After years of hard work, you finally get a huge raise. Congratulations! But whether you’ve earned your raise through a promotion or simply due to your performance and tenure, it’s important to be smart about your increased earning capacity. So, let’s take a look at practical ways you can go about with dealing with your bigger salary:
Check Your Take-Home Pay
First, before you even start planning your finances, you’ll need to calculate the actual take-home pay you’ll be receiving after taxes and current monthly deductions such as health and life insurance and your gym membership. After which, you’ll be able to see your disposable income which you can use to invest, spend, or save.
Try To Keep Your Spending At the Same Level
Bigger pay doesn’t always have to mean bigger spending. As much as possible, keep the status quo and only spend what you need. Be practical with your increased earning capacity and allocate the increase to things that have more long-term benefits (which we’ll be discussing in a bit). You don’t need to upgrade your food stock by switching from your usual cereal to some luxury or expensive breakfast mix.
Take Care of Your Debt
Your increased pay would probably incline you towards buying a new car or even decide to buy your first home. But before you even decide to go to the bank to take out a new car loan or a housing loan, it’s best that you pay off your current or existing debt. Paying off your debts may not be as gratifying as treating yourself or investing, but being free of doubt can give you peace of mind and a sense of victory.
Start Your Emergency and Retirement Fund
Now that you have more take-home money, you can start building your emergency fund. Allocate a part of your salary increase to a mandatory monthly emergency savings fund; you’ll thank yourself later on. Although an emergency savings fund is important, starting your retirement fund early is just as important and beneficial in the long run.
Get Professional Advice
If you’re undecided or wish to know more about what you could do with your added income, getting expert financial advice through a wealth management firm would be a good idea. They would be able to provide professional guidance on how to handle your finances, and their goal is to increase and sustain your wealth. Instead of just splurging your money in Salt Lake City, wealth management firms would help you with properly strategize your finances, help you invest, and even assist with your retirement plan.
Treat Yourself… Responsibly
It’s not wrong to pamper yourself after getting a raise. So take a reasonable portion of your income and treat yourself with a vacation or buy that TV you’ve been eyeing on recently. The keyword here is “reasonable”, always be practical with how you spend your money, even if you’re treating yourself. Never spend more than what you earn.
Getting a raise is indeed good news. But to paraphrase the ever-popular Spider-Man quote, with your increased earning capacity comes great responsibility; in this case, your newfound responsibility is how to be practical about your bigger take-home pay.