ADF members receive competitive salaries, attractive superannuation arrangements, subsidised housing and other allowances and entitlements. This provides a strong foundation to build your financial future.

Getting on top of your finances doesn’t have to be hard or complicated. We’ll provide you with reliable sources of impartial information, useful tools and other resources to guide you along your path.

The earlier you start the better!

Budgeting

A budget lets you see what you currently spend your money on, making it easier to make decisions about what’s important to you and what habits you might be willing to change to achieve the goals you set.

Using a tool like the Moneysmart budget planner or a free budgeting app can make the task easier. Don’t forget to include less frequent expenses like utility bills and car registration and insurance.

Hopefully, your budget will show a surplus. This is the amount you should have to save towards your goals. If it doesn’t, you’ll need to take a closer look to see what expenses you could reduce so that you don’t get into financial difficulty.

Review your budget regularly to ensure you are still on track.

Setting goals

To be successful in any field, you need the ability to form, commit to, and work towards meaningful goals, exercising discipline to achieve them.

Think about what you want to achieve financially over the next:

• 1-2 years (short term)
• 3-6 years (medium-term)
• 7+ years (long term)

Even if you start with just a single goal, write it down, work out how much you need to save each pay and how long it will take to reach.

You can re-assess and update your goals each year.

Tip: If you don’t already have an emergency fund, a good short-term goal might be to open an online savings account and build a buffer of 3-6 months’ worth of expenses, to act as a safety net for when life doesn’t go according to plan.

Superannuation is a compulsory retirement savings scheme. It’s a way of putting money away now to live off of later in life. Superannuation may also have tax advantages for you.

Defined benefit super

If you joined the ADF before 1 July 2016, you will likely be a member of MSBS (Military Super). This is a defined benefit fund, where your retirement benefit is a lifetime indexed pension based on your years of service and final average salary. You will also get additional contributions back as a lump sum.

If you have pre-1 July 2016 service and re-enter the ADF, you should automatically re-join MSBS. You may choose a different fund (e.g. ADF Super) however, we suggest you think carefully before doing this and consider getting financial advice before making a decision.

Accumulation super

If you joined the ADF after 30 June 2016, your super will be paid into an accumulation super fund. Your retirement benefit will be a lump sum based on contributions and investment returns accumulated throughout your working life. You can choose the fund your super is paid into. If you do not make a choice, it will be paid into ADF Super.

For accumulation fund members, Defence pays super at a rate of 16.4% of salary and some allowances, well above the legislated minimum requirement.

You can choose how your super is invested.

Why you should care about super?

Taking an interest in your super now can mean a lot more money in your pocket down the track. Keep in mind that you will need your super to generate an income for you when you stop working. The more you accumulate, the more lifestyle choices you will have when you retire, or maybe the earlier you can retire.

For example, a 21-year-old ADF member, with an income of $65,000 pa, employer contributions of 16.4% and a current super balance of $5,000, estimates their super balance at retirement. The graph shows the difference between getting:

• An average return of 5% pa.
• An average return of 7% pa.

The result shows that compounding investment returns over the member’s working life could potentially increase their super balance at retirement by more than $330,000.

This does not take into account member voluntary contributions or pay rises that would increase the difference.

You can also make extra personal contributions to super, either before or after tax. With the benefit of compounding investment returns, small contributions over a long period of time can also grow into a substantial boost to your final super balance.

For more information on MSBS (Military Super) or ADF Super, head to www.csc.gov.au.

Use separate accounts for spending and savings

If you’ve completed the Goals and budgeting section, you will have set at least one financial goal and done a budget, so you know how much you can afford to save towards reaching your goals. This section is about putting a system in place to actually achieve those goals.

Managing your money will be easier if you open separate bank accounts for bills, spending and savings and have your pay automatically split into each account.

Choosing accounts

A comparison website can help you find suitable accounts for everyday transactions like bills, spending and savings. Look for accounts that have the features you want, like the ability to set up direct debits and credits, without charging account fees.

Some savings accounts will have conditions attached to them, for example, you won’t pay account keeping fees if you deposit a certain amount into the account each month, or you’ll earn a bonus rate of interest if you don’t make any withdrawals. Make sure you can satisfy the conditions before opening the account.

Don’t be afraid to move your money around if higher interest rates are only offered for an introductory period. Opening a new account and transferring money to yourself is a pretty simple process with most financial institutions.

If you have a partner, consider whether you want joint accounts or whether you are keeping your finances separate for now.

Paying bills

Making sure bills and loan repayments are paid on time, is critical if you want to avoid late fees and interest charges. Late payments can also affect your credit rating.

Set up direct debits or credits to pay each account on or before the due date so your bills get paid on time, every time. This will make managing your money much easier, letting you focus on other things.

Maintain a minimum balance in your bills account to cover all your bills as they fall due, and keep an eye on your balance if you know a large expense is due for payment.

Managing debt

Try to avoid getting into debt for things that go down in value, like new cars. It will be a lot cheaper and far more satisfying in the long run, to save for large purchases.

If you must borrow money to make a large purchase, use a comparison website to find and compare loans with lower interest rates and useful features, like the ability to repay the loan early without penalty.

Credit cards

Credit cards may seem convenient, but if you’re not careful, they can quickly become a financial burden. Typically, credit cards are a high interest, high fee form of credit.

Before you apply for a credit card, we suggest you:

• Consider using a debit card instead.
• Understand the fees and charges – read the fine print.
• Pay your balance in full each month to avoid paying interest.
• Minimise the number of credit cards you have – you shouldn’t need more than one.

Buy-now-pay-later schemes

Be careful with buy-now-pay-later schemes. They may seem like a convenient way of spreading out payment of a purchase, but it makes it a lot more difficult to track your spending, especially if you have more than one going at a time.

These types of services encourage you to spend more than you can afford, which is great for them because they can then hit you with account fees, payment processing fees and missed payment fees if you’re late with a payment.

If you find yourself in trouble with debt, our money guide ‘Problems with Debt‘.

In Australia, individuals pay tax on a Pay As You Go system, which simply means you pay income tax on your money as you earn it. Defence deducts an appropriate amount of tax from your pay each fortnight.

We work on a sliding tax scale, so the more you earn, the higher the percentage of tax you pay. The highest rate of tax you pay is known as your marginal tax rate.

The table below shows the current marginal tax rates for Australian residents and illustrates how tax would be calculated for an individual earning $60,000 a year.

The tax year, or financial year, runs from 1 July to 30 June.

This means that if you earned $60,000 per year, your tax would be calculated like this:

If you are completing your own tax return, using the myGov website, it needs to be lodged by 31 October. If you are using a registered tax agent or accountant, you’ll have until 31 March the following year.

Don’t be tempted to make ‘dodgy’ claims, chances are you’ll be caught and issued with fines and other penalties. The ATO has guides for ADF members on what income must be declared and what expenses are allowed as deductions. You can find the guides at www.ato.gov.au.

Protect yourself from loss

Don’t risk suffering unnecessary losses, protect the things that are most important to you. Insurance is a way of managing risk.

Make sure your cover is up to date and that insured values are current for things like your car, home and contents.

Before you renew an insurance policy, shop around to make sure you are still getting value for money. We suggest doing three things:

• Go to your current insurer’s website and pretend to be a new customer – you may be surprised to find the premium offered is cheaper than your renewal notice.
• Use a comparison website to see how much you would have to pay for comparable insurance with another insurer.
• Armed with this information, phone your current insurer and ask them to match the best price you’ve found for the cover you want.

Many insurers offer a discount if you have more than one policy with them. You still need to be satisfied that even with the discount, you are getting value for money.

When comparing policies, take note of what is and isn’t included, insurance cover is not cheap if it doesn’t cover you for what you want covered. See our insurance money guide for more detailed information.

Will

A will is a legal document that states how you would like your assets distributed when you die. If you die without a valid will you will be said to have died intestate and your assets will be distributed according to intestacy laws in your state, which may not be in line with your wishes.

For a will to be valid it must meet certain criteria, which is why we recommend seeing a lawyer (ADF LEGALOs can usually help). Never use a will kit.

Store a copy of your will in a safe place (DCO stores wills of permanent members and some reservists) and tell your executor and next of kin where it is.

Review your will whenever your personal circumstances change, for example, you get married, separated or divorced, or become a parent, and make arrangements to update your will if necessary.

Power of attorney

While a will is something that all adults should have, a Power of Attorney (POA) is something that you might want to think twice about.

When you grant someone a POA, you are giving them the power to manage your money on your behalf. That means they can operate your bank accounts, buy or dispose of assets, and make financial decisions as if they were you.

You can limit a POA, for example, you could make it valid only for a specific period of time, or only allow transactions up to a certain dollar amount.

There are different types of POA, for example:

• General – ceases if you lose mental capacity.
• Enduring – continues to operate after you have lost mental capacity.
• Medical – allows your appointee to make decisions about your medical treatment if you become mentally or physically incapable of deciding for yourself.

Only grant a POA to someone you completely trust and get appropriate legal advice first.