Money for Any Reason You May Need!

5 Financially Savvy Things to do with a Pay Raise

Receiving a pay raise is one of the most satisfying feelings out there. It is a way for your employee to tell you that your performance has been excellent and that you deserve a reward. That being said, a pay raise does come with some responsibilities. Although you are going to be bringing home a higher salary, it is easy for the feeling of financial security to cause you to make poor financial decisions. However, the secret to truly benefiting from a pay raise is to make savvy financial choices following the increase. Here are five financially smart ways to spend your pay raise.

1.آ  Contribute More to Your Retirement Accounts

The first thing you should consider putting you pay raise towards is your retirement portfolio. Putting more money into your retirement account means making an increased monthly contribution, which thus means more spending money for you upon retirement. As a 35-year old, if you increase your retirement contributions by just $50 each month this could result in $270 more for your retirement income. By increasing your contributions, you are directly helping to secure your financial future. You can put up to 45,5000 each year into a Roth IRA if you are younger than 50 years old. Although you must pay taxes on these contributions, once you withdraw them theyق€™ll be tax-free.

2.آ  Pay Your Debt Off

By paying off your debts, youق€™ll waste less of your hard earned money on interest, as well as work to increase your credit score. Although these benefits may not allow you the instant gratification that youق€™d get from spending your pay raise on splurges, it can drastically reduce your financial stress and paint a much healthier financial future for yourself. Although it may sound counterintuitive, by tightening your belt after a pay raise you can clean up any financial mistakes youق€™ve made in the past so that they can stop having an effect on you.

3.آ  Plan Ahead For Taxes

No one enjoys having to deal with taxes when it comes time to pay them. This is especially the case if you are self-employed. However, with a pay raise can come the opportunity to assess and pay your taxes. Keep in mind that an increased pay raise affects your credits and deductions. Make sure that you put an accurate amount of your paycheck towards your taxes to take into consideration your newly increased pay grade. If the pay raise comes from an employer than you may want to think about talking to your HR department about increasing your tax withholdings.

4.آ  Donate Money to Charity

Upping your charitable donation contributions is not just a thoughtful thing to do; it also means that your donations towards a tax-exempt organization are tax-deductible. If your pay raise put you in a different income bracket than donating some of the money towards a charitable organization can aid in reducing your tax burden. Instead of putting aside a certain amount of money for charity or giving on a month-to-month basis, it is recommended that you put a certain percentage of your overall income to a charity. This makes it easy to adjust your charitable donations according to your salary. Knowing that youق€™re setting aside a certain percentage of your income makes it easy to budget for these gifts and calculate the effect theyق€™ll have on your taxes.

5.آ  Have Some Fun

Getting a raise in your salary does not have to be all work; it should also be a time for celebration. Try doing something fun to celebrate your increase in salary. Depending on the extent of the raise you may want to go out with your loved ones, buy a new outfit, or even plan a vacation. Even the most diligent savers can find it within their budget to take some time for themselves and celebrate a job well done. However, just ensure that your celebration falls in line with your budget.