Australian Defence Force (ADF) personnel face unique financial challenges and opportunities, especially when transitioning to civilian life. Many veterans may receive lump sum payments or regular benefit payments, which can serve as an economic foundation.
Deciding how to best manage this money is crucial. After leaving the ADF, veterans need to consider short-term and long-term goals carefully, and a financial adviser specialising in veteran services can help navigate these complexities.
What is the benefit of investing?
Investing offers the potential for higher long-term returns compared to leaving money in a traditional savings account. By investing in a diversified portfolio, veterans can grow their wealth over time, taking advantage of asset growth with the goal of achieving asset growth across non-correlated asset classes. A well-structured investment strategy almost always outperforms basic savings accounts, especially over the long term.
Types of investments
Veterans should explore various investment options to diversify their portfolios and reduce risk. Some common types include:
Managed funds
Managed funds allow investors to pool their money with other investors and have a professional fund manager make investment decisions on their behalf. This can benefit veterans who lack investment experience or prefer a hands-off approach and wish to professionally outsource investment decisions.
Shares
Investing in shares gives veterans partial ownership of a company. Shares may offer higher returns over time but can be more volatile in the short term. This strategy requires careful consideration of risk tolerance. By investing in both shares and managed funds, the investor will typically receive both capital growth and income.
Property
Investing in property can provide both rental income and capital growth, making it an attractive option for many veterans. Some veterans may appreciate property investment for its long-term stability and potential tax benefits.
It’s important to be cautious when considering property investments. Some investment companies and property developers have been known to target ADF members and veterans with property investment opportunities that may not always be in their best interest.
When investing in property, it’s essential to carefully evaluate the location, the credentials of the builder or developer (especially when purchasing off the plan or through a house and land package), and the property’s resale potential.
Thorough research and due diligence help ensure your investment supports your financial goals.
Term deposits
Term deposits offer guaranteed returns by locking in money for a fixed term at a set interest rate. Although returns are lower than other investments, term deposits provide certainty and are a low-risk option.
The importance of diversification
A diversified investment portfolio helps reduce risk by spreading investments across different asset classes. This approach can protect veterans’ financial well-being in case one investment underperforms. Diversification is essential for long-term financial security and can be tailored to veterans’ circumstances and risk tolerance.
Unique financial considerations for veterans
Some veterans encounter financial challenges when transitioning from military service to civilian life.
Veterans might be limited in income due to injuries from service or skills limitations. This shift can lead to uncertainty about budgeting and financial planning.
Additionally, Veterans may need to navigate complex systems of benefits, pensions, and entitlements, which can vary based on their service and health conditions. Veterans might receive lump sum payments or entitlements that require careful management to ensure long-term financial security.
Engaging with a financial adviser who understands veterans’ unique circumstances can help them adopt an investment strategy that accommodates their goals.
Income limitations
Although many ADF members go on to high-paying careers outside the ADF, or a comfortable pension in retirement, some veterans may see their income reduce significantly after they leave the military.
Limitations in income might be due to skillset, age, or medical limitations. While many ADF members possess valuable skills in high demand in the civilian world, others may find their military training and experience do not directly translate to civilian roles, potentially impacting their employability.
Some veterans may move from a stable, predictable income to a less certain one or even drop significantly if they do not have employment after service.
This situation means that any savings or lump sum payments must be invested carefully, as their capacity to earn this again after leaving the military may be limited. Veterans must consider that their ability to replace these funds may be constrained, reinforcing the importance of careful financial planning.
Consulting with a financial adviser can provide valuable guidance in strategising these investments to ensure long-term financial stability.
Investing a lump sum payment
Veterans may receive certain lump sums or regular payments, depending on their service and health conditions. It is essential to handle these payouts wisely. High-risk investments should generally be avoided, as losing a lump sum could leave veterans vulnerable financially.
National Service Financial offers guidance on managing these payments effectively, noting that lump sum payments should be invested or saved wisely to ensure long-term security.
Speak to a specialist in military financial matters to invest wisely
Consulting a financial adviser specialising in ADF members and veterans can help meet your financial goals. At National Service Financial, we can provide personalised advice based on your unique situation, considering factors such as earning potential, income changes, and lump sum payouts. Veterans can achieve financial independence and stability after leaving the ADF with proper financial guidance.
