You’ve just been called into a private meeting with your boss and you have no clue what it’s about. You bite your fingernails and rub your hands together as you take a seat in front of the large desk. To your shock, you are given a raise for your increased productivity and hard work. Now you can afford that vacation to the Bahamas you’ve always talked about!
Let’s pump the brakes a bit and think of a more strategic way to spend that fatter paycheck. If you’re not careful that popular “make more, spend more” phrase will rear its ugly head and you’ll be down in the dumps before you know it. Take a look at the following hacks on how you can maximize your most recent financial gain.
It’s now very common for people to graduate school, whether its undergrad or postgrad, with student loans. Even credit card debt is hard to avoid as you trudge through the education process. Perhaps you’ve made some poor choices at the beginning of your professional career and you are “paying for it” in your 30s. Whatever the case may be, use your raise to hammer away at debt.
Instead of paying the minimum on your credit care or student loan, throw some of your extra cash at these bills in order to chip away at them quicker. Paying the minimum will take years and you’ll be spending more in interest than you can bear. Being able to pay off your debts within a smaller time frame gives you the freedom to enjoy your money rather than having it cause you more pain.
Now that you’ll be receiving a larger paycheck, why not try to make a little more money on top of it. It’s a no-brainer decision. If your employer provides you with a 401(k) through matching contributions, take advantage of the extra cash.
Maybe you’ve been putting in a tiny percentage per paycheck but haven’t invested enough to qualify for your employer’s matching contributions program. Now you’ll have the extra income to do so. You may even want to put the total amount of your raise into your retirement account and take full advantage of the free cash offering. This plan of action won’t affect your budget either.
As mentioned before, you may want to take your new found money and use it right away for something you’ve been longing for. Nothing wrong with this mindset at all—unless you’re always in this mindset. One of the worst possible things you could do with extra cash is to spend it immediately.
Take a personal inventory on things you want, need, and “could do without.” Use these categories as headers on a list and write down anything that comes to mind placing them in the appropriate column. After you’ve completed your list, put it out of site for a couple of days—maybe even a week. When you are ready, read it aloud and see if you need to switch any items to another column.
This approach of waiting is a simple hack that can keep you from spending your extra money not only irresponsibly but unnecessarily as well. You may even want to incorporate a “zero-spend” to help you control any habitually impulsive buying.