Congratulations, you just got a raise! After the excitement subsides, you may wonder what you’ll do with that extra money. While it makes sense to treat yourself and celebrate upon first getting the news of your raise, after that, you should spend or save the money responsibly. Here’s how.
First, you’ll have to figure out how these financial changes will affect the year’s taxes. If it’s the middle of the year or summertime, you don’t have to seriously consider tax time yet, but if April is just around the corner, it’s best to consult with a financial professional.
Have lingering debt, either from student loans, home ownership, credit cards, or anything else? You now have some extra cash that can be allocated to help erase those debts faster. Living debt-free doesn’t have to be just a pipedream now.
When’s the last time you’ve taken a good hard look at your IRA or 401(k) plan? If you’re making more money, you may want to think about funneling some more of that into your retirement fund. Sit down with your boss, manager, or HR professional to talk about increasing the amount dedicated to your retirement.
Track your spending at home. Are there areas where you’ve been cutting back because you’re saving up for a big-ticket item, a remodel, or another similar pricey expense? It may now be easier to afford these. Similarly, if you’re just trying to get by, it may become simpler to do so with this extra money.
Lastly, if you really can’t think of ways to spend the extra money or you have all of your bases covered with the above, why not give it away? Donating some cash to your favorite charitable organization is a great way to increase feelings of wellbeing and enjoy some deductions at tax time.