good to have pressures of a loan, pressures of how much money I have left in the account. Because you're not willy-nilly spending money because I don't have anything else to spend it on.
So having pressures of I have a loan payment coming due next week-- well, I can make coffee at home today. I really don't need to go to a coffee house and spend $5 on a cup of coffee. I can make it myself.
So I don't think that those pressures you talked about are bad. Because they keep us in check.
EMILY BIGHAM: Yeah.
KEVIN DRISCOLL: They keep us financially sound.
EMILY BIGHAM: I'm going to go back to another military child haunting thing. So I had that wake-up call when it came to car payments. So I was living in California, and I'd moved out to the East Coast. And my dad had helped me buy a car.
And for a while, we were both paying for it, but it was like a set-it-and-forget-it type of thing. And then he did warn me. He was like, one day, this is going to be cut, and you're going to have to pay for the rest, and you need to be managing it.
And I was like, OK-- completely forgot. Well, I didn't forget. But then when the time came, I hadn't planned for when I had to start making those payments. And that was a wake-up call. And that was like, all right--
And thankfully, you know, I was managing the rest of my money fine, and wasn't going nuts. But I didn't realize how much I needed to think about it until I was almost at that little brink. So it's probably better to wait for those types of wake-up calls than the big wake-up calls.
And it's maybe going to practice a little bit with that, too-- like, set aside money and be like, OK, can I budget with this amount of money this week? Like, what is my threshold?
KEVIN DRISCOLL: Yeah, it's funny you mention that, because as we get a little bit older, those wake-up calls we had earlier in life help us avoid wake-up calls later in life. And so those are good scars. Those are really good situations that will develop some of your later decision-making.
EMILY BIGHAM: Kind of like the app, the Digital Investor app, right?
KEVIN DRISCOLL: That's right.
EMILY BIGHAM: That's kind of like-- it's almost like training wheels. And you can kind of play with that a little bit and see like, OK, where were the smart decisions, the not smart decisions based on how well you're doing, or--
KEVIN DRISCOLL: Yeah, I think you're right. But I also think that as people put money into an application like Digital Investor, it's not something that you should go into-- I have $1,000, and I don't care if I lose 20%. I don't care if I lose 200 bucks.
It's something that may turn into future success for you. It may create enough revenue, it may create enough of an asset to help you meet a goal. You may be saving for sending the kids to college in five years or 10 years.
And if you have less money because you're just playing around with it, it's hard to tell your child, well, you can only go to school for three years. I know I told you four, but you can only go to three because I lost your money just playing around. So it's really important to take your investments very seriously, even on an app like Digital Investor.
It's a learning tool. It's something that-- it is learning with training wheels on. But it's not something that-- We work too hard for our money, I guess is what I'm saying, Emily.
EMILY BIGHAM: Yeah.
KEVIN DRISCOLL: [? I worked ?] too hard for my money to throw 20% of it away because ah, it was just learning.
EMILY BIGHAM: So going back to my question about the risks, and what are the big risks, it's almost like, as long as you're paying attention and you feel like you're-- you feel comfortable with it, and you've talked to people, and you've done your own research, you understand what's important to you, you can sleep at night, you've talked to [? someone at ?] NFFG and you have a balanced portfolio, then I think as long as you have-- It's almost-- what do they call it-- almost like a planned risk, or-- is there a word for it, when you think about-- you're taking a risk, but you're almost-- Like, people who take big risks, they always say like, well, I didn't really take a big risk because I did so much--
KEVIN DRISCOLL: Educating.
EMILY BIGHAM: --planning and prep for it.
KEVIN DRISCOLL: Yeah, educated risk.
EMILY BIGHAM: I guess-- yeah, that's I guess what I'm trying to say.
KEVIN DRISCOLL: Yeah, absolutely. I mean, we talk about that with members all the time. What is an educated risk, and what is an uneducated risk, you know? And so if you want to put money, for example, into a certificate that pays 1%, and inflation is 2%, your risk is that that money is not going to keep up with inflation. It's not going to buy as much tomorrow as it did today.
If you're comfortable with that risk, it's an educated risk. Go ahead, take it. If you want to put it into a balanced portfolio, and you know it may go down, it may go up, I'm comfortable with that risk. So an educated risk is really what you want to do as you move into retirement. Take educated risk versus uneducated risk, because the uneducated risk is-- that's tough.
EMILY BIGHAM: That'll keep you up at night, for sure.
KEVIN DRISCOLL: Yeah, that's tough to bounce back from, yeah.
EMILY BIGHAM: Well, I've definitely kept you too long. But I've really been enjoying this conversation. I've learned so much.
And it's funny, thinking back to an hour and a half ago, and I was like, how are we even going to talk about a plan for retirement during a pandemic? Like, every word in there-- plan, retirement, pandemic-- all those words are scary to people. So I really appreciate the fact that you've been able to kind of help me understand and make sense of all of it.
And just to make sure, is there anything else, any last words that you want to get in there or say? Where can they find you? Where can the people find you?
KEVIN DRISCOLL: People can find-- NFFG through--
EMILY BIGHAM: Well, yeah.
KEVIN DRISCOLL: --through the credit union's website. We are available simply by typing in NFFG into the search within the credit union's website, and our pages will come up. But NFFG, like you said earlier in the conversation, is a wholly owned subsidiary to the credit union. And we--
EMILY BIGHAM: What does that mean?
KEVIN DRISCOLL: That means that because many of the products that we offer for our members involve risk, they're not protected by NCUA. The risk that you may have less money is real if you make an investment in Apple. It may go down.
EMILY BIGHAM: Do you have to apply for a Navy Federal membership and an NFFG membership, or one comes with the other?
KEVIN DRISCOLL: You do not. So you don't necessarily have to be a member of Navy Federal Credit Union to work with NFFG, although probably 99% of our clients that we work with are Navy Federal Credit Union members. Being a wholly owned subsidiary, we are a CUSO, a Credit Union Service Organization. So we benefit the members of the credit union.
EMILY BIGHAM: So you operate a little bit differently, which is why you're separate from Navy Federal, and why you don't have to be a member? And I only ask that question because I know that there's a lot of questions about the business side of Navy Federal, the business solutions. And you do have to apply for Navy Federal membership, and then you have to become a business member.
So just wanted to make that distinction in case that was a question. But that's great. Well, thank you Kevin so much for again, joining me in this. I know this went way longer than it was supposed to. But that's great, because there are so many interesting things to think about and questions, even though retirement's an interesting word.
And a couple of things that we talked about-- so we talked about some of the products. But I think rather than getting really into the products, you'd mentioned the Roth IRA is one of the most popular. And then also Digital Investor, if you're kind of looking to play in the stock market a little bit. But what it really comes down to is managing stress, and also just making sure that you have a plan. And there's no better way to do that than to talk to someone who's an expert, and someone who knows you, which is--
This has been a really great conversation. And thank you so much. I hope you have a wonderful rest of your day, and--
KEVIN DRISCOLL: Thanks for having me.
EMILY BIGHAM: --and thank you everyone, for tuning in. This is Emily Bigham. I'm your podcast host for MakingCents. And you can download and subscribe to MakingCents anywhere you get your podcasts.
ANNOUNCER: Navy Federal Credit Union is federally insured by the National Credit Union Administration. This podcast is intended to provide general information and shouldn't be considered legal, tax, or financial advice. It's always a good idea to consult a tax or financial professional for specific information on how certain laws may apply to your individual financial situation. References to and participation with the military community does not constitute organizational endorsement. Navy Federal is an Equal Housing Lender.
ANNOUNCER: Navy Federal Credit Union-- our members are the mission.
Episode 6: Planning for Retirement During a Pandemic, Part 2
Join as we continue our timely retirement planning discussion with Kevin Driscoll, Vice President of Advisory Services at Navy Federal Financial Group. In this episode, we’ll talk emergency and rainy day funds, certificates, financial pressures, the choice between a credit union and a bank and more.*
GUEST: A financial advisor for more than 20 years, Kevin Driscoll is Vice President of Advisory Services at Navy Federal Financial Group.*These products are not NCUA/NCUSIF or otherwise federally insured, are not guaranteed or obligations of Navy Federal Credit Union (NFCU), are not offered, recommended, sanctioned, or encouraged by the federal government, and may involve investment risk, including possible loss of principal.