Not everyone gets a raise every year but it’s nice when you do. Most companies give their employees a raise at the New Year. It’s great that you get a raise but there are some things you should consider when you get that raise. With each raise, you get you should look at bettering your financial picture instead of thinking oh I have more money to spend now. There are multiple ways to make the most of the money you’re going to be getting from your raise.
Put it directly into a savings account
If you are making good money to cover all your expenses? That pay bump should be considered for a savings account. But it might take some force to save that cash. You can have that pay bump be taken out of your direct deposit into a savings account before you can even touch it. You can always reverse it if your situation changes.
Save it for your retirement
On average you are supposed to be saving at least 15%-20% of your income for retirement. Most people can’t even hold on to $1,000 in their savings. You can still work on saving that percent once earnings go up. I personally have a Roth IRA that money goings into for a dedicated retirement account.
If you have a 401K you can tell your employer to put the raise right into that account. Or you can use an IRA most people like the Roth IRA to save that pay bump for retirement.
You can use the money to pay off debt
If you are carrying debt other than a mortgage or a car payment it can be hard. If your get that pay raise you can really start to conquer that debt more easily. The way to conquer credit card debt is to start paying off the highest interest card and on down.
You can start investing
This can be intimidating for most but the sooner you start the more opportunities you will have to make money over your lifetime. You can consider using your raise to open up an account and load up on stocks that you like.
Don’t lose sight of what your raise can do for your financial picture. Having more money in your pocket to spend can be tempting but start with a plan that works for you and get saving for a better financial picture. You can also find a side hustle to invest in.