Here's a piece from Money Central that tells what most people do when they get a raise: they spend more. It also suggests what you should consider instead -- how you should best spend a raise. The piece rambles a bit, but when you sift through it, they suggest the following ways to spend a raise:
- Pay down debt
- Put some towards short-term savings
- Spend some!
- Save some for long-term purchases.
The author then goes on to detail how the group of women she's been following doesn't do much of any of these -- they simply spend more. ;-)
Here are my thoughts on six great ways to spend a raise:
2. Fully fund your 401k -- at least to the point where you get the entire employer match.
3. Pay off debt -- especially credit card debt.
4. Sock some away for college.
5. Splurge some!
6. Give.
How about you -- what do you with your raises? How does that differ from what you actually do?
When we had kids and a mortgage, it was very difficult to fully fund the 401K (15%). But every time I would get a raise I would up it 1%. If I got a promotion I would up it 2 or 3%. In only a few years I was maxed out and didnt even notice I was missing that money. Now when I get a raise I examine my budget and see where where we have a "pain point". I spread my raise over those categories. Of course my retirement and other savings plans get the same amount of raise now!
Posted by: Terry | March 27, 2006 at 08:25 PM