The Federal Budget announced some pretty major changes, in particular for taxpayers. Every working Australian will receive some quite significant tax cuts, backdated to 1 July 2020, which will put extra money into your pocket.
The changes will take effect as soon as the bill passes through parliament and the ATO updates the tax schedules, so the extra take home pay could start appearing in your bank account within a few weeks.
The Budget papers suggest that people on incomes between $48,000 and $90,000 will take home an extra $2,160 per annum (about $41 per week), including the Low & Middle Income Offset, while those on more than $120,000 will receive an extra $2,430 per annum (about $46 per week).
Here are five things you can consider doing with the extra money in your pocket, in no particular order.
Pay Extra on Your Mortgage
Any extra payments on your mortgage over and above the minimum required monthly repayment will not only save you interest, it will also shorten the term of the loan. For example, a loan of $300,000 at an interest rate of say 3.00% over a 30 year loan term would normally have a minimum monthly payment of around $1,265.00 per month. If you were to add the $40 per week to your loan repayments it will knock around 5.5 years off your loan term and save you over $22,000 in interest payments. A pretty worthwhile outcome.
Pay Off Other Debts
If you have personal loans, car loans or credit card debts then consider paying them off quicker, starting with the higher interest rate debts first. There are some who say to pay off the smaller debt first, to get a psychological win under your belt. It doesn’t really matter which debt you choose, just commit to getting them out of your life as quickly as you can.
Start a Christmas Club Account
Put the extra money into a separate account to use at Christmas time to buy presents and pay for the turkey, ham and bottles of your favourite Christmas cheer. It’s amazing how many people don’t budget for Christmas and instead rack up the credit card, causing a Christmas hangover in January and February when the credit card statement arrives in the mail. An extra $40 per week will add up to some $2,000!
Plan a Weekend Getaway or Two
Why not take a few months of the extra money and plan a weekend getaway to some of our amazing regional areas. Not only will it be some quality time with your family or partner, but it will also be supporting small businesses in our regional economy.
Create an ICE Bucket
You’re probably wondering what I mean by an ICE bucket, but it’s short for an ‘In Case of Emergency’ Bucket. In other words, it’s two to three months of basic living expenses in a separate account to be used in case of an emergency. You lose your job, the hot water service breaks or any other unexpected and un-budgeted expense comes up, you can take comfort in knowing that your ICE bucket is there to carry you through, rather than having to use your credit card and incurring the high interest cost.
Of course, the above are just five possible things you can do with the extra money coming into your pocket. No doubt there are many other things you can do with the extra dollars. The greatest danger is it just gets caught up and spent in your normal day to day living expenses and you end up wondering where it all went.
So why not commit to making a plan for how you are going to use the extra money, and if you have other ideas we would love to hear them.