We Have Some Extra Money To Spend

This is something we have never really tackled at Mr Home Budget. However what about for whatever reason you have come across some additional money. Not sure where to put it, how about the following tips. For this example let's say $5000, however you can add your own number.

1. How is your standby fund looking? If you have read our book on saving money, you would know step 2 is to save money for a standby account. This money is to be used in emergencies only. A good example of an emergency is a fridge breaking down. You need a new fridge. However if your television breaks down, you can probably do without until you save for a new one. If you currently have zero dollars in a standby fund, you desperately need one. However we suggest you have a minimum of $10,000 in there. This will cover most emergencies for at least the short term. Open a SEPARATE account at your local bank and start saving. If you have heard about saving money for a rainy day, this account will at least give you an umbrella.
   
   
2. How about making a single once off payment on your home loan. You would be surprised at how much a single payment can save you. Below are some examples of what a once off $5000 payment on a home loan with 20 years to go on it at 7% interest can save.
   
   With $100,000 left to go, you can expect to save 2 years and 2 months, plus $13,742 in interest charges.
   
   With $200,000 left to go, you can expect to save 1 year and 1 month, plus $14,467 in interest charges.
   
   With $300,000 left to go, you can expect to save 9 months, plus $14,725 in interest charges.
   
   With $400,000 left to go, you can expect to save 6 months, plus $14,858 in interest charges.
   
   As you can see, $5000 can really add up over time on any home loan. Plus it brings in the
   time until you can say, "It's all mine".
   
   
3. Have you thought about investing it in shares on the ASX? We are not talking about trading in and out of shares like a mad man on Wall Street or taking a punt on one individual share. We are talking about investing in a wide range of quality Australian Big Blue Chip Companies. Many of the big four banks have managed funds that you can invest in. Managed funds pool money from people just like you, and then the money is invested by a staff member at the bank. Most banks have many different managed funds. We suggest an extremely low risk option. Something that invests in companies like Coles, Woolworths, Coca Cola and Telstra. Companies you know will be around in 30 years; and companies you have heard of and have a good history. A note of warning, many banks may go on to offer you a line of credit (just like a personal loan) to invest in their managed funds. We suggest that you never use borrowed money to buy shares. The interest charges generally outweigh the gains on your money.
   
   
4. What about reducing your electricity bill. Solar panels are all the rage at the moment. And most state goverments are offering big incentives to have them installed. In many cases you can even sell power back into the electricity grid. In some cases, you can bring your power bill down to zero. Look over the last few years of bills and work out the costs vs. the costs of solar power. Also remember, in most cases it should add value to your home.
   
   
5. What about if you're renting? Well if you have ever wanted to own your own house, here is the perfect start to a deposit. Just like the standby fund, open up a separate bank account. Start adding to it monthly and you should be well on your way.