Woot Woot!!! $$$$$ Don’t pay raises make you just want to jump up and down? They were already paying you some money and now they are telling you they will pay you MORE money! Kind of cool (unless you are under market value). See Glass Door.
Anyways… What is the first thing you do when you get a raise? Go out to some fancy, pricey place to celebrate like Red Robin? (Ms Blue Ribbon and I don’t get out much.) Buy a fancy new ______? Not if you are reading these blogs, or are trying to stop spending beyond your means.
When I received my second pay increase we were just starting to use the cash budget system. So we had decent heads on our shoulders. We determined a set of places we wanted to use the money in order to speed up the process of getting out of debt. Balancing the new money across different goals we wanted to achieve.
I had been out of college for 4 years and for the first time we were making a plan for the new money coming in.
We did a balanced approach by overpaying our loans and increasing the Roth IRA contributions. Fast forward to Oct. 2016 when we are consumer debt free and have a nearly completed emergency fund. We decided to increase our mortgage over-payment and upped the 401k 2% since we were so close to completing the emergency fund. This meant that we could start working on our long term goals.
Now any time we have an increase in our income we just review our goals for the year or long term goals and adjust how much money goes where to meet these goals. It doesn’t have to be a pay increase. This works with bonuses and tax returns as well.
It is important to know your goals and have plans in place to make sure you meet your goals.
This is how we are doing so far this year!
What are your plans for any influx of money? (ie paycheck increase, windfall, etc) How are your goals going for this year?