Making the best use of your resources

In today’s financial landscape, it is imperative to make wise decisions regarding the utilization of your funds. Strategic allocation not only impacts your cash flow but can significantly enhance your after-tax results. Understanding where to deploy your resources can create a pathway toward building wealth, ensuring you are better prepared for the future. Here's one example what you could do instead of paying down your home loan.

Leveraging Salary Sacrifice for Enhanced Returns

In scenarios where you have only a home loan, consider converting it to an interest-only loan. This may seem counterintuitive at first, but the strategy hinges on directing the savings from principal repayments into salary sacrifice contributions to superannuation.

For example if you receive a $1,000 gross salary and paid the after tax amount of $610 towards the principle on your home loan charging 5.5%, you'd save $33.55 in interest. The same $1,000 salary sacrificed to Super the after tax amount of $850 would earn an average of 10% return p.a. When taxed at 15% giving you an after benefit of $72.25.

The tax after benefit from applying your salary to Super is more than double that of paying down your home loan. With ongoing differences in earnings and tax rates this benefit increases exponentially over the longer term.

Herein lies a critical lesson: by taking intelligent risks and reallocating cash flow efficiently, you can leverage your financial resources to achieve superior outcomes.

Of course with this strategy your capital is locked away till you retire, but when your financial planner does a comparative result for you, you'll be amazed at the benefits and the difference it will make to your retirement.

While cash flow needs must be considered when planning your budget, the strategic deployment of your funds is paramount in enhancing your financial standing. It is advisable to regularly review and adjust your financial strategies according to your circumstances and market conditions. Always seek guidance from a financial advisor or accountant to determine the best individual strategies to enhance your after-tax results effectively.

Get in touch with Elysium Finance today to get started on your voyage of discovery.