Getting a raise is recognition for all the hard work you’ve put in. An increased salary can help make your financial goals like paying off debt, buying a house, or preparing for retirement more accessible. If you’re wondering what to do with your new income, consider these options.
1. Save it
The first thing you may want to do after getting a big raise is to save some of it. If you don’t already have an emergency fund, you can use your raise to create one. You can also use your extra money to put more toward retirement. If you don’t have a retirement account, now is a great time to start one. If you already have a retirement account, consider increasing your contributions.
2. Invest it
Once you’re comfortable with what you have in savings, you might decide to invest your extra income. Investing your money can help you grow your wealth over time and can provide you with financial security in the future. There are many different ways to invest your money, including through your retirement accounts, so be sure to do some research and find an investment strategy that suits your needs. You can also reach out to a financial advisor to help you make the right investment decisions for your situation.
3. Use it to pay off debt
If you have any outstanding debt, such as student loans or credit card debt, you may consider putting your new income toward paying it off a little faster. This can be a great way to save on interest in the long term and free up more cash each month.
4. Plan for your family
If you already have kids or are planning to grow your family, you may want use your raise to plan for the future. Put some of the money toward a college fund or start saving up for a down payment on a house. You might decide it’s the right time to get a permanent life insurance policy like whole life insurance or universal life insurance. Permanent life insurance comes with a guaranteed death benefit—ensuring that you can leave something for your heirs—along with other features like dividends and cash value that can grow over time.
If giving back to the community has been one of your goals for a while, your new raise may help make it possible. This can be in the form of donations to charities or causes that are important to you, or simply helping out family and friends in need. Many organizations allow you to set up automatic monthly or recurring donations, making the giving process easier.
6. Splurge on something special
Finally, don’t forget to enjoy yourself! After all, you’ve worked hard for this raise and deserve to celebrate—whether it’s going on a nice vacation or simply buying yourself a new outfit. If you already set aside some funds for discretionary spending or vacations, your raise may enable you to increase your monthly contributions so your goals feel closer.