Everything is Free
After 23 years in the Air Force, I knew one thing: everything is free. Medical care? Free. Legal advice? Free. Education? Free. Gyms? Free. Financial advice-ish? Free. Okay, even if you paid a little here and there for medical care, the rest of it was pretty much free. The military conditions us not to pay for things we can get for free. #winning?
Good Free vs. Bad Free vs. Worse Free
Getting somethings for little or no cost during military service is part of the bargain. We accept below-market pay, time away from family, unlimited liability on the use of our bodies to ensure the freedom of democracy… it’s reasonable for Uncle Sam to throw in a few fringe benefits.
Of course, nothing is really free. You just get paid less and they don’t charge you for the services they label as free.
Side note: As reminder—outside the military if it’s “free” then you’re the product. What do you “get” for free? What do you give to “get” that free stuff/service?
However, free is a powerful motivator. Your family probably doesn’t delay medical treatment while on active duty since it only feels like it costs time, and the benefits are obvious. If we avoid the moral hazards of either using too much of the free thing (i.e., the Tragedy of the Commons) or failing to take good enough care of ourselves (since we can just make up for it with more free medical care), then free medical care on active duty supports the readiness, health, morale, and well-being of troops and their families. It’s a pretty good free.
Financial “advice-ish” is also free both in the military and to some degree out in gen-pop too. I call the military’s offering “advice-ish” because DoD is a bit twitchy about the concept of financial advice. Financial advice isn’t purely a regulated term, but a good framework is that:
Financial advice is customized recommendations for action for a specific person, usually involving the purchase or sale of an investment product.
Financial counseling is (semi-?) customized recommendations for financial activity and behaviors that can bring about improved financial posture.
DoD and most employers understandably stay away from financial advice. How can they be in a position to know your family’s financial situation well enough to make product recommendations? Not to mention, employers are generally reluctant to recommend products they don’t make or sell.
Side note: The default TSP investment is a lifecycle fund based on age. It used to be the G-Fund. One could argue that this is financial advice as it is a recommendation to purchase an investment product… Hmm…
DoD and employers don’t mind offering counseling such as Save more. Here’s how to budget. This is how to manage debt. Counseling is pretty benign and repeatable, but for those needing to know how to balance goals, time, taxes, regulations, estate planning, education funding, insurance integration, and retirement planning, counseling does not quite shack the target. Financial advice is necessary.
So, what is “Bad Free?” I’ll argue that the bad version of free is when you settle for free, when not free would a better value. If you scour the internet for free financial/medical/educational/etc. advice but it leads you down the wrong path or pins you in analysis paralysis, that’s bad free.
Ignoring a funky lump on your body that’s been developing recently just because Dr. Nick’s Free Medical Advice and Pillow Sales website advises that “it’s nothing” could have catastrophic consequences. That’s bad free. Taking free advice to choose Traditional TSP when Roth TSP could save hundreds of thousands of dollars in lifetime taxes is also bad free.
Another bad type of fee can be credit cards. They do offer great convenience and better fraud/theft protection than debit cards. But like any type of plastic spending, they encourage us to spend more than we would if we used cash. Cash is inconvenient, easy to steal/lose, dirty, and rapidly becoming anachronistic, but our brains moderate spending more when we use cash.
A worse version of free when something is offered as free, but actually costs a lot. A common tactic in the seedy insurance-sales-masquerading-as-financial-advice world is to say, “We Offer FREE Financial Plans,” while convincing you that the optimum way to enact the plan is to buy an overpriced, unnecessary cash value life insurance policy that you’ll almost certainly forfeit before you die.
Few of us go seeking products, especially insurance products when we ask for financial advice. It’s crucial to know how someone offering financial advice is compensated. If they offer anything for “free,” the hair on your neck should be standing up. It’s likely to be a very costly “free.”
The painful part of “free” financial plans from insurance salesmen is that they come with golden handcuffs in the form of surrender charges. Whether it’s an annuity or cash value policy (Whole Life, Universal Life, Variable Life), insurance companies compensate the salesman upfront for selling the product (with a free financial plan…). To prevent a loss on that commission payment, the insurance company charges you a crushing surrender charge to exit the policy, usually for 7 to 20 years, so that your premiums will cover the salesman’s commission, the company’s costs, and the company’s profits before you get away.
Side note: A financial plan is not a fancy print out of projections and graphics any more than a war plan is a PowerPoint slide with bullet lists of desired end states. A financial plan, like a war plan, is the actions that bring about the desired end state.
Paying for financial advice from a fee-only (no sales or commissions) financial “advicer” isn’t free. You’ll pay either an hourly rate, an annual fee, a one-time fee, or a percentage of your managed accounts. But you get to choose when to pay, how to pay, and when to stop paying if you’re not satisfied with the value you receive. This is usually much less expensive than “free” financial planning and advice.
While I’m a big fan of the free basic estate documents that your local JAG office provides (including for retirees and dependents), the free version of estate documents could cost a lot. If you have young children or property in multiple states, a Will alone will likely result in two painful costs.
The first is probate in multiple states. Probate is expensive (thousands if not tens of thousands of dollars), potentially lengthy, and a public process.
The second cost of using a Will for estate planning with young children is that your kids will inherit your assets at the age of majority—18 or 21 years-old depending on your state. If you could be leaving a chunky six or seven-figure estate with life insurance, IRAs, TSP, 401(k)s, etc., do you really want such young adults to have access to that kind of money? Would it be better to meter the flow of inheritance as they mature a bit?
The JAG office can’t draft a Revocable Living Trust for you, but you’ll probably need a Trust to both avoid probate and establish effective guardrails to protect your children from a potentially corrupting amount of inheritance at a young age.
Settling for a free Will from the JAG when a not-free Trust from a law firm is indicated is a worse form of free.
Cleared to Rejoin
Free can be good, even if it’s not really free because the cost is built into something you’re paying for or it’s really part of your compensation package. Free can be bad when it encourages the wrong behaviors or impedes action due to analysis paralysis. Free can be toxic when locks you into a costly and inappropriate contract or leaves your heirs with an expensive or corrupting mess.
A military career often encourages us to expect professional services for free. While free is my favorite price, it’s not always the right price. Sometimes, max-performing our money means spending it even if we don’t have to.
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