It’s natural when you get a raise at work to begin to fantasize about all the things you want to buy. It could be that new iPhone you’ve been wanting or even a whole new wardrobe. However, money should be spent wisely on the things you need first. When all of your needs are met, then, and only then, can you splurge on some new toys for yourself.
There’s nothing wrong with going out for dinner to celebrate your raise though. But you do have to learn how to handle getting a beefier paycheck. Here are 5 tips on what to do when you get a raise at work.
1. Basic Necessities
We characterize basic necessities as food, clothing and shelter. There’s a little more to it than that though in our society. We have utility bills, mortgage payment, the cost of gas and all sorts of insurance policies. You should first make sure all of these basic needs are met. Are all your bills up to date? Are you sufficiently insured with your health, car, house and life insurance?
2. Financial Goals & Priorities
Most of us desire to quit our job some day and do a hobby for the rest of our lives. Whether it be opening up a restaurant, traveling the world or coin collecting. But none of these things are free. If you ever plan to stop working you’re going to need a sizable nest egg at retirement.
With your new raise, consider putting some more money away in your 401k retirement account. This holds especially true if you’re in your 40’s or later.
3. Fund Your Emergency Fund
Having reserve funds can offer peace of mind to some degree. It’s recommended to have 9 months of income stored away just in case. You never know when an unexpected expense will rear its ugly head, whether it be a medical expense or a costly home repair not covered by insurance.
4. Taking Care Of Your Debt
Almost every American has some debt, whether we’re talking about credit card debt, student loans, auto loan or a mortgage. If you have a debt with an interest rate of over 10% then you need to take care of this debt first, above anything else.
The added benefit of paying off your high interest credit card debt is that it will raise your credit score. It can increase your score so much that you can actually refinance your existing high interest auto loan or mortgage at a lower rate due to your better credit.
Donating money to a great cause makes us feel all warm inside. Then there’s the added benefit of getting a tax break on our charitable donations.
It’s easy to become a mini-philanthropist. You just find a great cause you love and offer your financial support. If you don’t want to fork over your entire (or even any part) of your new raise, you can volunteer your time instead.