Your first (and wisest) instinct may be to add more to your savings — but make sure you still have some fun! Splurge on a date night, raise a toast to yourself and take a little time to pat yourself on the back.
If you want to enjoy your raise while also using it to improve your financial stability, here are a few steps to follow.
Figure out what your net pay will be
The average raise in the U.S. for 2018 is 3.2%. Whether you earn this amount or greater, you should calculate how much you’ll actually be taking home every month. While your pay increase will certainly be welcome, the amount you’re told and the amount that appears on your paycheck will differ. Determine just how much more you’ll be ringing in, then decide what to do with your new funds.
Save, spend and give
There’s no simpler way to manage money than the save/spend/give method, where 1/3 of your newly earned income goes into each bucket.
There are many potential places to tuck away the portion of your raise that you save, such as an emergency or savings account, a college savings plan or a retirement account. Once you’ve decided where you will put your newfound savings, set up your checking account to automatically deposit the funds, that way you’ll steadily add to your savings on a consistent basis.
Saving money is paramount, but be sure to leave some to spend as you please, completely guilt-free. Take a vacation, spruce up your home décor, splurge on a new wardrobe, or just head out and celebrate. You’ve earned the money, and you’re entitled to spend what you earn. Put any thoughts of guilt aside and revel in the rewards of a bigger paycheck – just remember to be mindful of what you spend.
Donate the last third of your raise to a worthy cause – whether it’s a charity, a house of worship or a loved one in need. Not sure where to start? Guides to charitable organizations, will give you some ideas. There is no shortage of people and organizations that could benefit from your generosity.
As an added benefit, charitable donations are tax-deductible, and according to Business Insider, giving to charity actually makes people happier!
Pay off your debts
If you’ve got a cloud of debt hanging over your head, using money from your raise is a great way to pay it off and get closer to living debt-free. Creating a debt repayment plan can help you figure out how much of your raise can be devoted to paying off debts, and will put you one step closer to eliminating debt completely.