How to invest surplus cash flow

How to invest surplus cash flow

Rod Dickinson

Having extra money left in your bank account each month may be a sign that you can invest more for your retirement, and that’s great news! Perhaps you’ve accumulated a surplus cash flow with careful budgeting and planning. Maybe you’re earning more than you used to, or maybe your expenses have been reduced.

Whatever the reason for your surplus, it’s a great position to be in. But don’t just sit back and congratulate yourself on your hard work; leverage that extra cash toward reaching your financial goals or perhaps even creating some new, ambitious goals.

When you might have extra cash

Some people find that as their income grows over the years, their inflows outpace the rise in their cost of living. This can happen so gradually that you don’t realise you’re building a surplus. In this case, you may find that you haven’t been contributing as much to your superannuation as you should be or that you could start investing in other ways.

Windfalls can also create a situation where you have extra cash. The sale of a property, an inheritance from a relative, dividends from an investment: all of these situations can leave your personal finances healthier. But you’ll have to be careful. Without some planning for these windfalls, taxes and other expenses could eat away at your newfound gains.

How to decide the most effective use of this money

If you’d like to invest your extra cash and windfalls when they come along instead of buying the latest item that catches your eye, it’s wise to set up a plan ahead of time. That way, you’ll be less tempted to squander your extra cash.

With so many methods of investing, however, how can you choose where to put that money? What kinds of investments will be most effective at helping you to reach your financial goals?

  • A Personal Emergency Fund. If you don’t have a personal emergency fund you can fall back on in the case of job loss, unanticipated expenses, or other sudden needs, consider diverting surplus cash to such a fund. If you already have an emergency account, get ready to invest.
  • More Superannuation. Many people are surprised to find that salary sacrificing additional income is not only easy, but it can also have a beneficial effect on your taxes as well. More money in your super can mean a more comfortable lifestyle later on.
  • Education Funding. Do you currently have a plan for funding your children’s educations? Setting aside some of that extra cash for their future tuition bills not only inspires them to study harder (hopefully), but it can also give you peace of mind concerning their futures.
  • Investing in the Markets. If you’ve desired more control over your retirement saving, consider opening a self-managed superannuation fund or investing in the markets via other means. You may be able to manage your risk better, reduce your taxes and even improve your cash flow management.

How an adviser can help

Working with a financial adviser can help you to establish short- and long-term goals and to develop an overall strategy for your future. Your financial adviser may help you to consider options you’ve never thought of before, and allow you to move forward with confidence.

Not only can an adviser help you to start down a path that leads where you want to go, but they can also be a guide along the way, prompting you to make adjustments as your family grows and matures. With regular financial check-ups, you can know that you’re still headed in the right direction and meeting important goals along the way.

To get in touch with a wealth adviser about what to do with your surplus cash flow, contact us at Altus Financial. We’ll help you to create a plan that will lead to the achievement of your goals.

 


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