This guide is about considering your financial position post deployment and putting in place some simple strategies to set you up to succeed financially. We encourage you to use these resources to understand your options, and know where to go to get good information and advice, so you can make informed choices with your money.
After a deployment you are likely to have a sum of money that represents a unique opportunity to fast-track your financial goals. The question is, do you use it wisely, or do you blow it? A disciplined approach to your finances is an important part of reaching your financial and other personal and professional goals.
Financial wellbeing can also help reduce stress and anxiety, improve relationships and allow you to focus on what’s important to you.
Applying the same discipline to your finances that you do to your job, will give you the best chance of living the life you want to live. It doesn’t have to be hard or complicated. This site and the MoneySmart website provide sources of reliable, impartial information, useful tools and other resources to guide you along your path.
Before you race out and spend all your hard earned cash, take some time to think about what you really want to achieve financially in the short, medium and long term.
Write a brief description of these goals and a timeframe for achieving them. The MoneySmart savings goal calculator can help you work out how much you will need to save, over what period of time, to reach each goal.
You can re-assess and update your goals each year.
Post deployment your income is likely to reduce, so now might be a good time to redo your budget. A budget helps you work out what your current expenses are, so you can make decisions about how to achieve the goals you set. The MoneySmart budget planner can help you do this.
Knowing what you spend your money on and what’s left over, helps you decide what’s really important to you.
Reviewing your budget regularly will help you stay on track.
It’s important to keep your debts under control. If you have any high interest debt, such as credit cards or personal loans this could be a golden opportunity to get them paid down, using the money you saved on deployment. This also improves your cashflow as money you would have spent on loan repayments can be directed towards other goals.
If you have more than one high-interest debt, choose the one with the highest interest rate and make additional repayments until it is paid off. Then move on to the debt with the next highest interest rate and so on until all debts have been repaid
Interest-free deals and other buy-now-pay-later schemes are designed to get you to spend more and get stuck in a debt cycle. Unless you need something urgently, like a new fridge or washing machine, try to avoid using these schemes and save up for the things you want instead.
It’s a good idea to check your credit report and credit score when you get back from deployment to make sure there are no unauthorised transactions on your file. For example, someone having applied for credit in your name without your knowledge or authorisation.
Your credit report is a comprehensive report on your credit history. It lists personal details such as your name, DOB, address, employer, and driver’s licence. It also contains information about the credit products you currently have or you’ve had, or applied for, in the last 2 years, and whether you have any missed payments or defaulted.
Based on this information, credit reporting agencies give you a credit score and rank you as excellent, very good, good, average or below average.
Credit providers use this information to decide whether to lend you money, how much to lend you, and even what interest rate to charge you. People with a higher credit rating will often be able to negotiate better interest rates.
A higher interest savings account is great for emergency funds and short-term savings. However, if you are saving for a goal that will take you more than 5 years to reach, other investments could get you there faster.
Investing in growth assets, like property and shares, should generate an income, but also have the potential for capital growth, which is an increase in the value of the investment over time.
Capital gains increase the amount of money you’ll have to spend in the future, relative to what you have today. Just remember that higher potential rewards, usually come with higher risk, so make sure you understand the risks and are comfortable with them before you invest. You can learn about different types of investments in the MoneySmart investing section.
Before you invest it’s really important to have the basics under control so that you start from a position of strength and are less likely to get yourself into financial difficulty. You’re ready to invest if you have:
Real estate is a popular long-term investment in Australia, but did you know there are many ways to access property markets?
When you buy an investment property you are putting a lot of your money into one asset. If you also own a home, you will be heavily invested in residential property.
When buying a property, do your research, look for investment potential, not just the tax breaks, and buy in markets you are familiar with. Remember that property has very high entry and exit costs, so you need to be thinking long-term investment.
Gearing is where you borrow money to invest. Negative gearing is where your interest and other costs are more than the income you receive from the investment. This means you are making a loss, and will have to rely on an increase in value to make money.
Another way to invest in property with much less money up front and greater diversification is through Australian Real Estate Investment Trusts (A-REITs), which are a type of property scheme, and Exchange Traded Funds (ETFs).
If you’re thinking about buying a home to live in, you might consider the Defence Home Ownership Assistance Scheme (DHOAS).
DHOAS is a scheme that helps ADF members own their own home. If you have a period of full-time service greater than 4 years, you may be eligible for assistance through the scheme. The assistance consists of a monthly subsidy paid directly into your qualifying home loan. The longer your service, the higher your potential subsidy.
As your subsidy entitlement is based on your years of service, you may still be eligible to continue receiving the subsidy even after you leave the ADF. You should make enquiries with DVA promptly to establish whether you are entitled to a subsidy.
There are a limited number of approved lenders who participate in the scheme so it’s still important to compare what DHOAS may offer you with the cost of obtaining a loan outside of the scheme.
When you invest in shares, you are buying a small piece of the company you invest in. To create a diversified portfolio, you’d need to buy shares in a range of companies, across industries, and across markets. This helps spread your risk.
Another way to invest in the share market is through Exchange-traded funds (ETFs) or managed funds. They allow you to gain a broad exposure without a large outlay or the necessary expertise of choosing which companies to invest in. If you go down this path, make sure you consider the fees and not just the expected returns when choosing a fund.
Managed funds may be suitable if you are looking for an investment you can add to regularly. ETFs may be better suited to those who will add to their investment less frequently as you pay brokerage fees every time you buy and sell.
Shares and ETFs can be bought or sold on a stock exchange such as the ASX.
Shares and managed style investments can be actively or passively managed. Active management is where you buy and sell assets frequently in an effort to beat the market return. Passive management is more of a buy and hold strategy, for example, a passively managed index fund will buy a basket of shares similar to a particular index and hold them, giving you a return, before fees, that is almost the same as the index the fund is tracking. Passively-managed funds are usually a lot cheaper than actively managed funds because it requires a lot less human interference.
You can’t control investment returns but you can control the fees you pay.
Fees reduce your overall returns. A 1% difference in fees can have a significant impact on your investment balance over time.
When comparing similar investments, look at long-term average returns after fees before making a decision.
Spending your deployment money? Don’t risk suffering unnecessary losses. If you can’t afford to lose it, insure it.
Make sure the insured value for things like your car, home and contents is current.
Before you renew an insurance policy, shop around to make sure you are still getting value for money. If you find a better deal for comparable cover, ask your current insurer to match it.
Many insurers will give you a discount if you have more than one policy with them, but the discounted cost still needs to represent 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 what you want covered.
If you are thinking about buying a new car, or are considering the insurance you have on a current vehicle, make sure you understand the different types of car insurance:
We recommend that you always have at least third party property cover.
Generally you will need to declare all of your income, other than tax-exempt deployment or reservist income. The ATO has guides on what income must be declared, but this usually includes your ordinary salary and allowances, interest and investment income.
Deductions reduce your taxable income, which reduces the amount of tax you will pay. Go to the Australian Tax Office (ATO) and search ‘ADF members’ to find the tax guide for ADF members that explains what ADF members can and can’t claim.
For deductions to be allowed:
Don’t be tempted to claim tax deductions you’re not entitled to, the last thing you need is a tax audit.
You can lodge your tax return for free through myGov by 31 October or get an extension through a registered tax agent, accountant or the ATO.
You can find a registered tax agent near you through the Tax Practitioners Board.
If you need help choosing investments and are thinking about getting financial advice, watch the video: ‘Financial advisers: the facts & the fiction’, which will give you a good idea of what to expect when you see a financial adviser and what to look out for.
We also have a financial adviser referral program, which is a list of financial advisers that have made an undertaking to Defence to operate on a genuine fee-for-service basis, free from commissions and conflicts. You need to be aware that we do not in any way recommend or endorse the advisers on this list. Any relationship is between you and the adviser is a strictly private relationship that Defence is not a party to.
Before you choose an adviser, make sure they are qualified to give the kind of advice you are after and that they have experience in dealing with circumstances like yours. Make sure you understand and agree the scope of the job and the fees before proceeding, these should be outline in an Engagement Letter.
There are a number of places you can go to access free, impartial, financial education and information. Start by accessing the information available on this website.
Use the comprehensive independent resources at www.moneysmart.gov.au.
Get more information on your super at www.csc.gov.au.
For information on tax matters, go to ato.gov.au.