First things first, congratulations for your newest achievement. Now, let’s look at how you can put the extra cash into proper use.
Landing a raise at your workplace is a major achievement that you should celebrate. When you get a raise, think about how you will benefit from your extra earnings. Although you should enjoy our new achievement, you should figure out how to grow your net worth when deciding how to use the raise.
1. Calculate the new take-home pay
After getting a raise, don’t start spending it right away. Instead, take some time to assess your present financial situation and plan on how you can achieve future financial security. For starters, start by determining how your raise will affect your paycheck. For instance, will your tax and other deductions be affected?
2. Wipe out existing debt
If you have been working on getting out of debt, the raise you just received can go a long way in boosting your efforts. The easiest way to boost your net worth is by eliminating tour debts. Although reducing your debt load might not offer you instant gratification, knowing that you are debt free is a major victory.
3. Build your emergency fund
Paying off high-interest debts and building an emergency fund are the two best ways to use this extra cash flow. You might not have fun thinking about an emergency that will require you to spend your savings, but when it hits, it should find you prepared. Most financial experts agree that an emergency fund should cover at least six months of living expenses.
4. Contribute to your retirement
After you get a raise, think about your future golden years. A small increment to your retirement savings, even as little as one percent, could have significant impact on your future financial stability. Better make the contribution automatic. In case your employer matches your contribution, leverage the opportunity to grow your savings at a higher rate.