It’s no question that everyone could stand to make more money. It’s probably fair to say that all of us spend some amount of time thinking about all the things we could do or have if we only had a little more money, or maybe a lot more.
But when you finally receive that big raise that you’ve been waiting for, how do you treat it? Do you immediately book that flight, or buy that expensive television set with stereo surround sound? Or are you the frugal type who enjoys watching their savings account steadily rise?
Keep With Priorities
Regardless of your spending habits, the first thing you should ask yourself when you get that big raise is, “What has been the biggest stress in my life that this money can help relieve?” If you’re like the majority of people, then you’re likely carrying around some level of debt with you.
Whether it is a mortgage, a car loan, credit card bills, medical bills, or student loans, these are things that need to be taken care of. However tempting it may be to let off a little steam or buy yourself a present for a job well done, you have to keep a list of priorities and take care of what comes first.
Far too often, people stretch their financial means thinner than they should, thinking that they can afford to increase their standard of living without first paying off the debts they owe. Don’t fall into this trap yourself. Use your new wealth to live more comfortably, not more lavishly.
If you already have a good handle on your debt, or are carrying very little, then perhaps it’s time to look to the future. Contributing more to your 401(k), starting an IRA, or taking out a life insurance policy are all things you can do to prepare for life down the road. It’s never too soon to start saving up for retirement, that is unless you plan on working your whole life.
If you have children, starting a trust or college fund is also an excellent idea. They grow up faster than you think, and giving them the opportunity to start their adult life with some level of financial security is a gift that any child will appreciate.
Live as if You Received No Raise at All
If you’re not exactly sure what you can afford with your new level of income, then live as if you never got it in the first place. New wealth can be an intimidating thing, especially if you’re used to getting by with far less. Taking some time to evaluate your economic status may be exactly what you need.
Budgeting out daily expenditures and making some modest predictions to find where you stand will help you figure out where your money can be best put to use. Once your financial blueprint has been set, you’ll feel much more comfortable using that money.
So before deciding on what thing to buy, or what destination to go to, take a moment to inspect your life as it is right now. Point out to yourself the problems you’ve been faced with before, or face currently, and figure out how this money can help prevent you from ever having to face them again.