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Are you one of the lucky ones who recently experienced an increase in salary?
Congratulations!
It’s a great feeling to receive this kind of reward for working hard!
But it can be tempting to flaunt your newfound wealth and treat yourself; before you do, think about all that your income could unlock if managed correctly.
Having more money means having the potential to turn dreams into reality, both on a personal level and for those around you.
Follow these 14 tips from experts on how to responsibly manage your larger paycheck and take control of adding value not only to yourself but also to others.
#1. Set A Saving Goal
Set a specific goal for what you want to save each month and make it a priority.
Set up an automatic transfer into a savings account so that the money is taken out of your paycheck as soon as possible before it has time to be spent somewhere else.
The more specific you can be with your goal, the better; having something tangible that you’re saving for (like a new car or a down payment on a house) will help you stay motivated.
#2. Track Your Spending
Keeping tabs on how much you’re spending each month is the best way to make sure that your money isn’t being wasted.
Track every purchase, no matter how small, so that you can see exactly where it is going and adjust accordingly.
You may be surprised by just how quickly those little purchases add up!
#3. Tackle Existing Debt
Debt is like a black cloud hanging over you until it’s all gone.
Without debt, you can put more money towards saving and investing without feeling that these actions will have repercussions.
No matter how much debt you have, there are plenty of debt reduction strategies out there you can use to start chipping away at your own.
#4. Consult a Financial Advisor for Support
Not everyone knows what to do with their money to set themselves up for success.
Contact a financial advisor if a raise brings you more anxiety than joy.
They’ll sit down with you to better understand your current financial situation, help you improve it, and then develop a plan of action you can execute together.
#5. Invest in Items That Improve Your Quality of Life
With the above in mind, what counts as a frivolous purchase?
Frivolous purchases are anything you don’t need, especially things that cost a ton of money and offer little besides being a status symbol.
Instead, invest in items that improve your quality of life.
Some great ideas include a new bed, shoes, and similar items promoting self-care.
#6. Take Care of Any Health Problems You’ve Been Avoiding
Healthcare is expensive, so many put it off when they lack money.
Now that you have the money, staying on top of your health and consistently getting checkups and cleanings is crucial.
The longer you wait to deal with health problems, the more they’ll financially and physically cost you.
#7. Immediately Create a New Budget
Anytime there’s a change in income, it’s a good idea to alter your budget so you know how much money is coming in and where you can allocate it.
Sit down and craft a new budget that helps you utilize your new funds responsibly.
#8. Start Investing Your Cash
It’s never too late to start investing.
Your new salary will give you the extra funds to work toward a more stable financial future.
Whether you start with a 401(k) or a Roth IRA, getting started now is the best way to avoid issues once you reach your golden years.
#9. See How You Can Use Your Additional Income to Make More Money
A bump in salary is great, but it isn’t sustainable unless you continue to receive a raise that keeps up with inflation.
Ask yourself, how can I leverage my money to make more?
Whether you’re interested in alternative investments or creating your own side hustle, see how you can grow your money to improve your financial situation further.
#10. Develop an Emergency Fund
People living paycheck-to-paycheck don’t have enough money to save in an emergency.
Take some extra money from your new salary to start building an emergency fund.
A solid emergency fund generally covers four to six months of living expenses so that you have a buffer in case something happens to you in the future.
#11. Set Aside Money for Vacations
PTO isn’t guaranteed; vacations are necessary to maintain your sanity throughout your professional life.
Set aside some of your cash to create a vacation fund.
As you reach a reasonable amount, you can start planning a trip that will allow you to unplug and unwind for however long you need to be away from work.
#12. Get High-Quality Home Appliances
Home appliances can be costly if they’re older, using far more energy and water to do the job.
Consider using some of your salary increase to replace these appliances.
Your wallet will thank you later!
#13. Continue to Live Below Your Means
Lifestyle creep is something that happens when you start to slowly spend more and more until your current salary isn’t able to keep pace.
The key to avoiding this and ensuring your improved salary goes farther for longer is to live below your means and reduce your spending as much as possible.
#14. Don’t Make Frivolous Purchases
It can be easy to see more money in your bank account and start buying everything you’ve wanted in the past.
However, this is an easy way to go broke quickly.
Don’t make frivolous purchases if you hope to make your new salary count.
How To Have Stealth Wealth
When we think of the wealthy, we think of big homes and flashy cars. But many millionaires have stealth wealth.
This means you would never know they are rich by looking at them. The benefit? People leave them alone.
LEARN HOW TO BUILD STEALTH WEALTH
Free Budget Templates
It can be difficult to start budgeting from scratch.
While there are apps out there, some people like their privacy. This is where a spreadsheet budget comes into place.
But who wants to build one? Luckily there are some great free budget templates to use.
Here are the best ones.
Learn How To Save $100K
Saving money can be hard, especially if you are looking to have $100K in the bank.
But while it feels difficult, don’t let this stop you. Here is how you can save $100,000 in nine steps.
Best Retirement Calculators
Are you confused trying to understand how much money you need for retirement?
You’re not alone. It can be a complicated process. The good news is there are some simple calculators to use to make figuring out your number easy.
THE BEST RETIREMENT CALCULATORS
Time vs. Money
We all exchange time for money, but few of us stop to think about if our time is better spent doing the things we love instead of taking care of chores.
If you learn to stop thinking of things costing money and think instead of what you get in terms of time for paying for things, you could be much happier.
This thread inspired this article.
I have over 15 years experience in the financial services industry and 20 years investing in the stock market. I have both my undergrad and graduate degrees in Finance, and am FINRA Series 65 licensed and have a Certificate in Financial Planning.
Visit my About Me page to learn more about me and why I am your trusted personal finance expert.