How to top up your finances
Maria Bekiaris shares five ideas to top up your finances
Tax time is around the corner and if you're lucky - and a bit savvy too - you could end up with a decent refund.
The average refund tends to hover around the $2000-$2500 mark. Tempting as it might be to use the money to buy a new smart TV or take a holiday, there are ways you can put the money to better use.
Here are five smart ways to use your refund that will see you still reaping the rewards years down the track.
1. Put it on the mortgage. Save $6800-plus
This can be a great way to save interest and shave months off your loan. Let's assume you have a $350,000 mortgage at 6%pa interest over 30 years. If you get a tax refund of $2000 and make a lump sum payment into your loan after year five, you would save over $6800 in interest and cut four months off the term. Even if you wanted to keep $500 to put towards a splurge item, putting $1500 into the loan will save you just over $5100. You can use the "lump-sum calculator" on infochoice.com.au to do your own calculations.
2. Pay off high-interest debts. Save $1108
Credit card debt can be a killer. If you have $3500 outstanding on a card charging 18% interest and were putting $100 a month towards it, you'd pay $1391 in interest and it would take you 49 months to clear. And this assumes making no purchases during that time. Whack $2000 on the card immediately and keep paying the $100 a month and you'd save $1108 in interest and pay it off 32 months earlier.
3. Stash it in super. Boost your balance by $70,521
Credit card debt can be a killer. If you have $3500 outstanding on a card charging 18% interest and were putting $100 a month towards it, you'd pay $1391 in interest and it would take you 49 months to clear. And this assumes making no purchases during that time. Whack $2000 on the card immediately and keep paying the $100 a month and you'd save $1108 in interest and pay it off 32 months earlier.
4. Kickstart your savings. Make an extra $198
This won't have as much of an impact as the other strategies but it will put some extra cash into your pocket. If you put your $2000 refund into an account paying 3.3% interest, at the end of a year you'd have made $66 in interest or $198-plus in three years. If you were really serious about saving and put an extra $50 a week into the account as well, at the end of the year you'd have $4707 ($107 from interest) or $10,395 in three years - $595 of which would be interest.
5. Put it towards a course. Increase your earning potential
Enhancing your skills could result in a pay rise or new job. It can mean more money in your pocket in the long run. Look for courses that will give you skills in demand and set you apart from the rest. Remember if it's a course that helps you with your existing job you can claim a tax deduction.
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