At home, budget heroics

It won't show up in the Defense Department's budget, and it's rarely mentioned on network newscasts, but the war in Iraq and the war on terrorism carry a hidden cost on reservists and members of the National Guard who have been called to active duty. Besides the emotional burden, the deployments can put unexpected financial hardships on military families - sky-high telephone bills, unanticipated travel costs, and, perhaps most devastating: the loss of income from a full-time job.

For the past three months, Isabel Raymundo of Manchester, N.H., has had to contend with many of these burdens. Her husband, Mario, was deployed to Iraq in early March as part of the Army's 172nd Infantry Regiment (Mountain). Because Raymundo is a diesel mechanic for General Motors in civilian life, the family's finances are pinched while he's on active duty. As a result, Isabel, a nursing assistant, has had to take a second job cleaning offices. Working two full-time shifts back to back and caring for her children, she has time for only about six hours of sleep a day.

"Mario's deployment is a hardship, of course," says Mrs. Raymundo. "But we're doing just fine and he's serving his country. We've been planning financially for his deployment since he joined the New Hampshire National Guard in 2001."

Mr. Raymundo is among an estimated 300,000 members of the Reserve and National Guard who have been called to active duty over the past 2-1/2 years. More than two-fifths of US troops stationed in Iraq are Reserve and Guard members facing front-line dangers - and frequently facing repeated call-ups. It is the largest activation of the National Guard since World War II. A recent survey commissioned by the Pentagon found that 31 percent of families of reservists and National Guard members see a decrease in income when a spouse is called to duty.

"For some families, they've had to take on additional work to make up for lost income," says Capt. Gregg Heilshorn, a public affairs officer with the New Hampshire National Guard. "Fortunately, many businesses either make up the difference in lost income [between their employees' civilian and military pay] or continue paying benefits to the families of their deployed employees."

While large companies and state and federal governments can afford this - and in the case of some state governments, including California, are legally required to do so - small businesses cannot always include this cost in their budgets. That's the primary reason that Congress has passed a number of bills to help minimize the financial burden of deployment.

The rights of employees who depart for military service are spelled out in the 1994 Uniform Services Employment and Reemployment Rights Act, which stipulates that employers cannot terminate employees or hire permanent replacements. It also mandates that an employer give the same or a comparable job back to employees once they have returned from a military deployment.

"While this law is commendable, there are sometimes problems with enforcement," says Bob Norton, deputy director of government relations for the Military Officers Association of America, in Alexandria, Va. "We've found that the Labor Department and the Justice Department are not always going after violators of the law."

The other federal legislation that members of the Reserve and National Guard can rely upon is the Service Members Civil Relief Act.

This law provides a safety net of economic and civil protections. It precludes creditors from gouging servicemen and servicewomen and puts a ceiling of 6 percent on credit-card interest. It also allows service members to break a car lease or rental housing agreement and prevents a service member from being evicted from a rental property (the rent must be less than $2,400 per month, a figure that is indexed for inflation) or having their automobile repossessed while they are on deployment.

Deployed service members are also entitled to stays of civil proceedings such as bankruptcy, foreclosure, or divorce. And military income earned by soldiers in combat zones is tax-free.

Of course there are a number of proactive steps that guardsmen and reservists can take. Among them:

• Always build some cash reserves before being called up for active duty. The emergency fund should cover housing and food costs for several months. "Having some money for a rainy day makes sense for anyone, but especially for a member of the reserves or National Guard - when a deployment can sometimes last up to 18 months," says Betty O'Leary, a senior financial planner for Edelman Financial Services Inc. in Fairfax, Va.

• Set up a home equity line of credit. This revolving line of credit can address any financial need that arises during deployment. "It can tide you over until your spouse comes back from his deployment," says David Dondero, a certified financial planner in Alexandria, Va.

• Evaluate personal spending and look at unnecessary expenses. Preparing a post-activation budget can help prepare for lost income. Personal-finance experts advise canceling cable television and magazine subscriptions, cutting down on eating out at restaurants and, if necessary, selling a second car.

• Set up a trust for securities and property. "By naming a spouse as a trustee, it makes any financial transaction involving stocks or a home a whole lot easier," says Richard Smith, a certified financial planner in Annandale, Va. "This move is a large part of getting your estate in order before any deployment."

• Reduce credit-card debt. Interest payments are especially difficult when incomes are reduced. "By paying off high-interest credit cards before you are deployed, you can provide more financial options to a spouse who may need to use them in case of an emergency," says Ms. O'Leary.

Isabel Raymundo took many of these steps - months before Mario's deployment to Iraq. "We anticipated the call-up," she says. "Thankfully, we made the appropriate preparations."

When a family member is deployed, those back home have to cope with everything from insurance and mortgages to car loans and job protections for military members. A number of specialized websites offer personal-finance advice for military families. Among the best:

• Household International Military Financial Education Center (militaryfinance.umuc.edu) contains about 800 pages of financial information, more than 100 online calculators, and links to other helpful sites.

• USA Cares (www.usacares.us; 800-773-0387) helps direct families to military and other charitable organizations or corporate sponsors looking for ways to support American troops. The nonprofit is committed to helping military families who have run into financial troubles.

• National Military Family Association (www.nmfa.org) is a nonprofit advocacy group that provides information and assistance to military families.