COVID-19 and FSO’s
Holy pandemic! I’m continually astounded at the speed and scope of this global pandemic. There is no corner of the globe that is not touched by it, as we foreign service families can attest. I’m here today to discuss the unique impacts this global pandemic has on FSO finances and the steps you can take now to protect yourselves and your family for any future such shocks.
Global Authorized Departure
For those of you who are posted in developing countries, you may have opted to participate in the global authorized departure. Needless to say, this is a very uncertain time both in terms of our collective health and when/if you will be permitted to return to post. Here is a helpful guide from the FLO to assist you in making decisions regarding your authorized departure(AD).
You should be receiving per diem as part of the AD. I recommend my clients make a plan for that money ahead of time. That may look different for each individual family, but planning not to spend, for example, $25/day of that as an actual buffer for when the unexpected expenses crop up.
I think we’ve all heard about the $2 trillion CARES Act that was signed into law last week. Here are a few ways I think it will likely affect FSO’s.
Public Service Loan Forgiveness payment “credit” is given for six months. Everyone receives credit for six months of PSLF eligible payments from 3/30-9/30 this year regardless of whether they made payments during that time. If you have any high-interest debt or are building your emergency fund, it may be a good idea to pause payments and apply them towards your goals.
No federal SL payments required until September 30th. This is a huge deal! I recommend anyone who has high-interest debt like a credit card use the extra cash flow opportunity and pause federal loan payments. Use that extra money to pay off high-interest debt or add it to your emergency fund. You will need to call your federal loan servicer in order to elect this as they won’t stop any automatic payments you had scheduled. Just be sure to turn payments back on before the September 30th deadline.
No interest until September 30th. Interest rates for federal student loans have been set to 0% until September 30. You won’t need to do anything for this change to happen. Your monthly payments will stay the same, but the full payment will be applied to the principal and there will be no interest charges. This is also a good opportunity to make a dent in your student loans if you have extra monthly cash flow and want to pay off debt sooner as 100% of your payments during this period will be applied towards the principal.
Review your emergency fund
This situation just highlights the uncertainty around the FSO lifestyle. You never know if your tour might be cut short and your income drop due to an authorized or ordered departure. Due to this uncertainty, you should be sure that you have at least 3 months of net income in the bank, i.e. 3 months’ worth of paychecks, in order to cover any potential shortfalls.
Post differentials go away in CONUS and it can be a real pinch if you’re already spending most of your reduced monthly income. The anticipated stimulus check should be a nice start to your emergency fund if you haven’t already started one. Put this money in a separate account, preferably a high yield online savings account where you’ll earn a bit more interest and it will be out of sight and hopefully earn a bit more interest than your brick and mortar bank.
Ensure you have estate documents up to date
I always recommend that my clients get or review their estate planning documents while on home leave in between tours. It gives you a good opportunity to calmly consider your wishes and meet with an estate planning attorney while stateside if changes need to be made.
At the very least, a global pandemic highlights the need to ensure your healthcare wishes are known and followed given the statistically high likelihood that you could get very sick. That means getting at least a living will and healthcare proxy done in order to protect you and your family.
Here is a list of the minimum estate planning documents you’ll need:
Power of Attorney
Last Will & Testament-
Don’t forget to get a Power of Attorney form on file for your TSP too! Unfortunately, the TSP does not accept a general power of attorney. In the event that your loved ones need to access your TSP to take an RMD or to cover expenses, they won’t be able to without this document.
Stay healthy out there!