You Got a Raise! Now what?
Happy December! You might have thought we'd never get to the last month of 2020, but here we are! Time marches on regardless of what is going on around us. Just as this is the last month of the year, this will also be my last blog for a while. After two years of consistent posts, I will be taking a break the first half of 2021 to focus on my wealth coaching business. I will resume blog posts in July.
Our topic for today is raises! I know in 2020, with all the hardship people are experiencing, it seems weird to talk about more money coming in rather than less, but 2020 is a crazy year. While some businesses have suffered significantly, there are others that have boomed. In an effort to continue our journey to becoming an anti-racist organization, my company just engaged in a talent considerations process to correctly place those disproportionately affected by our racist and arbitrary hiring practices. These considerations resulted in salary and position adjustments for the majority of staff. It was because of this shift that one of my co-workers suggested this topic for a blog. So let's get into it!
On average, it takes at least 3 months to adjust to a pay cut, but only one paycheck to adjust to a pay increase. That means we find it a lot easier to spend more than to cut back. No surprise there. To make sure you are using your increase responsibly, there are a few things to do immediately.
The most important thing is to go back to your financial short- and long-term goals. These should always serve as your guiding star no matter what change is made to your income. Are you planning to buy a house? Renovate? Save up for a wedding or that six-month backpacking trip you've been dreaming about? Maybe you want to go back to school or start a business. Whatever your goals are let that determine what you do with your extra.
For example, I am currently saving up for a house. When I received my increased check at the end of November, I put ALL the extra money toward my house savings. In my budget for December, I've allocated that extra for house savings as well.
If your goal is to pay down debt, subtract that extra from every check and spend that money directly on your loans. They'll get paid faster and you can enjoy that increase guilt- and worry-free when your debt is gone.
Another thing to do is never allow yourself to see that money. Most companies that pay out through direct deposit allow you to have more than one account connected to your direct deposit. By adding a second account, you can allocate anything over what you were used to making to that other account. That account can be your "goals" account where you save all the money headed toward your financial goals.
You can also increase your contribution to your retirement fund immediately (yes you should be saving now!), so that it's effective the first check you get with the increased amount. This, again, ensures you don't see the money so won't spend it unnecessarily, and makes sure you will be set for when you retire.
During a season of giving, you can also help those less fortunate than yourself. You've received a blessing, so pass it on. God loves a cheerful giver, and there are many who need to receive. It can be a small donation of your time and money to local organizations, or your church, or a larger donation to a national or international organization that works on causes near and dear to your heart. I encourage you to think of at least one way you can give back.
Lastly, in the words of Tom Haverford and Donna Meagle: "Treat yo' self!" You've earned an increase, and there is nothing wrong with a little celebration. Celebrating is actually something I struggle with most. I want to jump right into the next goal. But taking time to appreciate where you are now is important. So go out to dinner, get a massage, spend some time and money on something that gives you joy and rest. Once you've taken that pause, then go back to working on your financial goals.
Hope you have a wonderful holiday season and I'll see you in July!