Isn’t getting a raise a great feeling?
You get an increase in your paycheck and feel like you’ve added value and have been appreciated by your boss.
There’s also a cause for celebration, right?
After all, you’ve received some extra money in your wallet and there’s nothing wrong with celebrating over a nice dinner with friends or family.
However, when it comes to managing that extra money each month, most Americans will encounter the temptation to spend it.
If you don’t manage your money wisely it will quickly become a part of your monthly cash outflow and disappear in the grocery store or at your local restaurant.
Instead, don’t look at your raise as a bonus you can freely spend each month. It’s an opportunity to achieve some of your most important financial goals!
Here are a few ideas on what to do when you get a raise:
Use Your Raise to Give More
Some people have found it difficult to give more in recent years, especially with a softer economy. This has resulted in churches and other ministries suffering and having to make expense cuts. If you’ve had to cut back on your giving now is the time to focus on helping support your local church or other nonprofit organization. Remember, your giving is tax deductible so you’re saving even more.
Create an Emergency Savings
If your emergency savings account is lacking or has dwindled away, the opportunity for savings is equally as good. Begin saving immediately if you don’t have at least $1000 in your savings account. A $1000 will protect you against most unplanned situations or sudden repairs to your car or house. Obviously, this amount doesn’t do you much good during a job lay off, so you need to commit to saving consistently each month until you have 3 – 6 months put back (according to Dave Ramsey).
Pay Off Debt Faster
If you’ve been looking for debt help you may have just found your answer. With this additional income you have a great opportunity to knock out that Christmas debt or other debt that’s been lingering around for a while. Absorb this extra money into your debt plan as an extra payment each month. There are plenty of free debt calculators on the Internet that will help you create your debt pay off plan.
Increase Investment Contributions for Retirement
Another great way to use this money is to absorb it into your 401(k) or IRA each month as an extra investment. The great thing about such a move is the fact you won’t see the money in your paycheck, so the temptation isn’t there to find another purpose for it. If you have a 401(k), make sure you’re investing enough to get any employer’s match! Don’t miss out on this free money.
Start Saving for Your Children’s Education
Finally, many Americans haven’t been able to start contributing to their children’s future education because debt or too many other goals have gotten in the way. The great thing about saving for your children is that it can change your family tree forever. Wouldn’t it be wonderful for your children to graduate college without debt and immediately start giving, saving and investing more than you ever did? Now is the time to start making that dream happen.
I have a feeling, once you start using your raise for any of the above goals, you’ll become more motivated as you see yourself make progress. You might even take your work to another level and get another raise next year.
If you’re having trouble deciding on the above, pick 2 goals, but don’t worry about trying to attempt more than 2 at a time. Doing so will just dilute your efforts.
Dave Ramsey’s Baby Steps recommend you tackle the above goals in this order: 1) Giving or Tithing; 2) Saving $1000 for emergencies; 3) Pay off debt; 4) Save 3 – 6 months living expenses; 5) Maximize your retirement investments; 6) Save for the your children’s education.
How do you plan to use your new raise?