Tax cuts were revealed in the budget – here’s how to make yours work for you

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A lot of us are going to have some money in our pockets this year.

It’s all because of the tax cuts and $ 500 in cash payments announced in this year’s federal budget.

If you don’t know how well this will work, check out this article.

The treasurer wants us all to spend a lot to help the economy come out of the recession, but is it the best option for your financial situation?

here is five ways to get the most out of your money.

1. Don’t spend impulsively

While the extra money may seem like little each week, it all adds up.

And the government wants us to spend, spend, spend.

Obviously, there are a lot of people who are struggling right now (especially low income people) and will have to spend more money for the most part.

And that’s fair enough.

But beyond that, maybe don’t let it burn a hole in your pocket and impulsively spend on something you don’t really need, suggests Kate McCallum, Multiforte’s financial advisor.

“If you’re going to spend it, don’t let it drip on more takeout or online shopping, or something that you don’t really enjoy,” she said.

“You get a buzz of planning, of doing it and then thinking about it.”

It will boost your morale and the economy.

“And maybe focus on spending and supporting your local community,” said Kristy Wilson, of Rural Financial Counseling Service North Queensland.

2. Remember to keep it (in a high interest account)

As a nation, we have already saved like crazy because of these uncertain times.

And if you worry about lose your job, or not be able to pay an upcoming expense, put money aside for an emergency is still a sensible path.

“If you can, try to set aside at least three months of spending,” Ms. McCallum said.

“In times of uncertainty, people become more aware of emergency funds, but we should actually have one in place all the time.”

You probably realize interest rates are quite low right now, so try to find the account with the highest possible interest rate.

Another option is to put it in a compensation account linked to your mortgage (this reduces the amount of interest you pay).

“And be aware that any interest on savings you earn is taxable, so if there is a low-income earner in the household, perhaps hold the savings in their name,” Ms. McCallum said.

3. Pay off these debts

It’s always a good idea to try and quick pay off all high interest debts, such as credit card or payday loans, says Wilson.

“Prioritize the highest interest rate first, then work from there,” she suggests.

Mortgage interest rate are quite low at the moment, so it’s a less urgent debt to repay.

But putting the money in a clearing account has its advantages. This reduces your debt, but also gives you flexibility if you need to access that money in the future.

4. Put it back in your super

If you were one of the thousands of people who withdrew up to $ 20,000 from their pension fund earlier this year, maybe think about reconstitute your super.

Remember, the magic of compound interest is earning interest on your interest.

And because tax cuts come slowly with each pay cycle, you might not even miss them if you just ask your employer to increase your super contributions, McCallum says.

Remember that if you have a low or middle income (and meet the eligibility criteria) and make a after-tax contribution to your super fund, you can get free money from the government, called a great co-contribution.

If you put a supplement $ 1,000 in your super account, the government will top it up with $ 500.

Attractive.

5. Invest it. You don’t have to be fancy to do this

While many of us own stocks through our super funds, you may have thought about buy stocks directly.

Australian stocks plunged in March. They have slowly increased, but have not yet returned to pre-COVID-19 levels.

“Remember that investing in stocks is a long-term proposition,” Ms. McCallum said.

“You should ideally invest for at least seven years.”

Corn be careful when choosing actionsbecause you will need to do some research.

To get settled, you will need a broker authorized to buy shares on your behalf, but there are plenty of brokers out there that offer an inexpensive “no-frills” experience.

And the minimum amount of shares you can buy is $ 500 (this is a rule of the market operator, ASX).

Remember that there may be tax implications to consider too.

“Be aware that dividends and capital gains (when it comes time to sell) are taxable, so consider putting them on behalf of the low-income employee, ”Ms. McCallum said.

This article contains general information only. It should not be taken as financial advice.

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