Congratulations! You just landed yourself a raise. So the burning question on your mind has become “what do I do with that extra cash?” While it’s easy to give in to those burning desires for things that you’ve been longing to purchase (that 62 inch plasma TV sounds great, doesn’t it?), it is best to stop and think and figure out the best plan to spend your new found wealth in the smartest way possible for your lifestyle. Some of you may be overwhelmed by this new cash that is burning a hole in your pocket, but don’t worry – it’s not that difficult. Let your commitment to simplicity guide you.
Many people may want to first look at their current state of financial affairs before going on that well-earned shopping spree. If you are carrying around debt of any kind, use your new raise to focus on paying that debt down. You will pay things off more quickly, cut back on interest and finance charges, resulting in more disposable income in the end, not to mention giving your credit rating a little boost.
If you are already able pay all of your bills on your previous income and do not have debt hounding you, take a look at your savings account. It is recommended to have three to six months of living expenses in accessible savings in case of emergencies. Use your extra income to build up your savings account and possibly supplement your retirement contributions if necessary. Have the amount of your raise automatically deposited into an interest bearing account or into a IRA fund. Try to pretend that money doesn’t exist and have it grow and work for you. Planning for the future may seem boring, but it’s a smart investment in the long run.
Now you may be one of the lucky ones that has no debt, has a healthy savings account, and is set for the future with a substantial retirement fund. In that case, use your new raise in any way you would like. You may choose to invest in stocks and bonds to increase your wealth. Find a good financial advisor to assist you in choosing the right investment options for you. You may choose to save that money in a “fun fund”, which you could use to save for that dream vacation, or a new car, or give in to the plasma television after all. And, if spending money is not really your thing, consider giving your money to a favorite cause or charity.
You worked hard to get that raise. Now make that raise work hard for you.