Or, How not to go into serious debt and ruin your life.
As a young Dig joining the Army and starting to make your way in the world, you will start to make good money and the temptation will come to blow all of your disposable income on having a great time when you are back from having the time of your life out field on exercises or on deployment.
This is a great thing and you may never have this much personal spending freedom again before getting tied down by car payments, girlfriends, mortgages, household bills, kids etc. It doesn’t hurt doing that for a while, but what if you made a small sacrifice and spent 90% of your disposable income instead of 100%?
Now for those of you that are savers and maintain a budget, are good with money, have no debt etc. this advice is probably not for you as you already are winning at life and you will view these options as minor stuff, mere drops in the ocean to your superior excel spread sheet life guide, but I digress. There’s many advice guides, both government and private that can help and some of them will be listed at the bottom (this also should go without saying, but see a professional before you do anything and this piece does not constitute advice, it is opinion.) that can help and you should check out, but this is a couple of small practical steps a dig can take on their journey to financial independence. Just think of this as a beginner training program and as you exercise your financial muscles and build up strength and muscle memory, you can go up to intermediate and advanced programs in the future and look back and laugh at how stupid everyone else is.
The tips I’m going to give are;
Don’t get a credit card
Don’t go into debt
Put cash away
Contribute to super
Don’t get a credit card
It’s always fun when you first have access to a line of credit. The only problem is if you don’t have to self-control to budget and pay off your credit card before the interest bills hit. If you find yourself borrowing cash in order to fund your weekend partying activities, you absolutely shouldn’t get a credit card. If you are thinking about getting a card to make purchases in order to get a credit score, don’t get a credit card. In this day and age, financial institutions want you to be in debt, it’s how they make money. You paying off your tiny credit bills every month before their interest bills arrive doesn’t interest them in the slightest. On the other hand, if you want to buy a house and have a shedload of cash, HPAS and DHOAS eligibility and a savings history of 6 months or more, i.e. that six months you spent overseas getting that cash for a house deposit, they’ll be happy to loan you the money. Things like job security, perceived career aspects on your behalf, the money making ability you have and the fact that the bank will make the value of your house in interest payments of the life of the loan means that you’re pretty safe. The caveat being that if you have done the sort of things in your past that will forfeit the ability to get a loan will still screw you over.
Don’t go into debt
Following on from the credit theme, don’t go into debt in general, especially if you plan on getting out of the army one day. Most digs inevitably discharge and take a pay cut to start a new career or a break in employment, but the payment deductions keep going, so instead of taking that break to reassess, reskill and pick a new career now have to jump in the first job option available whether they want or not or get back in because they fall flat on their face. So if you’re thinking you’ll get out one day, for starters don’t get into debt, but if you do plan ahead and work towards getting out by making a plan to minimise all debts before you go. So no stupid cars, definitely no credit card debt, no store cards, or any other crazy stuff. When you get out in the best position possible and maybe even have a few dollars in the bank.
If you’re a lifer, it’s not such a big deal I guess, the biggest thing you can do to build wealth is contribute to your super which we’ll look at next. Regardless, you don’t want to be that guy with a missus and endless kids, two car loans, a mortgage that is so big that it keeps you up at night and credit card/personal loans to cap it off. The stress of all of that and getting to payday and having it all go straight out of your account onto bills and not seeing change as they barely hit the interest repayments is no way to live your life either.
Not going into debt is going to leave you with cash spare to build your war chest, create wealth through investing or just give you the freedom of manoeuvre to do what you want and that’s good stuff.
Put cash away
Stash cash. That’s the catchphrase of Mr Money Moustache, A Canadian guy who managed to stop working his job in about ten years due to having a fairly severe savings plan. Links to some resources and blogs will be put at the bottom.
For the average dig, seeing that disposable income rolling in every payday is a trigger to a spending spree that ends up leaving the digger contemplating syphoning fuel from someone else’s car in the live in lines on Monday night. If it weren’t for base accommodation and automatic mess deductions, you’d be living in your car. I’m talking to those types of digs because I’m talking to a younger self. A blowout here and there is ok, but continued reckless spending will eventually screw you over badly. So we’re going to take baby steps away from that and develop some muscle memory to get onto the path of success. Try and put a small amount of savings away every fortnight, say $50 and don’t touch it. You’ll fail at this initially, because as soon as you have an excuse for an expense that needs sorting out now, it’ll be used up. But keep trying at it and eventually the habit will stick. Also think about setting up an account that you cant easily access and even going (for ease of use) and using some admin time to duck into one of the financial institutions on base and opening an account separate to everything else and diverting the $50 into that. With that account, be sure to destroy the card associated with it, or put it away securely and don’t bother loading the banking app for that account as you don’t need to look at it every day, you just need to let it grow. Hopefully setting up these barriers to your account will help to lessen the risk of it being raided for impulse spending.
Contribute to super
It’s pretty easy (obviously, like all the other points, talk to a professional.) to make post tax super contributions through your pay portal. If you live so that you have money left over after you get paid each payday, then you possibly have surplus money and can possibly afford to put some into super. This is a good little thing as you can set and forget and roll out a nice little sum at the end. You can also make appointments to speak to the super people as they occasionally work their way around all the bases and you can have a sit down for half an hour or so and try and have your statement deciphered and translated into something resembling English. It can also help to find out all of the multipliers available over time and all of the other ins and outs you may not know about. Salary sacrifice is a whole other thing if you’re thinking about leasing cars and other items. Just make sure you’re aware of bubble payments etc. But long story short, you should agree that if you save some money now and use the power of compound interest, you’d be better off in the future.
Long story short; Live on for as long as possible. You don't have to buy white goods or come up with rental bond or other things. If the washing machine blows up, just log a job, you don't have to go buy a new one. You can walk to work and save on fuel. You can just own a bicycle, which saves on buying a car. the list goes on, but you get the idea. You can also use this time to follow the other point and save cash.
These are just a couple of basic ideas for digs starting out on the road to financial freedom and again, you should not listen to a random person on the internet, you should seek professional advice, but this has been provided to make you think about your options and get you going. Please also check out the following:
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