So you’ve received a raise. Congratulations! As eager as you might be after getting that first big paycheck, it’s important that you take a step back and lay out a plan for how you’re going to allocate your money. Lots of people use a raise as more wiggle room with their spending or as an excuse to purchase shiny, expensive toys. But, it’s critical that you consider all the ways to create a comfortable financial situation for yourself both now and years into the future. Wondering what you should do as your wealth starts to grow? Consider these four money moves below:
Reevaluate your spending habits
Earning more money means that it’s important now, more than ever, that you’re making wise spending choices. Dig out your bank statements and see where you’re spending more than you should. Take your mortgage, for example– if you’ve been making routine payments for several years, you could be eligible for a refinance, meaning you’d be able to reduce your interest rate and monthly mortgage payments. On a smaller scale, you can find ways in your everyday life to cut back on spending like bundling your subscriptions into one lower price or choosing generic products. The more you save each month, the more impactful your raise will be.
Adjust your auto-savings
Taking in more money from each paycheck doesn’t call for a shopping spree. You need to be smart about the extra money you get each pay period and a wise way to do that is to put it into savings. Since most employees can utilize direct deposit, they probably also have the option to set up auto-deposits into savings. Even if you already do so, be sure to increase the amount after a raise so you can build up your emergency fund. Experts recommend 20% of your income should be saved, however there is no one-size-fits-all as everyone’s goals will vary. Talk to a financial advisor to determine your financial goals and how much you can afford to put away.
Increase your retirement contribution
Retirement is a major factor to consider when thinking about saving. Most of the time, companies will have programs in which you can dedicate a small percentage of your income to your retirement fund and that percentage will be matched to a certain degree by your employer. Check in with your company to see if this is available to you, and if not, there are individual retirement accounts to utilize. Either way, you should start as early as possible when preparing for retirement. Your hard-earned money and years in the workforce can help you live a comfortable life with little concerns about money in your later years.
Keep developing your professional skills
The connection between improving your skills at work and money management might be hard to make at first. But the fact of the matter is that becoming a better, more knowledgeable employee can improve your chances of getting a raise, putting more money in your pocket at the end of the day. Besides, your professional development is what got you that raise in the first place. If you’re not trying to prove yourself in the workplace, you won’t gain access to these opportunities for promotions and pay raises. That said, find out the most sought after skills in the workforce to stand out amongst your coworkers and you’ll be making your way to the top of the ladder in no time.
It’s important to set goals for yourself as soon as you receive your first raise so that you don’t waste your money. Make sure you’re allocating your extra money to funds that build wealth and set you up with a comfortable life down the road.
What is your approach towards money management after earning a raise? Leave us your thoughts on the comment sections below. Head over to Jobstore.com and unveil your next job opportunity.