Don’t let a pay increase put your finances in jeopardy
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If you’re like many people, when you get a raise or a better job, the first thing you do is sit and daydream about all the things you’ll be able to do with the money.
We all have a list of things we’d like to do someday, and making more money makes some of those things seem a little bit closer. It can be tempting to go out and make a few of them into reality. Right away.
But the thing is, even a $10,000 increase isn’t going to be an extra $833.33 per month. It’s going to be significantly less than that, especially if it bumps you into a higher tax bracket or you use this (great!) opportunity to painlessly increase your 401(k) contribution.
So hold off on new purchases or commitments until you’ve had a chance to see what your actual new pay amount will be. Doing otherwise could spell trouble. You might agree to more commitments than you can really afford, or there might be new expenses associated with the increase that you hadn’t considered. Maybe your new pay rate is associated with a promotion that requires you to dress nicer, for example.
Take your time with changes, and don’t let a pay increase put your finances in jeopardy.
February 28th, 2008 at 12:11 pm
This is good timing. Our annual pay rises are posted on the 1st April and I need to remember that even if it’s a good amount, it’s not going to be all that much every month.
Fortunately, since we are paid monthly, I’ll have got over the excitement by the time I actually find out what my new take home salary is.
February 28th, 2008 at 12:59 pm
This has been a real challenge in our house in the past and present. It’s hard for me not to start fantasizing every time Darling applies to a job and mentions a potential new salary. The moment he’s employed again, we’ll start updating our wardrobes and looking to purchase camping supplies and start talking about buying a scooter again…If we can survive on a single income, why take on more (unnecessary) financial responsibilities rather than stash the excess away in a high-interest savings account?
February 29th, 2008 at 6:57 am
Getting raises in the past has been very sobering - most of the time I was barely able to notice the fact that my paycheck went up at all. Very sound advice not to spend the money before you have it.
February 29th, 2008 at 8:15 am
I just got my annual raise and it goes into affect next payday, I already firgured it out and its only 40 bucks more every two weeks…very under whelming, we have been living fine on we make now, the 80 bucks a month will go into the 401k, not that it will make that much difference, but this is great advice.
Now hubby will get a 10% raise in September, that will be more exciting and we may upgrade our lives a little but we will try to save most of it.
March 3rd, 2008 at 9:20 am
Great tip
I actually budget based on my original salary even though I get raises/bonuses (I wait until I get the $$) and then I just make it “EF” designated so I don’t miss it