Learning that you’re getting a salary increase can make it easier to deal with a stressful, demanding job. However, before you receive one dime of your higher pay, you might make plans for the money. For example, maybe you’ll:
It's your money, so you're free to spend it however you like. But rather than do the “cliche things” and spend the cash on fun or upgrading your lifestyle, consider practical uses for this money. Here's a look at six smart things to do with a raise. Start Building Your Savings AccountsMoney experts recommend at least a 3 to 6-month emergency cushion in your savings account. So, if you have far less than this amount, or no savings at all, use the extra cash you earn each pay period to build or start an emergency fund. Research shows that approximately 26% of Americans have no emergency savings account. This isn’t necessarily the result of not wanting to save, but rather not having disposable income. And unfortunately, without a savings account, one emergency can push you deep into credit card debt. If you receive a $6,000 annual salary increase — and you’re able to pay all monthly expenses on your old salary — you can deposit every cent of your pay increase into savings and save about $6,000 a year. Start Saving for RetirementYou’re never too young (or old) to start saving for retirement. If you haven’t started saving for the future, use the increase on your check to open a retirement account. And if you already have a 401(k) or an individual retirement account, put the money to good use and increase monthly contributions. Rather than save 2% of your income for retirement, maybe you can save 5% or 6% The earlier you begin saving, the more comfortable your lifestyle when you retire. Use a Salary Increase to Pay Off Credit CardsCan’t seem to knock down your credit card balances? The problem might not be usage, but the fact that you’re only paying the minimum each month.
A salary increase might be the ticket to less debt and a better credit score. Instead of minimum payments, take your salary increase and triple or quadruple your current monthly payments. You can pay down cards faster; and the less you owe, the less you'll pay in interest charges. And since the amount you owe on credit cards make up roughly 30% of your credit score, paying down debt gives your credit score a boost. This can open the door to better loan financing opportunities, such as cheaper interest rates on mortgages and auto loans.
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By now, the holiday season is in full swing. It seems like everyone is shopping and focused on snagging the best deals for friends and family. Whether you’ve been eyeing a brand new North Face style for yourself or a smart TV for your family, there is probably an item high on your wish list. So, how do you get it? The first step is prioritizing and budgeting. Write out what you need to spend your money on (like rent and food), the amount of money you can spend on gifts for family and friends, and travel costs (if you’re going somewhere). The amount of money you have left is how much you can spend on your big purchase. Should You Make a Big Purchase?Since it is a big purchase (and it’s important to treat yourself), splurging on an item is completely okay. You’ll probably use it or wear it a lot, so the purchase will be worth it.
Whatever the item is, you love it, right? So, it makes sense to not buy the things you don’t love, so you have money to get what you love. Many non-essentials and impulse buys fit into this category. For example, how important is buying a dress or video game you have a passing thought about? Cutting out non-essentials makes your big buy more accessible, as you’ll have more money in your pocket. |
ArchivesAuthorCharlotte Rivers loves to jog along the beach with her poodle. In her spare time, she loves to write blogs. Category |