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Image / Agenda / Money

Budget 2023: a financial expert on how to make use of extra income


By Lorraine Donegan
04th Oct 2022
Budget 2023: a financial expert on how to make use of extra income

There is no doubt that Budget 2023 was quite an extraordinary budget in terms of extra income for everyone, particularly middle-income earning families.

Overall it’s been a generous attempt to balance out the fear-inducing headlines of rising energy costs. Here are 3 example categories that have benefited:

  • An individual earning 21,194.00 per annum is set to gain 1,725.00 per annum.
  • A self-employed individual earning 50,000.00 per annum is set to gain 831.00 gain per annum.
  • Married couples earning 75,000.00 with childcare costs (one earner) are set to gain up to 4,100.00 per annum.

In addition to the above, the following entitlements also apply:

  • Electricity credits of €600 for all households will be paid in instalments.
  • A €500 annual renters’ tax credit will be backdated for 2022.
  • Double children’s allowance in November and free primary school books from 2023 onwards.

But, if you had the option what else would you do with this extra income?

For many it may be all swallowed up in bills but being optimistic, I am hoping the following ideas may be of some inspiration to you.

PAYING DOWN DEBT
The inevitable is here – after many years of artificially low-interest rates, we have experienced one increase and will be set to see more. This may be the time to consider paying down debt. If you have a variable rate mortgage then consider fixed rate options; there may be an extra cost per month, but taking the hit now may be more beneficial than experiencing many hikes in the coming years. Talk to your bank about fixed interest rates available and make sure to tell them your ‘loan to value ratio’ (LTV rate), for example, if your house has equity of 20% or 40% then you may be entitled to lower fixed rates than that of those with no equity in their home. For personal loans, this too could be a time to increase payments by paying loans quicker; you will pay less interest, so check with the lender for increase options.

SAVINGS
Okay, if you are super lucky and can consider saving this extra income then this may appeal to you! Warren Buffett once said that it is wise for investors to “be fearful when others are greedy, and greedy when others are fearful” and this is a time of fear – markets are down, investor sentiment is also down. This, for the savvy investor means good value for long term investing, – advice is crucial here from an expert financial advisor – some of the best companies in the world right now have seen declines in their share value by 20%+. With the right advice and the right investment product, you could really do well for your future goals.

TWO-FOLD BENEFIT
Boost your retirement fund by investing the extra income and claiming tax back. There are still great tax incentives between 20% and 40% tax back on contributions and tax-free growth. Your future self will thank you for investing now, gaining decades of growth. When I meet people, some are not fully aware of the amounts they can invest personally in their occupational pensions – allowances go right up to 40% of annual earnings or try to start a plan if you are a newbie.

Lorraine Donegan LTD t/a Donegan Financial Services is regulated by The Central Bank of Ireland.

Illustration by pch.vector