Whether you’re just starting out as a professional in mining and resources, or have been well established over the last decade, even the slightest surplus income can make a difference to your overall financial position. Loosely defined, surplus income refers to funds that remain after you have met your expenses and taxation commitments. If your weekly surplus income is $100, the simple maths shows that your annual income surplus should be $5,200. This represents an important opportunity to put your unused income to work for the future.
To make the most of surplus or unused income, you need to consciously put that money to work. More often than not, it simply disappears into the spending abyss. However, depending on your particular circumstances, that $100 per week could pay down debts, go towards saving for your kids’ education, contribute to your superannuation or perhaps be saved for a lifestyle benefit such as a holiday.
We urge you to consider surplus income as part of your overall financial plan. While surplus income may be easily overlooked as incidental amounts not worthy of close examination, when accumulated over an entire year, it has the potential to make a significant difference financially.
At Resources Unearthed, we have identified 5 small ways to utilise surplus income:
1. Put it towards your home loan
Using surplus income to make additional home loan repayments could result in you paying off your loan faster and reducing the total amount of interest otherwise paid. You could also consider a 100% offset account. The money in an offset account is accessible while also having the capacity to offset and therefore reduce the interest payable on your home loan.
2. Pay down debts
If you have a car loan, personal loan or credit card debts, putting your surplus income against these balances will lower the total amount of interest payable and contribute to clearing the debt sooner.
3. Invest in your kids
Your children are in the education system for a long time, especially if they aspire to go on to tertiary education. Using surplus income to begin saving for your children’s education could be a great starting point. A longer-term financial strategy may be designed to make the most of compounding interest through long-term investment strategies such as shares, managed funds, term deposits and specifically designed education funding plans.
4. Add to your superannuation
Every voluntary contribution to your superannuation fund adds to your retirement nest egg, and there may also be tax advantages. Making direct personal contributions to your super fund account or talking to your employer about salary sacrifice contributions may be worthwhile considerations. We recommend that you seek financial advice to determine the most appropriate course of action for your circumstances.
5. High-interest savings account or investments
Allocating your surplus income to a high-interest savings account has two potential advantages. Firstly, you may retain the flexibility to access funds on an ad hoc basis and secondly, your savings have the potential to grow further by taking advantage of compounding interest. This strategy is easy to implement and helpful for individuals and families planning for large expenditures like overseas holidays or buying a new car.
Alternatively, if you’re comfortable investing funds for the long term, consider allocating surplus income to an investment portfolio such as shares or managed funds. These investments may offer a higher return than cash over a long period of time, but do come with the downside of short-term fluctuations in value.
No matter your choice from the list above, making a small change today can transform into a BIG difference for your future. Talk to us today about which option is right for you.
For more information about how you can make the most of your surplus income, or arrange a complimentary and obligation-free financial planning consultation, please contact James Marshall on (07) 3007 2007 or contact@resourcesunearthed.com.au
Resources Unearthed is a solutions hub that provides integrated financial, legal and business advisory services for executives, professionals and business owners in the mining and resources sectors.
Stratus Financial Group and its advisers are Authorised Representatives of Fortnum Private Wealth Ltd ABN 54 139 889 535 AFSL 357306. This information does not consider your personal circumstances and is of a general nature only. You should not act on it without first obtaining professional financial advice specific to your circumstances.
