You got a raise at work. Congratulations! That’s a big accomplishment, especially in this unsteady economic climate. Companies aren’t exactly handing out raises left and right. But you got yours, so now you just have to figure out how you’d like to optimize your financial situation. This is not something you want to make a hasty decision about because ideally, this extra money should benefit you over the long run to improve your life. Make the most out of your raise with these tips.
Tip #1: Start an Emergency Fund
When you don’t have an emergency fund set up, this raise that you just received is a great way to start one. Ideally, you want to have at least 3-6 months of living expenses saved in case of illness or job loss. Depending on how large of a raise you are working with, you can feasibly set up your emergency fund account fairly quickly in just a few months time. Having that extra savings in case you need it can be a big load off your mind when you may have been too strapped before your raise to secure this fund.
Tip #2: Pay off or Lower Debt
High-interest credit card debt can be an enormous drain on your finances. It can be hard to get ahead with payments when it just seems like you are tackling only the interest accrued each month. Paying off those debts or lowering the balance on those credit cards into something more manageable can be a great way to spend that additional raise income. Doing this will feel like a weight off your shoulders and allow you to use your money going forward more wisely.
Tip #3: Save for Something Exciting
This is truly a cool goal to have that will inspire you to pocket those extra bucks. Saving for something you have dreamed about wanting to do for a long time, like a trip to Europe, a down payment on a better running car, or even making some major home improvements are all things that you can look forward to saving for with your newly acquired income.
Tip #4: Put the Extra Into Your Retirement
Maybe not the most fun option, but in the long run this one is sure to benefit you the most. Paying the income tax on your raise is inevitable, unless you roll that raise into your retirement savings. Those contributions are tax-deferred so you don’t lose any money that way. You aren’t enjoying it in the short term of course, but that will set you up in a beneficial way later in life when you are looking into retirement. You may even be able to retire earlier than you might think!
When you are trying to adjust your finances due to a raise or other happy circumstances, talk to a financial advisor that might be able to help you lay out some achievable goals with your money matters.
This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.