There's no doubt about it: one of the best feelings as an employee is getting a raise. Whether it was a big promotion with new responsibilities or simply a boost for a job well done, you should be proud.
But before you consider yourself a high roller, take a moment to read these tips on how to maximize the new money you'll get from each paycheck!
Give it a Little Time
When you just got a raise at work, here's what you should do next: nothing. Now is the time to exercise restraint.
If you've just received word of your raise, your first impulse might be to start buying any extras you come across. You'll think: I deserve this. I earned it. And it won't hurt to buy it because it's covered by my raise!
And it's true — you do deserve some extras now. But it's critical that you wait a few weeks to find out exactly how much money you'll actually have after each paycheck. Pretend for a short while that you didn't actually get that raise and see how your finances look afterward.
After that, you're free to have a little fun!
Rethink Your Budget
Now that you'll have more money coming in, that means all the numbers on your monthly budget will need to change. If your income is only slightly increased, you can basically keep the budget the same, just add a bit of money across the most important categories.
However, if you received a significant raise, you may want to totally refigure your monthly expenses. If you can pay considerably higher toward your food, your housing, your vehicle, etc., you might even consider some much-needed upgrades!
Consider Your Taxes
The more money you make, the more taxes you'll likely pay. If you move up the financial ladder dramatically and find yourself in a brand new tax bracket, you'll definitely need to account for that and plan ahead.
Make sure you withhold the right amount you need to pay after every paycheck. Talk to payroll at work and have them increase withholdings or adjusted through the usual payroll process.
Remember: in a higher tax bracket, there's a fair chance you won't receive that annual income tax return you're used to. If you were receiving money each year before, you may find yourself paying instead, so be prepared.
Pay Down Your Debt
One of the wisest decisions anyone living in Houston or Longview, Texas could make with a raise is to increase the amount of money they pay each month on debt reduction. In the past, we've talked about the snowball method for debt reduction.
By allocating the extra money you're receiving each month specifically to your various debts, that snowball will roll down the hill far faster. And you know what that means — you'll be debt-free considerably more quickly than you would have been before your raise.
Build up Your Emergency Fund
We get that you want to do something fun for yourself. You worked hard to earn this money, and you deserve kudos for your achievement. But looking out for your financial future is actually a reward in itself. You will worry less in your golden years and feel secure about what you have built when you have safety nets in place.
One of those safety nets is an emergency fund. This is an easy-to-access account that includes enough money to live on for three to six months, should the worst happen. Whether you find yourself laid up from an injury you suffered on the job, or your spouse gets laid off, having an emergency safety net will make you feel more secure.
Resolve to put the extra money you earn from your raise into your emergency fund every two weeks. It may not seem like much at first, but you'll be surprised by how quickly it grows. And once you have enough of a cushion, you can put the extra money toward something else.
Last but not least, if you have the money to spend after you've followed these other tips, take this opportunity to do something for yourself. Take a mini-vacation, enjoy the sights and sounds of your local Longview or Houston area, make a lasting and useful home improvement, buy that new toy you've been eyeing, or even buy a gift for someone you care about.
When you get a pay raise, it's an accomplishment. And if you don't take the time to pat yourself on the back, you might miss out on fully appreciating the fruits of your efforts.
Now you know what to do when you get a raise. For more financial advice on a weekly basis, don't forget to bookmark the Atlas Credit blog! Check back each week, and share with your friends!