Save wisely as tax rate falls

Assuming a monthly income of up Bt20,000, or Bt240,000 a year, you will pay no tax after availing of the maximum permitted deduction of Bt60,000 and individual exemption of Bt30,000. (Bt240,000 minus Bt60,000 minus Bt30,000 leaves you with Bt150,000 net taxable income, which is within the exemption limit.) And even those with monthly income above Bt20,000 pay lower tax.

Wow! What shall we do with this additional Bt50,000 a year? Should we live more lavishly, or save for an inflationary future? But wait a minute - do we really have that Bt50,000 extra in hand?

It's not difficult to work out. Under the old tax scheme, the extra Bt50,000 that is now tax-exempt would have been taxed at the rate of 10 per cent. So your tax saving is actually just Bt5,000 a year, or roughly Bt417 a month. Small, isn't it?

Yes, but don't look down on it. This Bt5,000 can be the seed money for your future financial security. First, you just need to note that the additional monthly saving is only Bt417 compared with your thousands of baht cash inflow. You should be able to summon up the discipline set this sum aside (or round it off to Bt500 if you like).

You should not fall into the trap of spending more because you have more money. It is recommended that you separate your saving from your expenditure account. Otherwise, you may unintentionally think the extra cash is a negligible windfall to be spent, and it will disappear.

Once you see the money accumulating month after month, you might consider making it work a little harder for better returns. Many asset-management companies offer a "saving plan" investment scheme that allows you to invest a small amount each month in a mutual fund of your choice.

You need to be very patient to see your money grow with this saving plan, especially with a very small investment of just Bt5,000 a year, but in the end you will be surprised at how much money you have. For example, if you are 30 years old and invest your annual Bt5,000 tax saving in a typical equity fund with an average return of 13 per cent per year, you will have Bt1.47 million when you retire at the age of 60. No one can stop you turning your Bt417 a month into a big lump sum. Don't wait another month.