So you’ve finally gotten that big raise you’ve been hoping for. Congratulations! But don’t start spending to make your champagne wishes and caviar dreams come true just yet, at least not without reading this first! Here are five things you can do with all that new money you have now that you’ve gotten a raise.
1. Don’t Go Crazy — But Don’t Deny Yourself Either
Everyone’s first inclination upon getting a nice fat raise is to throw caution to the wind. Yet this is not necessarily your best choice. Giving in to the impulse to begin spending money emotionally and treating yourself to celebrate your big win might feel good while you’re in the moment, but after you get your credit card bill next month and you realize you just racked up more debt that you can afford even after your raise, you’re going to be kicking yourself.
At the same time, you can and should celebrate your accomplishments. Just do it in a small but significant way that will satisfy your need to acknowledge that yes, you just managed a major coup and that you’re awesome. A nice dinner out with family, catching a few drinks with coworkers, or going to the movies with friends are all great ways to feel great about your new raise. Buying a brand new Mercedes isn’t.
2. Use the Opportunity to Pay Down Your Debt
Just about everyone carries at least a little bit of debt nowadays. Whether it’s from financial aid from school or personal loans, credit card debt, liabilities from a mortgage, or a vehicle you’re paying off, all of these pieces of personal finance can benefit from you bringing in more money than you were before.
Using a raise to pay down your debt doesn’t have to be dramatic. No one is expecting you to completely pay off a massive balance, after all. However, what you can do is increase the amount you pay every month to shorten the time it takes to repay these loans. This is especially helpful if you’ve been making monthly minimum payments, as not only will you be paying less overall in interest you’re also fighting back against any bad credit you might be carrying.
3. Improve Your Quality of Life
After you’ve celebrated your victory and re-evaluated your personal finance situation, it’s time to consider how you can improve your current quality of life. You can use your new, larger budget to begin improving your lot in life in ways you couldn’t afford to do so at your older, smaller salary. Even a few incremental changes can make a big difference.
Again this doesn’t mean buying big-screen televisions and going on lavish vacations. It does mean, though, that you might be able to afford the repairs your car needs to keep it running, or that you can buy a full tank of home heating oil instead of just half and turning the thermostat down to make it stretch. Replace old and worn-out clothes, equipment, appliances, and so on where you can.
4. Begin Saving For the Future
Finally, and perhaps most important, you can use the extra resources you now have to begin putting some money aside for the future.
Whether it’s a rainy-day fund to make a bigger purchase in a few months or it’s long-term savings as part of a retirement plan, whatever you save with an eye towards the future is going to benefit you sooner or later.
5. Start an Emergency Fund
It’s certainly difficult to do this nowadays, of course. In fact, most of us are certainly lacking in this department, simply because of the cost of living. But once you get that big raise, and if you spend that new money you’ve got wisely, you can (and should) begin putting cash aside for a later date to cover some of life’s little (and big) emergencies.
Yes, you may be doing well now, but with economic conditions ever in flux, your ability to earn a living might take a nosedive without warning. Planning for the future might not be the most exciting thing to do with your raise money, but it might be the one thing you can do that will have the most positive impact on your life.
The Final Word on Spending Your Raise Wisely
And there you have it: our quick and dirty guide to enjoying your new raise like a pro. Keeping these things in mind will go a long way towards you reaping the full benefits of your new salary. Before you know it, you’ll be living your best life — and your next raise might be right around the corner!