Spend or save? What to do with a little extra cash

Planning and advice | | 2 min read

A sudden cash windfall means opportunities. And temptations.

All of a sudden that new jet ski is within arms-reach. Or maybe you’ve had your eyes on a holiday, backyard pool, or new TV.

While those may all be excellent purchases, there is another option. 

Whether it’s a bonus, unexpected tax refund, or a win at the races, investing some of your new-found wealth in the future has real benefits.

Here are some things to consider.

How to invest that money 

Paying down your mortgage, clearing credit card debts, investing in the stock market, or topping up your super are all reasonable ways to do more with your cash windfall. 

Granted, they may not be as exciting in the short term, but a small investment in the above can mean big returns in the future. Let’s have a closer look.

Fast track your mortgage

Paying down your mortgage can make a significant difference to both your interest payments and the length of the loan. 

According to the government’s Money Smart website, “On a typical 25-year principal and interest mortgage, most of your payments during the first five to eight years go towards paying off interest. So, anything extra you put in during that time will reduce the amount of interest you pay and shorten the life of your loan.”

Pay down credit card debt

Australians owe around $50 billion on credit cards.

That translates to an average credit card debt of $3,258, and about $1.5 billion in annual fees and charges.

Anything you can do to lower your credit card balance is going to save you money in the long term. Whether that’s making a one-off payment to bring down the balance, or consolidating your credit cards into a single "interest free" loan, managing your credit cards is one of the simplest ways to better manage your money.

Think about long-term investing

The share market has enjoyed a good run for the past 10 years. The S&P 500, which tracks the share price of 500 major U.S. companies, recorded average annual returns of 13.9% p.a. over the past decade. 

More recently, the tech market has seen extraordinary returns. Tesla shares began 2020 trading at $84.90 USD and ended 2020 above $700, a gain of over 740%.

Past performance doesn’t dictate future performance. And those Tesla numbers are unlikely to be replicated anytime soon, so we’re not making a recommendation. But a sudden cash injection can be used to either start a stock portfolio or top one up. At a very basic level an ETF (Exchange Traded Fund) or index fund allows you to invest in a diverse range of stocks in an easy and convenient way.

Don’t forget your super

And finally, there’s your superannuation. While making additional contributions to your retirement isn’t as exciting as a new purchase, it can certainly make a difference in the long run. 

Making a one-off payment into your super comes with two benefits:

  • The additional amount benefits from compounding interest over the long term. So even $1,000 can grow into a significant amount over the years,
  • You may be able to claim a tax deduction on the additional amount you contribute*.

Not sure what to do with a sudden cash boost? Talking to a financial planner can help you understand your options, and how a small initial investment can grow over the years.

You can book an appointment online and the first meeting comes at no additional charge, which is a great way to start.

Learn more about our financial planning services.

Issued by Togethr Trustees Pty Ltd ABN 64 006 964 049, AFSL 246383 ("Togethr"), the trustee of the Equipsuper Superannuation Fund ABN 33 813 823 017 ("the Fund"). The information contained herein is general information only and does not take into account your personal financial situation or needs. You should consider whether this information is appropriate to your personal circumstances before acting on it and, if necessary, you should also seek professional financial advice tailored to your personal circumstances. Where tax information is included, you should consider obtaining personal taxation advice. Before making a decision to invest in the Equipsuper Superannuation Fund, you should read the appropriate Product Disclosure Statement (PDS) and Target Market Determination for the product which are available at equipsuper.com.au.  Financial advice services may be provided to members by the trustee’s related entity Togethr Financial Planning Pty Ltd (ABN 84 124 491 078; AFSL 455010). *Past performance is not an indication of future performance.

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