Where Should You Put Spare Money: Mortgage, Super, or Invest?
When you have extra cash, deciding where to allocate it can be challenging; whether towards your mortgage, superannuation or to other personal investments. Each option has its advantages, depending on your financial goals, taxation position, stage of life and risk tolerance.
Paying off your mortgage can offer peace of mind and reduce long-term interest costs. It’s a low-risk strategy, particularly appealing if you’re close to retirement or prefer guaranteed returns. The interest rate associated with your mortgage (or other debts) can be a key factor in your decision making.
Boosting your superannuation can be a smart move for retirement planning. Contributions benefit from tax incentives, potentially enhancing your retirement nest egg. The earlier you start, the more compounding works in your favor through tax-effective investing. However typically, superannuation cannot be accessed until 60 (for most) so this can be a key factor in your decision making.
Investing outside of superannuation (personally or in another tax structure), on the other hand, can offer equivalent returns but comes with risks. If you have a long investment horizon and can tolerate market fluctuations, this option might align with your wealth-building goals. Consideration of your personal tax position is one of many key factors in your decision making.
Whilst your unique circumstances & position will dictate the best path forward. Ultimately, a balanced approach might be the best strategy; that being a combination of mortgage repayments, super contributions, and investments. With the view to being flexible, in that overtime you may adjust the proportion of surplus cash you allocate to each “bucket”.
Jayden Allison CFP®
MFinPlan, BCom (Eco&Fin), Dip. FS (FP)
Financial Planner
General Advice disclaimer
The general/factual information provided was done so without taking into account your personal objectives, financial situation or needs; you should consider the appropriateness of the general/factual information, in light of your own objectives, financial situation or needs, before following or relying on the general/factual information; if the general/factual information relates to the acquisition or possible acquisition of a particular financial product, then you should obtain a copy of, and consider, the Product Disclosure Statement (PDS) for that product before making any decision.
