- When you earn an extra
bonus at work, you might celebrate with a bottle of nice
champagne or new tires for the car but too often, people
use a pay raise as an excuse to completely upgrade their
lifestyle. This can lead to long-term debt that is
difficult to pay off. But if you’re smart about how you
use your windfall, you can get more out of your paycheck
that just an extra thrill.
The first step is asking for a raise when you feel you’ve
earned. Workers, especially women, are often intimidated
about asking their boss for more money, but could stand to
earn $1 million more in lifetime salary if they only
asked. If you feel that you work hard enough to merit an
upgrade in pay, go for it! But before you do, prepare
yourself and your family for new money.
Most raises kick in about two weeks after you ask for them
which is time enough to fantasize about what you would
love to have and then focus on what you really need.
Prioritize your money goals starting with your debts. If
you have no debts, consider saving the money in a
long-term trust fund with a high interest rate. This can
help you earn extra money on top of your salary faster
than a new decorative scheme in the dining room.
To make your raise truly worth its dollars and cents, plan
to spend it over the long term rather than splurging it in
a few short months. A celebratory dinner out is
appropriate, but dividing it out evenly over your monthly
budgets can help you afford things when money would
normally be tight, like the holidays or the middle of the
year.
If you do have debts from college or credit cards, take
care of those bills first. Procrastinating on bills can
lead to high interest rates and accumulating debts that
the creditor could file a lawsuit for, damaging your
credit. Using your raise to pay off an expensive bill can
help you keep your financial profile intact, even if you
have been a bit late in paying the bill.
The smartest thing you can do with your money is pretend
that you never got a raise at all. Store the money away in
a college or retirement fund and continue living on your
budget smart lifestyle. This can help you keep a level
head about your newfound wealth while at the same time
helping you make the most of your new money for years to
come.
