Articles/Reviews > More Articles > What to do with that tax cut
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What to do with that tax cut I have found it interesting to read varying views on what to do with the extra money from your tax cut if you get one.
One thing for sure is that you have lots of choices you could make. One choice is not to make a conscious choice at all. So where will that leave you in say 10, 20 or 30 years time? As it is choice not chance that will determine your financial future I suggest you think about what you are going to do with the cut. The cut can easily be absorbed into your every day finances and probably disappear without a trace unless you make a choice to do something specific with the extra. That choice could benefit you and your family in the long term.
An example of a smart choice you could make was given in an excellent article on tax cuts in the Bay of Plenty Times recently. The article stated that if you paid $15.66 per week off your $280,000 mortgage it would save you $43,000 in interest and pay off your loan three years quicker.
After reading that article I did some more figuring and worked out that $15.66 could actually turn into cash of around $105,000. If you had been paying $397.58 per week off your mortgage (an approximate amount I got from a mortgage calculator off the internet) then consider this. If you took three years of payments that you now didn’t have to pay off your mortgage (156 weeks) at $397.58 per week and put them in the bank that would equal $62,022.48 without any interest added in only three years. It doesn’t allow for tax to be paid on savings either but I think you will get the idea of what I am trying to point out!
I find that amazing that just $15.66 extra paid into your mortgage has the power to turn into $43,000 saved in interest plus when you add the three years in payments that you have now banked as savings ($62,022.48) that equals a whopping $105,022.50 saved over 30 years from an investment of $15.66 per week. It is another example of it is not how much money you earn that is important, it is what you do with what you earn that matters.
If you have kids, get them involved by asking them to search out the answers to questions such as “if we pay another $20.00, or $10.00 per week off our mortgage, how much will that save us in interest?
Alternatively, you could choose to use the same $15.66 per week to buy takeaways. Think about where that choice will take you if you have a mortgage.
It is choice not chance that determines your financial future.
Sylvia can be contacted on 07 544 6174. Her book, Parents: How to stop your kids from going broke is available from Paper Plus bookstores or www.silbo.co.nz
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