You likely work for a paycheck, but money affects your job in more ways than simply what you bring home in compensation. Bad financial decisions affect your security clearance. That means poor financial decisions may cause you to lose your job, and your career. Financial awareness is important for everyone, but particularly those in the national security and military community.
There are 13 factors, called adjudicative guidelines, that can either deny a renewal or revoke a security clearance, but the one thing that affects the largest number of security clearances pulled (approximately 75%) is irresponsible financial indebtedness. For military members needing a security clearance to hold their job, losing it can mean a lost promotion opportunity or potentially an end to a military career – both which affects the financial situation of that military family immediately and into the future.
Just what is financial indebtedness? According to Guideline F of the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information, it is a “failure to live within one’s means, satisfy debts, and meet financial obligations which may raise questions about the individual’s honesty and put people, property or information systems at risk.”
We all have a certain amount of debt. It is almost impossible in today’s world not to have at least some debt. But at what point does it become a problem for security clearance holders?
Most financial experts recommend having a debt-to-income ratio of 37% or less; anything over 43% is a sign of that “financial distress is inevitable, if not imminent.” In 2015, the organization VeteransPlus counseled 38,635 service members and 55% of them had unsecured (mostly credit card) debt at a debt-to-income average of 46.5%.
But having a high debt-to-income ratio alone does not jeopardize a security clearance – it is how the debt was acquired and how it is being managed. If the debt was out of control of the individual, such as a downturn in the housing market resulting in an upside-down loan, or a change in employment of a spouse, that is not viewed as badly as is debt acquired from gambling, reckless spending or careless investing.
The management of debt is the second thing looked at closely. If the family can show they are actively trying to manage that debt, that is a checkmark on the positive side. Such things like showing proof of seeking credit counseling from a non-profit agency, making at least minimum payments, using a budget, disputing an error on a credit report are all signs of making an effort to manage debt. However, getting behind on payments, defaulting on student loans, etc. can question the integrity and financial soundness of the individual holding the clearance.
And the reason why this is of such importance as far as a security clearance is concerned is that having an excessive debt-to-income ratio and not having taken steps to manage it creates an incentive to sell classified information to raise money to pay off debt. There are lots of foreign entities that pay big money for this information about the United States that can’t be acquired by other means.
Next week we look at the Servicemembers Civil Relief Act and how it can offer military families financial assistance in certain situations