I Just Got a Pay Raise, What Should I Do Next?
Getting a pay raise is a wonderful feeling. Especially if you know you’ve been working hard and grinding it out all year long. It feels good to be compensated for your time and efforts. What should you do with this new influx of cashflow… Splurge? Celebrate? Save more? Attack debt? Invest? There are so many different things you can do. Why not do them all !!!
I’ve gotten 3 pay raises since I landed my first job in 2013. I didn’t change my spending habits much. Yeah, I like to have a little bit more fun and shop every now and then, but I made sure my priorities came first. I’ve always increased my monthly contributions to my online savings account. Then, I increased my monthly payments towards my car note to pay off the loan quicker and save on time and interest. Lastly, I made sure to invest more in my Roth IRA and 401k retirement accounts.
- Do Not Dramatically Inflate Your Lifestyle
I say dramatically because it’s normal to want to enjoy the fruit of your labor. Money is meant to be spent either today or later in retirement. Just don’t go crazy with it, like buy a really expensive car just because you’re getting paid $5,000 extra per year.
- Increase Your Savings Rate
You’re already accustomed to living a certain way with your previous income. With extra income now flowing in, it leaves you room to accomplish more goals. It’s always good to get into the habit of saving money. You can save up for traveling, emergency funds, birthdays, Christmas etc…
- Attack Debt
Freeing up yourself from consumer debt would not only bring you a personal satisfaction, but it would also give you more disposable income to pursue other financial goals. If you’re paying $300 a month on a car note and pay off your car guess what… You now have an extra $300 in your pockets to do whatever you may please. Reducing expenses have also felt like a pay raise if you think about it. Without the car note, that’s an extra $3,600 a year to your net worth.
- Invest More
If you defer a certain percentage of you earnings to a 401k your company will adjust your contributions to your new pay increase automatically. If you don’t have a 401k you can always invest in an IRA or taxable investment accounts. There are other ways to invest too. You can pay for a class or certification that will increase your earning potential. You can now save up to start a small business. Buy books, take online courses etc…
Who am I to tell you what’s right or what’s wrong? Follow your passion and what motivates you to accomplish your goals. Enjoy life, but please don’t blow all of your money.
Dog via GIPHY