Many wouldn't care who saw them scoop up $100, yet most people obliviously pass over more than this every month.
Here are six silly ways you're sidestepping cash.
1. Allowing a slack stash
Saving into a savings account when you have a mortgage is a big boo boo. You should instead put it on your home loan where "earnings" are bigger – mortgage rates are typically 1 percentage point higher than deposit rates – and tax-free. (This should go in an offset account that runs alongside your loan).
If you hold a $350,000 mortgage at the average 4.68 per cent discounted big-bank rate, stashing $50,000 into an offset will be almost twice as good as putting it in today's top 3.6 per cent savings account.
You'll save $90,000 rather than earn $49,000, from which you'll have to pay tax.
2. Ignoring super freebies
This is like walking past $500 lying on the ground. Or even $540.
You get a co-contribution of up to $500 if you pay $1,000 after tax into your super fund and you're on less than $50,454 this year; the full whack is paid on incomes of $35,454 or lower (you must be earning).
You can't get at it until your super is unlocked at age 56 or later but, with all the debate about whether you need $1 million to kick back in comfort, take the government help for goodness sakes. And if you want an instant payoff too, there's a $540 tax offset – so lopped straight off your tax bill – if one spouse makes less than $13,800 and the other kicks in $3,000 after tax on their behalf.
They don't have to be earning so this is a great way to boost the super of a stay-at-home-and-work-for-nothing partner.
3. Losing money – seriously
More than 1.3 million bank accounts, life insurance policies and investments have been misplaced, says ASIC, and they're worth a staggering $1.24 billion as at June 30 2015. A bank account is now deemed "lost" if you've not touched it in just three years* [note legislation change below] – and it's snaffled by the Federal Government until you claim it back. A quick, free search on MoneySmart will tell you if you're missing an average $904.
But chances are you can find far more in lost super, so classified for as little as moving house without a forwarding address. The Australian Taxation Office (ATO) says there are six million lost and ATO-held accounts with a total value of just over $16 billion – that's $2,667 each. Find out if any is yours by going to SuperSeeker on ato.gov.au. You could even have an unclaimed inheritance; check with your Public Trustee.
4. Paying the big banks' 'lax tax'
This is what I call the repayment premium for sticking with the big four banks, instead of the cheapest providers, for your debt products. I've calculated the cost to the average Aussie of lifetime loyalty to our largest institutions at $90,513 – the equivalent of a luxury car or retirement at least a year early! It could certainly consume your initial house deposit.
My figures are based on potentially paying 1.38 percentage points over the odds on the average $357,500 mortgage, 5.95 percentage points too much on an $18,000 personal loan and 10.36 percentage points more on a $3,195 credit card balance. The lowdown is you could 'pick up' an extra $336 every month.
5. Giving interest-free loans to the ATO
Still on interest, if you get a tax refund at the end of every year, why are you giving the ATO an interest-free loan for that entire year (especially while you may have debts accruing interest yourself)?
Consider filing a PAYG withholding variation – also available with a search on ato.gov.au – so you lose less tax from every pay. On an average $2,000 refund, that's a bonus $167 a month. Just don't overestimate and risk a bill.
6. Frittering away your future
Micro-payments – think music downloads, apps, magazines and yes, the old coffee – do maximum damage. They're a little like dropping money on the ground!
But just $4.15 saved a day, or $126 a month, grows to a life-changing $1 million at an 8 per cent total return over 50 years. Would you even miss it?
* Legislation has changed and bank accounts are now lost after seven years not three.
This article was originally published by the Sydney Morning Herald on 7 August 2015.
This article represents the views of the author only and does not necessarily reflect the views of AMP.
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