Congratulations— you’ve just secured your first large raise at work. All your hard work has finally paid off and people are noticing your dedication to your job and you’ve been rewarded accordingly. You may be wondering what you should do with your newfound wealth. When you get a significant raise, now’s the perfect time to assess your finances to decide how to best spread out your paycheck to help you now while also maximizing your financial success in the future. Here are a few things you may want to consider doing with after securing a large raise.
Upgrade Your Vehicle
After years of driving a sensible used vehicle for your daily commute, you may now have the funds coming in to finally get your dream car. Assess whether your raise will afford you the opportunity to save for a down payment and monthly costs for that vehicle you’ve had your eyes on forever. Do your research to find the right model for your needs and don’t forget to check out deals that local dealerships may have going on that you can take advantage of. If your current vehicle has any equity in it, you may be able to leverage that towards a down payment which may make your new vehicle purchase even more affordable.
Pay Down Debt
The best time to pay down outstanding debt is when you find yourself with an unexpected boost in your salary. You can use the extra money you’re making to put straight towards wiping out your debt, which can bring you one step closer towards obtaining financial freedom. You may even want to consider consolidating your existing debt to get a better rate, which can make it easier and quicker to pay off.
Boost Your Savings
If you’re in good financial shape and don’t have much outstanding debt, you may want to take advantage of your nice raise to help boost your existing emergency savings account. You can never have too much set aside for a rainy day, so if you can afford to, sweep the extra income you’ll have coming in directly to your savings account. You’ll be better prepared for the unexpected, which can give you added peace of mind.
Save for Retirement
Saving for retirement is important. However, not many people put enough money into their retirement accounts to support them when they’re no longer able to work. If you don’t have money put away in a retirement account, use your raise as an opportunity to open up and begin funding a 401k, which can help you with your daily living expenses when you eventually retire. If you already have a retirement account open, use your raise to boost your savings percentage to put even more money away. A good rule of thing is to put away about 15% of your paycheck towards retirement. If you can’t afford to put away 15% right away, slowly boost your retirement savings each time you get a raise and be sure to take advantage of any employer match to get an added boost.
After you’ve done the responsible thing of boosting your emergency savings and retirement, paid down any existing debt, and upgraded your vehicle, you shouldn’t feel guilty about using your raise as an opportunity to go out and treat yourself. It’s okay to celebrate your success, especially when you’ve worked so hard, as long as you don’t go overboard. Take in a show, go out for a nice dinner, or take that trip you’ve been dreaming of. While it’s good to be responsible with your money, it’s okay every now and again to splurge and reward yourself for a job well done.
Keeping these ideas in mind, you’ll know what to do when your hard work is rewarded in the future with another large raise. You generally can’t go wrong with being responsible while occasionally treating yourself.