This is the good problem to have. Your income exceeds your daily expenses and any disposable living (holidays, night outs etc.). The next question is what to do with your spare cash flow?
Everyone you ask will probably have a different answer as to where to put your money but in this article we have short listed some different options you may consider;
Cash – There are many high interest cash accounts out there that offer at call very good interest rates. This is the most conservative option and whilst cash is very important to your investment portfolio if you have all of you money sitting in cash the power of your dollar is essentially being eroded by inflation.
Shares – You can invest directly into shares or through managed funds. Either way this investment has move volatility than cash but it also offers growth prospects. If you are looking to create medium term wealth, shares and managed funds are a good option. To reduce the risk, a clever strategy is to gradually invest small amounts over a longer period of time. To increase your exposure, you can also borrow additional amounts to increase your leverage in the market. This can be seen as a risky option, but if managed correctly can provide substantial longer term benefits.
Residential Property – Spare cash flow can be used to fund an investment property. A larger deposit is required to start this investment but if you select the right property you will receive substantial tax benefits and a strong underlying income. This requires more commitment and time than most other investments.
Paying off your mortgage – A simple solution is to pay off your mortgage. It is simple to calculate the benefit of this strategy but the problem is this the most you will get out of the strategy. It doesn’t change the growth characteristics of your property.
Make additional contributions to super – This is a great tax effective strategy if you are approaching retirement. Super is a fantastic investment vehicle that now has some great investment flexibility but the problem is that you cannot access your money until you are at least 55.
The answer as to what you do with your money depends on your deposit amount, level of cash flow and time. Usually the best solution is to diversify and build an investment portfolio that includes all of the above.