Making the Most of Extra Cash

Whether it’s a year-end bonus, tax refund, or unexpected cash gift, having some extra money in your pocket can feel great — but it also raises a big question: What should you do with it? Financial experts suggest there are smarter ways to use extra funds than just splurging — including investing in the stock market, topping up your superannuation, or paying down your mortgage. (S0urce: SBS Australia)

In this article, we break down the pros and cons of each option and help you decide what makes sense for your financial goals and wellbeing.

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1. Invest in Stocks: Growth Potential With Risks

Investing spare cash in the stock market offers the potential for higher returns over the long term — but it comes with risk and volatility. Stocks can grow significantly if markets perform well, but they can also lose value in downturns — especially over short timeframes.

• Potential benefit: Historically, equities have delivered long-term growth that might outperform mortgage interest, particularly if you reinvest dividends and hold for years.

• Main risk: Markets fluctuate — and you could see losses if you need cash during a downturn.

If you’re considering stocks, make sure you’re investing for the long-term, have an emergency fund already set aside, and understand your risk tolerance. For beginners, diversified index funds or ETFs can be less risky than picking individual shares.

💡 Tip: Use dollar-cost averaging — invest a fixed amount regularly — to help smooth out market ups and downs.

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2. Boost Your Super: Tax-Effective Retirement Saving

Putting extra funds into superannuation is often smart because of its tax advantages and compounding growth over time.

• Money in super typically grows via diversified investment options chosen by your fund or by you. (Source: Moneysmart)

• Contributions like salary sacrifice may reduce your taxable income, making this an efficient way to build retirement savings. (Source: Shadforth)

Some Australians also use the First Home Super Saver (FHSS) Scheme to channel extra voluntary super contributions toward a future home deposit — keeping those savings tax-efficient while you build. (Source: Aware Super)

Important: Super funds are locked away until retirement age (unless you qualify for schemes like FHSS), so this isn’t a good choice if you need access to the money soon.

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3. Pay Down Your Mortgage: Guaranteed Savings

Using extra cash to pay down your mortgage can deliver a guaranteed return — because you’re reducing your debt and the interest you pay over time.

Here’s why this strategy matters:

• Lower interest cost: Reducing your loan principal sooner means less interest over the life of your mortgage.

• Shorter loan term: Extra repayments can cut years off the loan schedule.

• Peace of mind: Being mortgage-free — or closer to it — can reduce stress and increase financial flexibility.

Your bank may allow offset accounts, which are savings accounts linked to your mortgage that reduce the interest you owe while keeping funds accessible if needed.

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Comparing the Options: What Experts Say

There’s no one-size-fits-all answer — but here’s a quick framework:

• Long-term growth focus: Stocks or super may be better if you’re building retirement funds or can withstand market ups and downs.

• Risk-averse or debt-centric: Paying down a mortgage gives a guaranteed return (in saved interest) and reduces long-term risk.

• Liquidity needs: If you might need cash soon, stocks/investments can be sold quicker than most super contributions.

This aligns with financial planning frameworks economists and advisors often use — weighing risk, liquidity, and time horizon before choosing how to allocate extra funds.

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Should You Pay Off Your Mortgage Early or Invest?

This video explores the age-old question: should you pay off your mortgage early or invest through ETFs? It breaks down the trade-offs to help you choose what best suits your goals and risk tolerance.

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Tips: A Smart, Flexible Approach

1. Emergency Fund First
Before investing or paying down debt, ensure you have 3–6 months of expenses safely set aside.
This gives you a buffer if unexpected costs arise.

2. Split Your Strategy
You don’t have to choose just one option.
Consider dividing extra cash across savings, investment, and debt reduction based on your goals.

3. Know Your Tax Implications
Super contributions can be tax-effective, but remember money is locked away until preservation age (unless specific schemes apply).
Mortgage interest savings are tax-free but don’t reduce taxable income.

4. Use Tools and Calculators
Online mortgage calculators and super growth tools can show how much you could save in interest or gain in retirement returns — helping you compare options directly.

5. Talk to a Financial Professional
A tailored strategy based on your income, age, goals, and risk tolerance can make all the difference.

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Final Thoughts: Balance Risk, Goals and Timing

Extra cash isn’t just extra spending power — it’s an opportunity to strengthen your financial future. Whether you choose stocks, super, or mortgage payments, the best choice depends on your time horizon, risk tolerance, and personal goals.

At MyMoneyMedic, we focus on helping you make informed decisions that reduce financial stress and build long-term security.