After months of toiling away at your job, your efforts have finally been recognized and your income has increased! Getting a raise feels great because it not only affirms that you’re doing a good job at work, but it also gives you a bit more financial wiggle room, and a higher paycheck each pay period. Though you could blow the additional funds on nice dinners and new tech accessories, there are much smarter ways to make use of these extra dollars. Here are 3 ideas.
Wait a few weeks to see how much you’re really bringing home.
It’s easy to get overly excited about your raise and want to treat yourself or your family to an upgraded wardrobe, a fancy vacation, or a new car. Yet, you may be surprised how much of your net income will go to taxes and other withholdings. If you’re curious to know how much money you’ll really bring home, divide your new pay increase by 26, tack it onto your biweekly paycheck, and then calculate the portion that will go to taxes and other items. If this is too difficult, here’s a foolproof method: wait a few pay periods before making any extra purchases. That way, you won’t accidentally overspend.
Revise your budget accordingly.
While you’ve certainly earned your raise and the extra financial freedom it gives you, you’ll still want to make sure that your new income level is appropriately distributed to all areas of your budget. No budget yet? Now is a perfect time to create one. List all of your outgoing expenses, including fixed monthly bills and discretionary purchases, and the amounts you contribute to savings, investments, and donations. You should also factor in non-monthly expenses, like annual taxes. Compare all of these figures to the amount of money you earn and place your new income where you think it will make the biggest impact.
Contribute more to your retirement fund.
According to MarketWatch, if a 35-year-old earning $60,000 per year were to increase their retirement savings by just 1 percent, or $50.00 per month, it could result in an additional $270 per month in retirement income, assuming a 7% rate of return and retirement at the age of 67. You know where we’re going with this: adding more cash from your income now can help you live more comfortably later. If you’re under the age of 50, you can contribute up to $5,500 annually to a Roth IRA. So, retool your retirement fund and see where you can contribute a bit more funds with your new, higher income.
Staying on top of your personal and professional life can be a challenge. At Oxford at Lake View Apartments in Corinth, Texas, we hope to make your daily routine a bit easier with tips and tricks that can be applied to every aspect of life.