How to handle your pay raise in a smart way

How to handle your pay raise in a smart way

If you were given a pay raise you'd probably want to handle that extra money as well as possible to gain the most of it. Here you will find the best ways to boost your bank account. Read on to find out more details!

If you were given a pay raise you'd probably want to handle that extra money as well as possible to gain the most of it. Here you will find the best ways to boost your bank account. Read on to find out more details!

Asking for a raise has paid off for many U.S. workers in recent years, especially younger ones. A financial windfall—whether from a raise, gift, inheritance or side hustle—is always a good thing, but you want to make sure you manage the cash wisely. Here are some smart ways to handle a boost to your bank account.

If you got a pay raise, well done! But before you decide how to spend it, examine your paycheck to see how much you actually take home each month, since taxes might be more than you expect. Then reassess your budget. Once you have a solid plan for paying all your bills on time, explore ways to improve your financial situation with your new funds.

If you got a pay raise, well done!

More than one in six millennials stress about their credit card debt, according to the Better Money Habits report. Whenever you get a little extra money, it’s smart to make paying off high-interest debt a top priority. Getting rid of debt has a trickle-down effect on your finances. By eliminating high-interest charges and large minimum payments, you can free up more money for other financial goals. Less debt can also help improve your credit score, which means you may qualify for lower interest rates on mortgages and auto loans.

If you haven’t started yet, now is the perfect time to begin building an emergency fund. Ideally, you should try to save at least six months of your basic living expenses, and you can use that money for things like car repairs, doctor visits or to pay your bills if you ever lose your job. That way, you can avoid borrowing money, adding to credit balances or tapping into savings meant for other financial goals.

If you haven’t started yet, now is the perfect time to begin building an emergency fund.

Adding to a retirement account is one of the best ways to put new income to use, especially if your employer matches your contributions. Consider increasing your contributions by the same percentage as your raise. You could also start investing some of the money for other medium- to long-term goals such as a down payment on a house.

Finally, once you feel like you have a good plan in place for the priorities listed above, you might consider other ways your additional funds can help improve your life. Think about how you might align your spending to your values and your goals. 

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