5 Smart Personal Finance Tips for Handling a Raise at Work
Think twice about how you're going to spend that extra money.
When you receive a raise, you think it's great. You have more financial freedom. However, you may have found your previous salary perfectly fine for your financial needs. Instead of putting the extra money in savings, you're using it on things that you don't need. It's time to look at your budget again and make some changes to your personal finance situation after that raise.
Check the Amount You Really Have
The first thing to do is check your paycheck and see just how much you're really getting. You may be surprised to see that you're not getting as much as you initially thought because of Uncle Sam's cut. You can wait a month and see your paycheck and work it out yourself, or you can wait for it all to be worked out for you. The latter will take a little longer.
Look at Your Budget Again
When you find you have more income, you need to look at your budget again. You don't necessarily need to spend it all, but you do need to spend it wisely. Portion a section of your new income for savings and consider clearing more of your debts if you have them. If you don't think about where the money is going, you're more likely to spend on things that you don't really need and you waste it.
Consider Adding More to Retirement
Where is the best place for that money to go? That's the number one personal finance question when you realize you have extra. Do you save for a new house or spend the money on luxuries? While you want to have fun, you want to live a comfortable life when you retire. It's worth considering adding more into your retirement fund.
This can come directly out of your paycheck, so you never really see the money in your bank account. This is a great way to avoid missing it. If you don't have a work retirement pot, you will need to be vigilant to make sure it goes where it needs to.
Could you put more into your savings for retirement?
Make More Charitable Donations
If you want that money to be tax-exempt, one popular method is to make a charitable donation with it. Pick your favorite cause and make sure that money goes there each month. Make it easier on yourself by setting up a direct debit with the organization. You will need to keep track of your payments for when it comes to tax time.
Have Fun with the Money
Don't put all the money in savings or to charity. You need to have a life, so let yourself have some fun. Set an amount in your budget that you can spend on whatever you want; no questions asked. It could be $50 per month or $50 per week, whatever your budget allows for. Never feel guilty for your purchase, but you will want to consider whether it is worth spending your money on items at the time.
Getting a raise doesn't mean you can just spend the money on anything. Think about how you're going to handle that money and where you'll spend it. Your retirement fund could see an increase, which will give you a better pot decades down the line. However, you may decide that it is just enough to clear your debts off sooner and then you can reassess your personal finance needs again.
Alexandria Ingham is a freelance writer with experience in technology, internet marketing and personal finance