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5 Things to Do with Your Raise

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Just received a raise? Wondering what’s the best use of the additional money? Here are 5 great things to do with the added cash in your pocket!


Start or increase your emergency fund

An emergency fund is money you have stashed away to help you deal with life’s unexpected events. Having an emergency fund of 3 to 6 months of living expenses provides peace of mind when life throws a financial curveball, such as a layoff, a medical emergency, a car problem, a leaky roof, or an unexpected need for costly travel. Without an emergency fund, you are forced to rely on your credit cards, take out a loan, or withdraw money from your retirement plans to fund the emergency, which can leave you reeling from the burden of new debt. Adding a regular amount to a separate account just for emergencies can help you sleep at night and avoid costly debt when the unexpected happens.


Pay down your highest interest credit card

A 2016 American Household Credit Card Debt Study reported that for households that carry credit card debt, it costs them about $1,300 a year in interest. In 2017, the Federal Reserve reported that for households who carry credit card debt, the average amount of debt owed is $16,883. With credit card interest rates running anywhere from 13% to 21%, you are likely paying a lot to borrow that money. If you are like most Americans, you have an average of 2 credit cards. A great use of that new raise is to pay down expensive credit card debt, starting with the card with the highest interest rate. Your goal? Get to the point where you completely pay off your balance each month.


Increase your contribution to your workplace retirement plan

If your company has a retirement savings plan – a 401(k) or a 403(b) or a 457 – and you haven’t yet maxed out your contribution, consider adding to your contribution. It’s an easy and painless way to save for retirement. It’s automatic and the money comes out before it hits your bank account. If you received a 3% raise, consider increasing your retirement savings by 1 or 2 percent. You will still see a bump in your take-home pay and you won’t notice that 1 or 2 percent that went to savings. If you do this each time you receive a salary increase, you’ll be well on your way to saving the 15% of gross income that’s recommended to be saved for a comfortable retirement.


Give a gift

Psychologists say it’s often the giver, and not the receiver, who reaps the biggest psychological gain. There’s a lot of pleasure in knowing you’ve taken care of someone, or delighted them, or helped them through a hard time. If you have the means to do it, a raise can be an opportunity to give to a friend or family member, or a charity of your choice. And remember – if your gift is to a tax-exempt 501(c)(3) organization, you may be able to deduct the value of your donation from your taxable income.


Treat yourself

Hey, you got a raise! Good for you! Time to celebrate and have some fun. Carve out a responsible amount of money from the windfall and treat yourself to something special – dinner at a fancy restaurant, a golf game at a premium course, a spa treatment, a ticket to the theater or a sporting event – whatever sounds fun and rewarding. You deserve it! Have fun with part of it, but do something responsible with the other part.




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Andrea L. Blackwelder, CFP®, ChFC, CDFA® and Joseph D. Clemens, CFP®, EA are the founders and partners of Wisdom Wealth Strategies. Their shared passion is simple: to bring financial empowerment, understanding, and peace-of mind to people who wish to improve their financial future, build wealth for their families, and achieve financial independence. Click here to find out more about how you can work with the Denver Financial Advisors at Wisdom Wealth Strategies.


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