YOU DID IT! You got the raise!
ALSO READ: What’s Your Money Personality?
High fives all around. Quick celebration dance.
Wow, what a rush right? The temptation is probably to take the whole office down to the local watering hole and buy a round of drinks. While it’s all well and good to celebrate your good fortune here are a few things you probably shouldn’t do after you score that coveted raise.
1. Don’t tell your co-workers about the raise
It’s a good idea to keep your salary raise to yourself. Seriously. Career experts advise against sharing your salary with your coworkers because of the potentially negative side effects. Letting your co-workers know about your recent pay raise could bring up feelings of jealousy or make you the target of office gossip. You don’t need that. Ain’t nobody got time for that.
Talking about your salary is a good thing…even if upper management may frown upon said practice. You want to know where you stand and that you are being compensated fairly, but unless someone asks you straight up…there’s really no need to bring up the raise.
2. Don’t rush into spending the new extra money!
Before you jump into making new purchases, take some time to get used to the dynamics of your bigger paycheck. You need to check and see just how much you’re really getting. Does your raise put you in a bigger tax bracket? If so, you may be surprised to see that you’re not getting as much as you initially thought because of the IRS.
The more money you make, the more money they take. Never forget that.
A $5,000 salary increase sounds like a lot, but that works out to be an extra $400 a month, before taxes. Depending on where you fall tax bracket-wise you could see a third of that go bye-bye.
You can wait until your next paycheck or work it out yourself but it’s best not to do anything drastic until you have the answer to the questions posed here.
3. Don’t break your budget
Just…don’t do it. You were doing fine before (hopefully) and you’ll do fine after. There’s no rule that because you’re making more that you have to start spending more. That phenomenon is called lifestyle creep.
When you get a raise, you may be tempted to start indulging a bit more but instead take some time to think about where your raise is going to do the most good.
For example, you may want to put more money toward your savings or paying off any debts you may have before pulling the trigger on buying that new, fancy iPhone 13S. Or….what if you invested that entire raise? Putting your extra funds into wealth-generation can be a fantastically effective long-term strategy.
4. Don’t forget to invest in your career
This can be thought of as investing in yourself since you are putting money back into the very reason you obtained a raise: enhancing your knowledge, skills and abilities. Such an investment could include getting an advanced degree in your field, continuing education courses, joining professional clubs, or learning a brand new skill.
5. Don’t discount charitable contributions
Charitable donations are a nice thing to do. But they also aren’t just a nice thing to do. Donations to tax-exempt organizations are deductible from your overall tax obligation. So…not only are you doing a good thing by contributing to charity, you’re also helping alleviate your own tax burden. We’re just saying!
Beware, though, because many charities are run poorly and a very small percentage of your donation actually goes to people who need it. Do your research first before you commit any funds.
6. Don’t miss the fun
There’s nothing wrong with spending some of your raise. You worked hard and you deserve to enjoy it, at least a little. But avoid making choices that will increase your expenses of living. Especially since the most common mistake people make is increasing their lifestyle expenses to match the new raise. So if you’re constantly increasing your expenses based on the raises you receive, you’ll always be living paycheck to paycheck and you’ll honestly never get rid of that suffocating feeling like you’re just scraping by.
Depending on the size of your raise, you may want to go out to dinner with friends, buy a new electronic gadget, or plan a family vacation. Just make sure what you choose is in line with your budget. What’s important is doing so in moderation. Buying a new gadget or planning a vacation should depend on the size of your raise and what you have budgeted for.
7. Don’t forget to pay your debt
Start with the highest interest debt and pay it off first. Use the raise as an opportunity to increase the amount of your regular debt payments. Doing so has multiple benefits; you’ll get debt out of your life and reach your goals faster, and you’ll increase your credit score by lowering your debt/income ratio. This doesn’t mean delay saving for retirement!
Remember to consistently contribute to your retirement account and emergency funds.
Just because you’re earning more money doesn’t mean you should throw it away on purchases you don’t need. Remember that without debt, you will be able to save more money. And more money means you can make a higher monthly contribution, which in turn means more retirement income, and more money in your emergency funds.
Now, on a brighter note…
Congratulations on your raise! You’ve done a sweet job and you should be totally proud of yourself. Just remember that 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. Planning for the future should always stay in the forefront of your mind.
Make sure your money is working as hard as you are, by putting a plan into action.