So, you put the family home up for sale after many years, and moved into a home that better suits your lifestyle. What did you do with the extra money from the sale?
If you’re still trying to work out the best way to maximise the proceeds, the six ideas below should start you on the right track.
First – Get advice from a financial planner
Nothing is a substitute for good qualified financial advice. A financial planner can sit down with you and explain the implications and benefits of every option for you. They can help you to avoid creating a tax nightmare for yourself and create as much wealth as possible with your surplus cash.
There are a few different options that you can generally choose from when you have extra funds because you have downsized your home. Keep in mind – your financial adviser is the best source of information, and this is in no way intended to be seen as personal advice.
Deposit money into a high-interest account
If you want a low-risk option and you don’t want any nasty surprises, depositing the funds into a high interest yielding account could be the best option for you. Banks offer great deals on term deposits, if you’re happy to have the money locked away for a specific period of time.
Re-invest the money in property
If you’re keen to build a property portfolio and try to grow your capital, property investment could be the way to go. You will need to consult your accountant or financial planner about the tax implications, and if you need to take out a mortgage to cover an extra amount, make sure you can afford to make the repayments.
Even if you plan to rent the property out, it’s worth planning for short periods where it may sit unoccupied and not generate rental income.
Invest in your superannuation
If you choose to invest money in your superannuation, make sure you discuss the tax implications with your accountant or financial planner, but generally speaking you can make some lump sum payments into your super.
Invest in shares
Shares are overwhelmingly the most risky choice for investing your extra dollars. If you don’t understand a lot about the share market when you start out, you might want to read a few of the many horror stories out there, and consider if this option really suits you best.
Otherwise, there are experts who can provide advice and give you the best chance of success in the share market – but keep in mind there are never any guarantees.
Invest in fixed-interest government bonds
Another option which is very secure if you want to earn decent interest, is to invest in fixed-interest government bonds. These are guaranteed by the government so you shouldn’t have to worry about losing the lot with this option – unless our government really drops the ball during your fixed period.
Remember, your accountant or financial planner should be your first port of call before you jump into any of the above investment options. But at least now you can turn up to your appointment ready to talk the talk!