FINANCIAL WINDFALL? How to spend your bonus money wisely

It doesn’t matter whether your financial windfall comes in the form of a tax refund, work bonus or a small inheritance, this ‘bonus’ money can help you to secure your financial future if it's spent wisely. Let’s take a look at four ways you can use your bonus money to help secure your financial future and give you long-term benefits, rather than a short-term happy dance!

1.   Pay off your debts

The interest on any unpaid credit card debts can quickly become out of control, so if you have one or more credit card debts that you can’t pay off, now is the time to clear that debt. Cash advances should also be paid in full immediately, as their interest rates are high and your debt can quickly skyrocket.

You can also pay out any personal loans (always check the terms first, as you may be penalised for early completion of these loans) and pay down your mortgage (check with your bank if you have a fixed interest loan, as you can only pay down a specific amount every year).

2.   Start an emergency fund

This is where your bonus money can come in handy by giving you a sizable nest egg that is only accessed in an emergency. Look for a savings account with the highest interest rates you can find (although interest rates are low at the moment, any interest is better than none!) and keep enough money in this account so that you can pay all your bills and household expenses for at least three, if not six months. If your bonus money isn’t large enough to cover six months’ worth of bills, keep topping it up until you reach your target and then you can breathe easy!

3.   Top up your super

Topping up your superannuation is a very ‘savvy’ strategy and involves making non-concessional contributions (after-tax) to a limit of $100,000 each financial year. However, if you are under 65 years of age, you can contribute up to $300,000 at a time by paying it forward, but you will need to find out if this applies in your situation.

Also, if you earn less than $53,697 each year and make non-concessional contributions to your super, you will be eligible for the government co-contribution scheme, where the government contributes additional money to your super fund. Low income earners on $37,000 or less can benefit from a low income superannuation tax offset contribution from the government. If you want to top off your super with your bonus money, it’s best to talk to a financial adviser who can make sure that you don’t go over your limits and pay extra tax.

4.    Open an investment portfolio

Making long-term investments in the share market is a risky tactic, but if you go in with your eyes wide open and find a fund manager who has a record for positive returns, you can start to grow a sizable nest egg for your future with your bonus money.

If you want financial advice on making the most out of your bonus money, call me (Amanda McCall) on 07 3356 6929 or book your appointment online.

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