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5 Ways to Optimally Use Your Pay Raise

Some folks may be getting 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.

  1. 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.
  2. 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.
  3. 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.
  4. 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!
  5. If you feel you must go out and spend, make it on something that will help you be a better you , like a course to help your career, or even 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.
  6. 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 and make the same money (I mean 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).

Feel Free to Comment

  1. 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.

  2. 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.

  3. 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.

      1. 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.

  4. 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 🙂

  5. 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.

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