Home > Personal Finance > 7 Ways to Make the Most Out of Your Raise

Comments 0 Comments

So your employer has finally rewarded you for all that hard work. Now what? When you receive a raise at work, it can be tempting to set out for a shopping spree, but it’s wise to wait a few weeks before using any of this new cash. It’s important to see how much more your raise really brings you each paycheck and plan to use this larger amount to reach your financial goals. Check out the following ways to put your raise to work.

1. Pay Off Debt

If you have debt hanging over you, it’s a good idea to make your highest priority whittling it down or getting rid of it completely. Create and execute a debt repayment plan, focusing on those with the highest interest rates, usually personal loans or credit cards. Without debt, you will be able to save more money and reduce stress. Not to mention that keeping your revolving debt, like credit cards, low (or paying it off entirely) can help improve your credit score. (You can see how your debt is affecting your credit scores by checking them for free on Credit.com.)

2. Adjust Retirement Plans

After reviewing your debt and liabilities, it’s important to check in on your progress with retirement savings. You can use the extra money each month to start maxing out your retirement benefits, first focusing on your 401(k), particularly if your employer offers matching contributions.

3. Make Extra Payments

Whether it is student loans, car or mortgage payments, one or two extra payments can go a long way in helping you become debt-free. This can shave years off of your payments and save you more interest in the long run. You can add a full extra payment each month or even just some extra money each time you make a payment. Before you do this, however, it’s important to make sure you won’t be penalized for pre-paying (especially when it comes to your mortgage).

4. Pad Your Emergency ‘Cushion’

It’s a good idea to use some of your raise to create or enhance your emergency fund. This will help you out in case you lose your job or something else unexpected and expensive comes up. It’s often recommended that you keep at least six months’ worth of income aside so you will be prepared for whatever comes your way.

5. Reassess the Budget

Before you start allocating money for new budget categories or decide to add more money to underfunded ones, it’s important to review your income and expenses carefully. Think about where your raise could do the most good and continue to keep track of your net pay and costs each month.

6. Consider Taxes

While you are planning and executing what to do with your raise, be sure you do not forget to account for taxes. The more you make, the more you are taxed so it’s a good idea to investigate any change this raise will make during tax season. Also, consider increasing your charitable donations — it gives you a great feeling to give back and can reduce your tax burden since donations to tax-exempt organizations are deductible.

7. Do Something for You

Being financially responsible doesn’t mean you shouldn’t treat yourself after you worked so hard to earn this cash. Consider what reward you can afford and allow yourself to celebrate your success — in moderation.

However you use your raise, now that you have worked for the money, make this money work for you. Nothing is a better reward than a more secure financial future.

More Money-Saving Reads:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team