By the Superfitdad
It’s
the end of the Australian financial year which means, for those who have
incurred personal expenses in the course of their business, it’s tax return
season and, ideally, tax refund season.
Much
like the truffle season in Alba or the Indian wedding season for Gold prices,
this can mean a flurry of expectant spending or, at the very least, plotting
about what spending might ensue, assuming things work out favourably.
And
irrespective of whether you have a tax refund in the offing, any time you have
a lump sum coming your way, it’s a great opportunity to start building or
growing your asset base.
So,
in no particular order, here are some things to consider.
1.Clear Debts (Especially Credit Card)
You
might think: so what? A measly $1k on the credit card. No need to worry
about that. Let’s buy some shares or a holiday or some fun – pick your poison!
NO.
Not on your nelly, my friend. The reason? Unless you have an interest-free
card or have transferred a balance, you’ll be paying 15-25% on the credit card
debt. All your other investments will NOT be paying you anywhere near this
much. At least on a consistent basis.
2.
Pay Down Mortgage / Save For A Mortgage
Paying
down your mortgage might not seem sexy. In fact, there an entire industry
geared around enticing you to do other things with you money. Ignore them,
though, and seriously consider paying down your home loan.
But
being mortgage-free, early, is a pretty cool thought. If you don’t have
own property yet, start thinking how you can accelerate the process.
3.
Invest In Yourself
How
many new skills have your learned since you were 25? For many of us it’s
hard enough mastering the meagre skills we’ve been given or acquired so
far. But investing in ourselves and our future by cultivating our
skill-set or talent stack is probably the most important investment we can
make.
To
a certain extent, it doesn’t even matter what you’re learning. Whether it’s
learning a foreign language, taking a course on public speaking, learning to
write code, the key thing is to be challenging and stimulating ourselves to
develop and grow. Do this and, almost by osmosis, your performance in all
areas will soar.
4.
Top Up Your Superannuation / Pension Fund
Propping
up your pension with an after-tax lump sum isn’t as attractive as chucking in
pre-tax and reaping the tax benefits offered by salary sacrificing, say.
And,
it’s not really sexy.
BUT…
Don’t
you want to have a comfortable retirement, especially given that there’s no
telling how long we might live nowadays? Also, once you’ve tucked it away
in your pension, it’s there for a very long time, giving it a very
love-you-long-time cogitation period. Which, in plain English, means it’s got
plenty of time to grow and accumulate.
5.
Become An Owner
Feeling
emboldened now that you’re newly flush? Hit the markets. Not the Farmer’s
Markets, silly. The Stock Markets. A good way to get some exposure to the
markets and become an owner (in a very tiny way, of course) of some of the
world’s biggest and best companies is via index funds.
Index
funds are popular because they don’t carry the same kind of costs associated
with actively managed funds. [Question: have you ever met a poor fund manager?
No, me neither. It’s because your fees are paying for the Jag, the Rolex and
their kid’s school fees.]
Not
only are index funds cheaper than managed funds – often by 1-2.5% per year –
they routinely outperform the funds with managers. Strange, huh? So if
you’re looking for a proven way to create and grow wealth over a long
time-frame (10+ years), the stock markets and index-linked funds tread a proven
path.
Or
you could…
6.
Buy Individual Stocks
Not
for the faint-hearted, this can be an exciting ride.
If
you get a tip from a mate about a firm that makes mining valves and supplies a
firm who’ve just found a massive unknown copper deposit somewhere in the middle
of Whup-Whup, well, you could be quids in.
You’re
unlikely to get any information before hundreds and thousands of others have
that same information. That hot tip your mate gave you has been through brokers
and dealers and market-makers. People will be all over it.
The
golden rule, though: always tick the box to have your dividends invested. Never
deviate from this and you should be okay [assuming your stock pays a dividend].
7.
Travel
They
say nothing broadens the mind like travel.
Which
is tricky because if you’re a new-ish parent, the idea of transporting your chaotic
sleep-deprived existence to somewhere unfamiliar where you don’t know the name
of the barista or the nearest 24 hour petrol station for the late-night banana
dash. But whether you’re encumbered by kids or not, it’s never that bad.
It’s
actually wonderful. The whole family seem to recognise the importance of the
trip and improve their behaviour tenfold.
8.
Buy Art
If
none of the options listed before appeal, then there are a couple of other
options to consider.
I
select them because they have the potential to be appreciating assets.
If
you can cultivate an appreciation of art, I think it can be useful. Finding
something (as in, a piece of art) that resonates with you and can calm you when
seas get stormy can be a real comfort.
9.
Buy Jewellery
This
is basically: a watch.
As
we’ve seen there are a myriad of options and we’re in danger of suffering from
a Paradox Of Choice when it comes to using our tax refund
wisely.
There
are other things I couldda and shouldda mentioned – But, in the interests of
expedience, we’ll leave it there for now.
At the very least, buy something that will appreciate and grow or will help you or someone else appreciate and grow. As long as you do that, you’ll be winning.
Important Information
The information on this website is general advice only. This means it does not consider any person’s investment objectives, financial situation or investment needs. If you are an investor, you should consult your licensed adviser before acting on any information contained in this article to fully understand the benefits and risk associated with the Raiz product.
The information in this website is confidential. It must not be reproduced, distributed or disclosed to any other person. The information is based on assumptions or market conditions which change without notice. This will impact the accuracy of the information.
Under no circumstances is the information to be used by, or presented to, a person for the purposes of deciding about investing in Raiz.
Past return performance of the Raiz product should not be relied on for deciding to invest in Raiz and is not a good predictor of future performance.
