Question: I worked hard last year and now find I have AUD$50,000 sitting in my bank account. I know I can just go and spend it, but I’m wondering what else I could do with it to get the best out of my finances for 2010. What are some of the main options available to me? Sincerely, Mr. Hardworking.
Answer
There are lots of people who could happily tell you the best way to spend AUD$50,000, but let’s assume you want to do something more productive with it. You may have figured out already that leaving it in your normal everyday bank account will only earn you nominal interest, so let’s look at some of the other options.
Firstly, the standard investment options… You could move your funds to a high interest call account, invest in a fixed-term cash deposit, or even invest in shares and managed funds. It is handy to have some funds available in a call account for day-to-day living expenses, but you can generally earn a higher rate of interest with a term deposit if you don’t need ready access to some of your funds.
Share markets have been volatile over the past year or two, so you need to be prepared to weather the ups and downs of investing in shares or in the plethora of investment funds. If you are not keen on the idea of risking your hard-earned capital, there are also structured products available that enable you to participate in sharemarket gains while limiting the risk of losing any of your original capital. We recommend that you seek expert advice if this is the route you wish to take.
Next, you have other investment options that involve a purchase of some sort where AUD$50,000 could come in handy as a deposit. These options may include some financing to make up the balance of the purchase price. Financing an asset leaves you with funds for other purposes.
An amount of AUD$50,000 will also make a solid contribution towards buying a practice. Some lenders have loans available that are designed especially for these purposes, and the right loan can give your career – and your wealth – a big boost.
Aside from a practice, you could look at purchasing property – either for your practice, as an investment or your own home – and reap the benefits from the right loan. It is also a great time to use your savings as a deposit to get into the property market while interest rates on borrowings are still relatively low.
Of course, if you have one, you can put the extra funds into your current home loan. This is particularly advantageous if you have an offset account because it effectively reduces your interest costs. If you have not yet taken the plunge into home ownership, then residential property can be another great investment, especially with the first-home owner’s grant still available. And AUD$50,000 can go a long way towards meeting the additional costs that creep in when moving house.
You have many options, and the way to go is best decided after considering your personal goals and circumstances. I also can’t highlight enough the importance of good advice, especially when it comes to selecting finance. It can be a minefield, but it can also be the best financial decision you make.
Michael Fazzolari is a financial expert from Investec Experien and is well known to the optical industry. With more than 10 years experience providing specialised finance solutions to healthcare professionals, Michael is focused on providing a high level of service in addition to his broad knowledge of finance products and solutions. You can contact Michael on (AUS) 0406 428 996.
Important Notice
The material contained in this editorial is general commentary only and is based on information we believe to be reliable. None of the material is, or should be regarded as advice. Accordingly, no person should rely on any of the contents of this editorial without first obtaining specific advice from their own tax adviser, accountant or lawyer. To the maximum extent permitted by law, Investec Experien, its related bodies corporate, principals, employees and agents accept no responsibility to any person who acts or relies in any way on any of the material contained in this editorial. Examples are used for illustrative purposes only. All finance is subject to our credit assessment criteria. Terms and conditions, fees and charges apply.
