Have you recently received a raise or promotion? Congratulations! This is exciting news and warrants rewarding yourself for a job well done. However, before you head out the door to spend your newly earned funds, don’t forget to be intentional and consider how the increased pay can most benefit your unique financial situation.
Contemplate your tax contributions
Don’t get caught off-guard next tax season! Sometimes receiving an increase in pay can put you in a new tax bracket. To review how your raise could impact your financial situation, consider having a conversation with your tax consultant. Before reaching out, you may also want to contact your Human Resources or Payroll department to make note of your current tax withholding election so it can be reviewed with your tax professional.
Reflect on your savings
After receiving a raise or promotion, set aside some time to ponder your emergency savings contribution. If you do not yet have one established, now can be a great time to begin contributing without deducting money from other areas of your budget. Consider opportunities like MSUFCU’s Savings Builder or other dividend-earning savings account options to expedite your journey to financial security. Once you have opened your savings account, or decided how much more you would like to contribute, don’t forget to create or adjust your automatic transfer amount to stay on track with your goals.
Accelerate debt pay-off
If you are already contributing to your emergency savings, but are making payments toward a number of debts, consider jumpstarting your repayment plan by increasing your payments. This will shorten the amount of time it will take for you to pay back the debt and save you money on interest. To pay off debt even faster, consider snowballing your payments. To incorporate this method, pay the monthly minimum payment to all of your debts, but apply any extra money you have to your smallest debt’s payment. Once your smallest debt is paid off, add what you were applying to that bill to the next smallest debt’s payment.
Consider your tomorrow
Receiving a raise or promotion can prompt us to reevaluate our budget, but don’t forget to consider how much you are contributing toward your retirement plan. If your employer offers a 401(k) match program, review your contribution amount. If you are not contributing the full amount of what they will match, consider increasing your contribution to receive the entire benefit. If you are already receiving the full benefit, consider making an appointment with a financial advisor to discuss opportunities to further to grow your investments.
Invest in yourself
Are you feeling comfortable with your budget and savings contributions? Consider investing in yourself with personal and professional opportunities. Having extra money can allow you to continue your education which could lead to further advancement opportunities at your place of work, or to a job change you have been meaning to explore. You might also now have the means to launch your own business, take the vacation you’ve always dreamed of, or simply buy the car you’ve been eyeballing. No matter what you do with your pay increase, ensure how you spend or save it aligns with your financial goals.