With upcoming tax cuts on the horizon, many individuals will find themselves with extra cash in their pockets. This presents a valuable opportunity to make strategic financial decisions that can have a lasting impact on your future.
One smart move would be to consider increasing your savings with the additional funds. By putting this extra money into a high-interest savings account or investment vehicle, you can take advantage of compound interest and watch your savings grow over time.
For example: if you currently earn an annual income of $60,000, based on the marginal tax rate of 32.5%, you’ll currently pay $9,967 tax per annum. From 1st July 2024, this tax rate will be reduced to 30%, meaning you will pay a total of $8,788 tax per annum – a saving of $1,179 per year or a little over $45 per fortnight.
Now, if you were to put this whole saving into a high-interest savings account, let’s say of 6%, you will have saved $1,207 after just one year!
Then if you were to invest this amount and continue adding the $45 to it per fortnight, over the next 10 years, you will have taken complete advantage of compound interest and could have a total saving of $17,128!! It’s these tiny things over a period of time that can make all the difference!
Whether you choose to save for a rainy day, invest in your future goals, or simply enjoy some well-deserved treats, the key is to make informed choices that align with your financial objectives. The potential of compound interest can turn this windfall into a significant asset for your long-term financial well-being.
So what will you choose? Which way will you go? Will you pay it off debt, let it be absorbed like you never received it or save that amount over a period of time and watch those savings grow? The choice is yours – choose wisely!!