🕰 Hello it’s me: This post was originally written in 2014. At that time, interest rates were low, and avocado toast wasn’t controversial. Today’s landscape includes inflation, skyrocketing housing costs, and more precarious work. The principles still hold true, but the stakes feel higher. The main advice about avoiding lifestyle creep, prioritizing debt and savings, and celebrating modestly is more relevant than ever.
Some folks hopefully get a pay raise. As a service here is a short list of some beautiful ways to optimally use your new pay raise.
You do know my great love for lists. I hope you appreciate this as much as I did compiling it.
- Forget that you got a pay raise; use your current budget and use the extra money to pay down debt. Did you need this extra money to live on? I doubt it, so why not get yourself out of debt? Avoid Lifestyle Creep and live within your means.
- If you have automatic payments to your Mortgage and/or RRSP ( or TFSA ), increase them to reflect the amount of your raise. If you got a 4% raise, then up your payments by that amount as well. This way, you are at least getting ahead more. The same should be done if you have young kids and are putting money away in an RESP for them. More money NOW means less pain later.
- If you haven’t started saving for the future, now is the time. You have extra money to save (unless of course you still have debt, if so go back to step 1). Get that RRSP going or a TFSA and your future self will thank you profusely.
- If you must “celebrate” keep it low-key. Vince Lombardi told his players, “When you get into the end zone, act like you’ve been there before.“, the same thing with your pay raise, no reason to go bananas and blow your money, you deserved it, you worked hard, now keep it!
- If you feel you must go out and spend, make it on something that will help you improve. Choose a course to help your career. You could also invest in a gym membership to help stay in shape. It’s great to have all this money, but if you are sick or unhealthy, it isn’t going to mean much. The educational aspect of this is the right way to go. Help expand your horizons by expanding your mind.
- Here is an extra one (for no additional charge) for those who aren’t driven by money, but more by quality of life questions: if you are making 4% more (or 8 days more pay ), how much less can you now work to make the same money? I mean in days, not effort on the job. If your firm allows you to take unpaid leave, have you got yourself a few more days off that you can take? It’s trite but nobody says in retirement, “I wish I was at the office more days”.
I am sure I have missed many other great ideas, but remember hopefully this is the first of many pay raises, so don’t go berserk spending or celebrating, act like it will happen again (soon).
Follow-On: The Value of Persistence
If there’s one ingredient that turns financial theory into actual progress, it’s persistence. A one-time decision to save your raise is great, but doing it every year? That’s how empires (or at least paid-off condos) are built. Persistence helps you make boring financial choices. These choices include paying off debt instead of buying AirPods. You must make these decisions over and over again.
Consistency is underrated in personal finance. You don’t have to make perfect choices, just mostly good ones, repeatedly. The more you persist, the more your choices compound. You don’t see it in year one. However, by year five, you’ll be the weird friend who owns things instead of leasing them. Keep at it. Especially when it’s boring.
FAQ for Raises
Start by ignoring it. Seriously. Pretend you didn’t get it and apply that “extra” money to crush debt, bump up your RRSP/TFSA/RESP, or invest in something that builds long-term value like education or your health. If you must celebrate, keep it low-key: think tickets to a movie, not champagne brunch.
As a 20-something in Canada in 2025, this article is both timeless and mildly painful. Why? Because pay raises aren’t exactly falling from the sky these days. With rent in Toronto making six-figure earners cry and avocado toast now considered a necessity, the idea of having “extra money” feels theoretical. That said, this post is a solid gut-check.
It’s refreshing to see advice that doesn’t immediately leap to “treat yourself” culture. Instead, it calls out lifestyle creep like it’s a financial villain — and it is. The list format works, and the self-deprecating tone keeps it relatable. One suggestion? Add some modern references — maybe mention how crushing student loans or using a raise to escape gig work might be more urgent today than a gym membership.
And remember your 4% pay raise is probably around 2.5% net once the tax man takes his cut(s). Having a 4% net raise on yur income would be a great raise.
The best time to get a raise is when you are changing companies or job classifications unless, as mentioned above, you are in a union.
Since I work in a union we get a guaranteed pay raise every year. I always tell my co-workers that if they aren’t maxed out on our company stock plan then they should take that yearly raise and apply it to the plan.
After a few years they will be maxed out and they wouldn’t have even noticed.
Company stock plans are always interesting, are you putting too many eggs in one basket (speaking as a former Nortel employee, YES!)
4%, who the hell gets that much these days? The more average 1.5 to 2% is more than absorbed by the increase in food over the last few years.
Yeh, that is also true, my bad (but I am old I remember when that was a low raise). ⌛
I remember those days too. We used to get a 3 year contract 3 months before the next one was due. The only advantage (and a good one) was always rolling the back pay into my RRSP. By having the lump sum you could do something. I found the $15-$20 increase per cheque was lost in the noise.
This procedure you broached does work with a promotion or in my case my site was made an Isolated Post. The bump in pay went 100% to investments or debt reduction in addition to amounts we already saved.
Being retired the only pay raises I get now are the ~40 dividend increases I get from stocks I hold in my investing accounts. I’m enjoying my golden years 🙂
I have never seen anybody else advocate the ‘bump your mortgage by your raise amount’ until now. That’s awesome and it’s a great tip, but I’d likely do that assuming that you’ve already paid down other debt, especially credit card and maybe even student loan debt.
I’m hoping for a small raise early next year.
Yes, pay down your debts first before monkeying too much with your Mortgage payments, absolutely! ðŸ‘