A cluster of employees stands in the doorway of Dave Faraldo's office, staring expectantly. The retired Navy captain glances briefly at what they have handed him, then offers a grim pronouncement. "Christmas is canceled this year," he growls. "Get back to work."The employees double over with laughter. "We thought you'd appreciate that, Dave," giggles one woman, backing her pumps down the tiny hallway. "Merry Christmas!"Unable to feign displeasure any longer, Faraldo chuckles and turns the picture around for inspection. There he is, the executive director of the Navy-Marine Corps Relief Society, mugging for the camera -- his blue-eyed nonchalance betrayed by two reindeer horns rising from the blanket of his thinning hair. The photo is featured in the Relief Society's 1999 Desk Calendar, which will be distributed worldwide. "Didn't see that one coming," he admits.Faraldo takes the joke in stride, but his Grinch performance isn't pure fiction. At least a small part of him wishes he really could cancel Christmas this year. His motive isn't religious or even philosophical. For Faraldo, it's all about the Benjamins. He knows that thousands of Navy service members will spend themselves into debt during the holiday season. And in early 1999, they'll come to him for help."They're out there right now -- buying," says Faraldo, inclining his head as if to hear the distant cha-ching of a cash register. "Those same people will start rolling in in mid-January, early February."While excessive holiday spending worries Faraldo, the retired P-3 pilot knows frugality alone won't shrink his client list. The sad truth is that most Relief Society clients are spawned by meager wages: Navy personnel are consistently, almost universally, underpaid. The so-called wage gap between Navy service members and their civilian counterparts is an estimated 13 percent, and the gulf is growing.According to a 1997 Department of Defense-funded study, as many as 43 percent of service members say they have trouble paying their monthly bills. Eleven percent cite low pay as their primary reason for not re-enlisting. And for the first time since the military abandoned the draft 25 years ago, the Navy can't meet its recruitment goals.In the booming economy of the 1990s, the Navy has seen record numbers of qualified personnel leave the service for more lucrative jobs in the private sector. Those who remain are less marketable, less-desirable employees, further crippled by a host of poverty-attendant problems. To make up for the mass attrition, the Navy pours millions annually into training new recruits -- at a cost of $22,350 per recruit, not including wages.The problem isn't just measured in dollars, however; it's also taking a toll on naval readiness. According to the report, sailors with financial problems tend to be unfocused, emotionally unstable and generally unreliable. They are also more likely to abuse alcohol or their spouse, and may be more prone to suicide.Though the Navy has been aware of these problems for more than a decade, the situation has reached crisis proportions in recent years. The problem is so apparent that in the 1998 Defense Appropriations Bill, Congress demanded that the DOD develop a program to teach all branches of the military personal financial management skills and "report to Congress on actions taken to correct this deficiency." Even President Clinton -- no military booster -- has joined the debate in recent weeks, pushing for a military pay raise."This is not just a question about the comfort level of our sailors," says Faraldo intently. "This is about naval readiness. This is about our ability to respond to crises around the world. We can't have that destabilized by our financial problems."To combat the problem, the Navy is looking at ways to teach service members basic financial skills -- to help them better manage their money and to insulate them from unscrupulous businesses. Though the Navy can't teach away skimpy paychecks, it can offer service members a basic financial education and access to financial safety nets.But it could be years before the Navy's new initiatives have an impact -- and servicemen are unwilling to wait. In October, the Navy's first-ever Financial Fitness seminar was organized. Attended by 120 service members and top officials, the forum was a rare, frank exchange on the unique financial burdens of service members. It also yielded a six-page memo, distributed to naval bases worldwide, that included suggestions and recommendations for improving the financial lot of service members. The Navy has also taken a very public stance in the fight against title loans and other rip-off businesses.Then again, Faraldo observes, it's not like they have any choice. "This isn't something the Navy can ignore," he says. "This is an absolute priority."It was February 1997, and Rita Smith needed money. Her husband, an enlisted sailor with a couple years of service under his belt, was at sea. She was at home with three children, lots of unpaid bills and an empty bank account.Unable to pay the mortgage or buy groceries, Smith (not her real name) jumped in her 1989 Ford Ranger and drove to a nearby Title Loan store. Moments after she disappeared through the door, she emerged with $1,700 in cash -- enough to stave off foreclosure and hunger until the next paycheck.It was the ideal transaction -- exactly how supporters of the title loan industry claim the system operates. But as Smith and her husband would soon discover, the loan came with a hefty price.Each month, for the next 20 months, the couple scraped together the $374 they needed to pay the 22 percent monthly interest on their loan. After nearly two years of payments, they had spent $7,400 on interest -- and still owed the original $1,700 principal.In October 1998, her husband again at sea, Smith found the financial burden too much to bear. Terrified her car would be repossessed, she went to the Relief Society for help."We loaned them enough to get out from under the debt," says Faraldo. "But when you ask if we were able to help them 'in time,' the answer is 'no.'"Though the truck wasn't repossessed, Faraldo observes that the vehicle was only worth $6,000 to begin with. An average person -- even with a high-interest loan -- would've paid just $200 interest on a $1,700 loan.More than a simple rip-off fable, Faraldo says the story highlights how ignorance in fiscal matters can impact Navy operations."Imagine how it is to have this kind of debt hanging over your head when you're at sea; you get a rare chance to call home, and instead of 'How are you, how are the kids?' they are talking about this terrible debt, and what they're going to do about it," Faraldo says. "It's a terrible strain [on the sailor."]Smith's situation is not unique, according to Rear Admiral Ken Belisle, former interim commander a Naval Base in Florida. Naval bases nationwide are magnets for businesses that prey on sailors, from the more traditional pawn shops to the newer check cashing services and title loan shops. Belisle is well acquainted with the easy-money gauntlets that target sailors; he himself had to travel daily past many of the businesses that exploit his employees, and many of these same businesses advertise in Navy newspapers.Although Belisle only served a brief seven-month stint as commander, he used his time to advance a personal goal of neutering these predatory financiers. Joining forces with Faraldo and USO Director Bill Kennedy, Belisle advanced his philosophy of "financial fitness" for sailors, advocating mandatory financial education for officers and new recruits."We [direct] sailors on everything from how to fill out forms to how to wear a uniform," says Belisle, who emphasizes that his views are his own. "We need to do the same thing for [financial education]. We need to institutionalize this information, to make sure that everyone gets it."In theory, the Navy is supposed to be doing this already. In 1990, to combat growing readiness concerns, the Navy instituted a Personal Financial Management Program. According to program director Fachon Reed-Chester, the program is designed to provide Navy personnel with financial advice on everything from car purchases to retirement planning. The program requires each "command" -- of which each base has dozens -- to designate a financial advisor to assist fellow command members on financial matters."It's our goal to teach financial reponsibility regardless of the size of a service member's paycheck," says Reed-Chester.Despite lofty goals, most agree the 9-year-old program has failed. According to the 1997 DOD report, the chief reason for this appears to be that the program's assigned financial advisers aren't well trained or especially enthusiastic -- an assessment Faraldo agrees with."Suppose I told you that in addition to your job now, you were going to have to be the financial adviser for your workplace," suggests Faraldo. "And suppose it was a job without much prestige, and suppose I didn't give you enough time to do it well. How excited would you be to do it?"Though Reed-Chester defends the accomplishments of the program, the Navy's own figures show a financial situation spiraling out of control.The desire of the Navy to right the financial situation of service members is not purely benevolent; the organization's financial fate is closely linked to that of its sailors. According to the '97 study, sailors' indebtedness translates into "substantial dollar and manpower costs to the Navy." Using what they acknowledged was "a conservative estimate," the study's authors said the Navy loses at between $172-$258 million each year in productivity due to the financial instability of service members. In direct costs alone, the report found a minimum of $36 million -- or 891 "man hours" -- spent processing paperwork related to the financial problems of Navy personnel.Other findings were equally damning. Among them:Navy commissaries and the Navy Exchange System receive more than 165,000 bad checks each year totaling more than $200 million. Forty-three percent of active duty personnel reported difficulty paying their monthly bills. Sixty percent of Navy security clearances -- or about 300 a year -- are revoked due to service members' personal financial troubles. Fifty-eight percent of married service members reported dealing with financial problems while deployed. Thirty-three percent complained they often do not have money for essentials -- such as rent, bills, clothes and transportation. Sixty-two percent say they are unable to put money into savings. 4,300 service members filed for bankruptcy in 1996, with the Navy as creditor.The report didn't attempt to downplay the findings. In addition to the financial drain, the report concluded that financial instability led to "reduced operational readiness, lowered productivity, lapses in concentration, deployment concerns, early returns, refusal to re-enlist and discontinuation of service by officers."In a word, says Admiral Belisle, "Destabilizing."When considering the financial stats of service members, it's important to remember who is not in the Navy. Not brazen entrepreneurs, get-rich-quickers, or struggling small business owners. Not aspiring actors, stock market dabblers, drought-stricken farmers or life insurance salesmen. In short, the Navy is staffed by full-time, fully-abled U.S. Government employees: people with health insurance, job security, steady paychecks and pensions.With all that stability, it's hard to believe that so many service members are teetering on the brink of financial ruin. Even harder to believe is that Dave Faraldo's job is getting more demanding -- even as Navy ranks shrink.Each year, the local Navy-Marine Corps Relief Society helps between 12,000- 13,000 service members and hands out $3.3 million in aid. But even with the military's national effort to trim troops, Faraldo is handling as many cases as ever.Created by retired servicemen in 1904, the private, non-profit Relief Society was originally envisioned as a resource for sailors in financial trouble. Its goal was to offer help for unexpected expenses -- funeral services, broken-down cars -- and its funds are doled out accordingly, in small, housekeeping increments. Today, however, Faraldo says as much as 25 percent of relief funds go to pay for life essentials -- "food, clothing, shelter."In order to determine the root of an individual's financial crisis, the Relief Society requires all applicants to consult with a staff financial adviser. Before any money is given, either as a gift or an interest-free loan, a detailed monthly budget is created. This budget is necessary, says Faraldo, to determine where the money is going.Rita Smith's case is typical. When she came to the Relief Society, she was seeking money to pay the mortgage. It wasn't until she met with a financial counselor that the title loan debt was discovered."They don't come in and say, 'I've got this big title loan debt,'" Faraldo explains. "They come in and say, 'I need money for rent.' It's only after we do a budget analysis that we come up with the huge monthly title loan payments."While the Navy takes the threat of title lenders seriously, it is more concerned that service members are vulnerable to these lenders in the first place. And the reasons for that are somewhat complicated.The primary reason, says Faraldo, is service members' lack of basic financial knowledge. Most new recruits come to the Navy straight out of high school, having never lived away from their parents or known self sufficiency. Unlike college-bound kids, these young recruits are more likely to be from poor homes, and less likely to have a financial safety net if they incur debt. At the same time, first-time paychecks can seem deceptively large."Some of these kids think, 'Wow, $900 a month -- I'm really making some money!'" says Admiral Belisle. "They don't realize that once they pay rent, buy some groceries, they really don't have much left over."Both Faraldo and Belisle agree that the Navy needs to do more to teach money management skills. At bottom, though, the financial problems of service members have as much to do with compensation as with spending habits. Base-pay for an entry-level enlistee is $10,142 -- or $4.87 a hour, less than current minimum wage ($5.30/hour). When this amount is augmented by housing allowances ($455 a month), and -- for sailors with a spouse and kids -- family allowances, the annual income moves closer to $20,000 a year.Even so, for married service members, the income is insufficient. "Setting up a household is not cheap, and a lot of these kids want a nice house like their parents," says Faraldo. "They simply can't afford it."Though many service members try to supplement their income with part-time jobs, these positions are difficult to maintain during a lengthy deployment. A night job at Taco Bell isn't a possibility if you're on a ship at sea, observes Faraldo: "There's no moonlighting jobs on a ship."This same problem often prevents Navy spouses from working full or even part time. "Who's at home with the kids when a sailor is at sea?" asks Feraldo. "Someone has to be at home."As the technology and aerospace industries have grown over the last two decades, the Navy -- unable to compete with private-sector wages -- has seen thousands of Navy-trained employees lured away. Even Navy SEALs -- long one of the most exclusive and prestigious of the military's special forces -- has been unable to keep members from bailing. According to a recent NBC investigation, the elite force has lost 20 percent of its members to the private sector during each of the last two years. Many have used their tactical fighting skills to secure lucrative jobs on Wall Street.Until the Navy offers higher wages, says Belisle, private sector jobs will continue to tempt sailors. And if projected pay raises are any guide, the attrition won't end anytime soon."Navy salaries ... for the next few years are going up 4 to 4 1/2 percent," says Belisle, " -- not enough to really catch up [to narrow the wage gap]."In addition to closing the pay gap, Belisle and Faraldo agree, the Navy must overhaul its retirement program. Until 1986, service members with 20 years of service were eligible for 50 percent of their base pay. But 13 years ago, in order to make up for budget shortfalls, the Navy instituted the "Redux" program. The new program cut benefits for 20-year veterans to just 40 percent of base pay, and reduced annual cost of living adjustments (which currently fail to match inflation).Unfortunately, while the Navy has made a commitment to improving the financial situation of sailors, its funding is subject to the whims of Congress -- a body more inclined to spend on futuristic machinery than the human beings at the core of the defense system."The Navy, more so than any [of the] other armed forces, is an instrument of the nation's foreign policy," says Belisle. "In a crisis, the first thing [the government] want[s] to know is 'where is the closest aircraft carrier?'"In a critical situation like that, he says, "The last thing we need is [a service member] trying to load weapons and wondering, 'How am I going to pay that bill?'"