In the next little while many folks may be getting a pay raise and as a service to you folks here is a short list of some wonderful ways to optimally use your new pay raise.
You do know my great love for lists, so 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 you 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, and now you have extra money to do it with (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.“, 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 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.
- Here is an extra one (for no extra charge) for those who aren’t really 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).