“How Should I Invest My $10,000 Savings?”
Q: I usually spend about $10,000 a year on overseas travel. Last year I spent that money on small house renovations. Since I probably won’t be able to travel again this year, I want to make sure that I make good decisions with that $10,000. My priorities are to buy a new car, build up my bank balance and boost my superannuation. I am 49 and single, and am in the top tax bracket. How do I make $10,000 work hard for me?
Lisa, Camperdown, NSW
It depends on whether you want to focus on the short-term (buying a car) or the longer term (investing in super). Let’s take a closer look at the options.
1. New Car
Remember that a car is a depreciating asset so if you want to shop smart, consider buying second-hand, a prior-year model or a demonstrator vehicle. Also ensure you check the running costs: NRMA and RACV have calculators that will help.
2. Bank Balance Boost
It is important to have a cash buffer in your bank balance, so shop around to find a high interest cash account. A good rule of thumb would be to have a buffer of six months’ worth of expenses.
3. Superannuation
Boosting your super with additional pre-tax (concessional) contributions is a great option. Thanks to the lower tax rates on super, this allows you to have more of your money working for you. Based on your income, the tax you pay on a super contribution of $10k would be just 15 per cent instead of your marginal tax rate (including Medicare levy) of 47 per cent. That’s $3200 in tax savings. In addition, the earnings on your money in super also enjoy lower tax.
4. Decisions
If you can’t decide what to prioritise, divide it into thirds and you can contribute towards all three. Momentum is important, so just do it!
By Kate McCallum, financial adviser and author of The Joy of Money; multiforte.com.au
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The information provided is general information and not personal advice. Tonic is not a financial advisor. You should consider seeking independent legal, financial, taxation or other advice to check how the information we publish relates to your unique circumstances. Tonic is not Iiable for any losses caused, whether by negligence or otherwise, arising from the use of, or reliance on, the information provided directly or indirectly, by this website.
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