"Goals are dreams with deadlines" -- Diana Scharf

Tuesday, April 23, 2013

What Should You Do After Receiving a Raise?

Last week, Mr W. called me at work two times with the same five-minute period.  I was away from my desk, so I missed both calls.  He then sent me a text that said, "don't panic but pls call when you can."

In my experience, repeated attempts to contact me during business hours means one of two things: either something very good (adorable puppy sighting) or very bad (kidney stones) has happened.  In either case, it's generally a good idea to return the call ASAP. 

What was Mr. W's reason for calling?  Well, he'd received a raise.  In fact, a really spectacular 25% raise.  I imagine he must have felt something like this:



Image credit: min6939 / 123RF Stock Photo


So, what should you do after receiving a raise?  First things first, thank your boss.  Express your appreciation for the recognition, as well as the continued opportunity to contribute to the company/organization's mission.  Receiving a raise affirms that your company/organization values your work and recognizes your potential.  It's also proof that your employer wants you to stick around.  Having that vote of confidence feels great.

Then, some form of celebration is in order.  It doesn't have to be anything elaborate or expensive, but I firmly believe that happy life moments deserve a celebration.  I'm not saying you should spend $300+ per person for a dinner at Per Se.  We just enjoyed sushi from our favorite place.

Once you've had a chance to absorb the good news, assess how the raise will impact your financial goals.  What are you going to do with the extra money? 


This is NOT how we're planning to use the extra money.  At least, not any time in the near future.



Image credit: sparkstudio / 123RF Stock Photo


Mr. W. and I know we don't want to inflate our lifestyle.  We're not planning to buy a new car, rent a bigger apartment, or wear fancier clothes.  We already have what we need and feel very blessed in our current situation.  We're content with what we have.  In other words, there shouldn't be much change to our spending.  If anything, this raise confirmed our commitment to our existing financial goals.  Our goals haven't changed, but his raise could help us to reach them a little sooner. 


This is what we'll be doing with the extra funds:
  • Increasing retirement contributions
    • We haven't decided precisely how much to increase Mr. W's retirement contributions.  Most likely, we'll double the percentage that he was previously contributing. 

  • Paying down the car loan faster
    • Our car payment for Mr. W's car is $366/month (used Honda, 36 months at 4.6% APR).  We're planning to pay off an additional $100-$150/month. 

  • Saving more aggressively for our first home
    • By our rough calculations, we should be able to save about $4,000 more, per year, for a down payment.   This number will vary depending on how much more we allocate towards retirement and paying down the car loan.  I think we're still a few years away from buying our first home.  Nonetheless, it's good to know that we'll be able to put more money away for the down payment. 

How would you make use of a raise?

12 comments:

  1. Great job on his 25% raise. That is awesome!
    I would "spend" that money right away- put it into specific savings categories as you see fit and increase retirement savings!!! =)

    ReplyDelete
    Replies
    1. Thanks, Holly! We were really excited that his raise was as high as it was : )

      Delete
  2. Congratulations to you and Mr. W! Twenty-five percent is no chump change! I would increase my 401k contribution by 2%, increase payments towards the principal of my mortgage, and trade in my 11 year-old car for a 5 year-old car. :)

    ReplyDelete
    Replies
    1. Thanks, My Shiny Pennies! We're super-happy about the raise. I think your approach sounds wise -- it's very balanced.

      Delete
  3. No joke, whenever I've gotten a raise my first thought is something like "Sweet! More for savings!" I do like the concept of giving yourself a small reward though. A night out with my wife with my parents babysitting our son would probably do the trick.

    If I got a raise today, a significant chunk would go into our savings account for a house down payment. That's our big savings goal right now beyond retirement.

    ReplyDelete
    Replies
    1. Thanks for your comment and for stopping by, Matt! I agree, the reward doesn't have to be anything big. Just something nice to acknowledge the accomplishment.

      I think we're in a similar boat to you -- saving for a house is also our largest financial goal at the moment.

      Delete
  4. First, congrats to you and your hubby! 25% is some serious cash flow.
    When I got a 10% raise last year, I had all these grand plans for it, and then I realized that all it really did was relax our style of living. While we didn't inflate our lifestyle in any way, we mostly just got to breathe easier. Our budget wasn't as crunched and down to the penny as it used to be. It took us a while, but we finally really hit a home run with our budget, with a good mix of paying down debt, saving, and living life.

    ReplyDelete
    Replies
    1. Thanks so much, Erika. It's been a week now since he got the news and we're still pretty elated.

      I'm sure the feeling of being able to breathe easier, financially, is a great one. And I'm glad you guys were able to find a budget that worked for you and helps you meet your personal and financial goals. We're still looking at our budget and figuring out what we can cut vs. what we value too much to cut. It's always a work in progress, I guess.

      Delete
  5. Congrats to Mr. W (and you!) for the 25% salary raise! That's so awesome that both of you plan on using that extra money wisely :)

    ReplyDelete
    Replies
    1. Thanks, GMD! Almost as soon as he shared the good news, we started planning ways to use the extra funds.

      Delete
  6. Great job Mr. W! That's quite a windfall. I'd use the money to accelerate our debt payment and put it towards our long-term goals. And use a portion of it to fix our driveway.

    ReplyDelete
    Replies
    1. Thanks, Justin! Your approach sounds like a good one. We do have a few car repairs we've been considering. We might put some money towards that, as well.

      Delete