Congratulations! You just received a well-deserved raise for your hard work. You’re probably ready to go buy that shiny new car or start hunting for a new house. But wait! Before you make any lifestyle changes think about what you can do to invest in your future rather than investing in your present. Use your raise wisely now and you’ll thank yourself later.


Use Your Raise to Pad Your Savings

It can be so tempting to splurge after getting a raise. Before investing in your short-term wants be sure to invest in your long-term needs. Don’t spend your money right away. Allow that cash flow to sit in your savings or a Money Market Account for a while before spending it.

According to CNBC each person needs a minimum of a six-month savings cushion. You may think that sounds extreme but emergencies happen and they’re almost always unpredictable. Cars break down, children get sick, and, and companies lay people off. Your savings cushion can make the difference between paying your bills and sinking further into debt, in spite of your current higher income.


Use Your Raise to Invest in Retirement

When you get used to a certain amount of lifestyle spending, cutting back becomes hard. But when you retire, that’s exactly what you’ll have to do. So start investing in your future right now!

It may seem strange to put away money that you’re not going to see for decades to come but those decades will pass faster than you think. A small amount contributed to a 401(k) or IRA early in your career can yield more than larger amounts contributed later. Take full advantage of any company contributions.

If you’re not contributing the maximum to your 401(k), increase that percentage now. Take the advice of Mr. Money Mustache who figured out the simple math that shows how properly invested money can aid you in retiring earlier. Live below your means and recognize that just because you can afford the finer things in life doesn’t mean you should spend your fortune on them. You’re going to need that fortune in your golden years.


Use Your Raise to Pay Off Your Debt

Credit card debt and school loans can feel crippling. What most people don’t think about is that they can pay off their debts faster if they budget more than the bare minimum for payments. Increase your monthly loan payments or make one large payment to knock down the principal. It’s a drag being unable to immediately indulge using your new income. Focus on the future. You may miss that money now but imagine what you’ll be able to save up for once you’ve paid off all of your debts and loans.

And here’s a bonus! Carrying debt is one of the top causes of stress for U.S. workers. So use your raise wisely to reduce your debt, and reduce your stress.


Don’t Forget About Tax Brackets

It’s easy to forget that you may end up in a higher tax bracket with your new raise. If you’re wondering how much the government will take out this year just calculate your yearly income. Afterward, compare it to CNN’s 2018 tax bracket chartThis handy chart can help you approximate how much of your paycheck will go to taxes. Likewise, it can help you predict whether or not you’ll end up owing this year rather than receiving a refund like everyone hopes they will.


You Can Still Treat Yourself

Let’s be honest, treating yourself is probably the first thing everyone thinks of when they get extra money. That’s perfectly fine! You’ve worked really hard to get this raise. After you’ve worked out a new budget with the help of a financial advisor, save for something that you want: a dream vacation, a down payment on a new house, or a new car.


A big raise is definitely something to celebrate. Just make sure that you don’t start an unsustainable lifestyle. Use your raise wisely and invest in your future.


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