If you get extra money or a windfall such as a tax refund, a bonus, or an inheritance, you might be tempted to splurge on things you don’t need.
Sensible things to do with your extra money.
If you get extra money or a windfall such as a tax refund, a bonus, or an inheritance, you might be tempted to splurge on things you don’t need.
Here are some smart ways to spend this money that will give you long-term benefits.
Pay off debt
Smart tip
It’s best to pay off your higher interest debts like credit cards first.
If you put your extra money towards paying off your debts you’ll pay less interest and save money. You could use it to pay your credit card bill, your mortgage or a personal loan.
For more information see making repayments.
Put it in a high interest savings account
If you put the money in a high interest savings account it will grow with the power of compound interest.
For example, if you put a $2,000 tax refund into a high interest savings account that earns 6% interest, in 5 years time you’ll have $2,676.
To find out more see savings accounts.
Contribute extra to your super
Making extra contributions to your super can really boost the amount of money you have to retire on.
If you earn less than $46,920, the government will match your after-tax super contributions. The co-contribution matching rate is 50c for every dollar you contribute up to a maximum of $500. For more information on how to make extra super payments see contributing extra to super.
The super vs mortgage calculator can help you work out where you should be putting your spare money.
Consider investing
Investing your windfall will really make your money go further.
If you’re new to investing, start with investing basics.
If you would prefer to rely on professionals who are skilled in making investment decisions, a managed fund could be right for you. For more information see managed funds.
Get financial advice
For large amounts of money, such as from an inheritance or a redundancy payment, you should get financial advice. An adviser will be able to help you work out a strategy to make the most of your money.
For more information see financial advice.
While it’s always nice to spend extra money on luxuries, think through your options and see if your windfall can give your finances a real boost.
Source: www.moneysmart.gov.au/life-events-and-you/life-events/getting-a-windfall
