Earning a Larger Reward: Getting the Greatest Benefit From a Raise. After another year of hard work and late hours on the job, the annual pay raise is a welcome sight. Instead of watching it disappear into the monthly budget, there are several ways it can be used to provide even greater rewards for the future. The most beneficial uses will differ for each person’s budget, but there are a few key areas worthy of anyone’s consideration.
Almost everyone has debt of some kind, from student loans and a mortgage to hospital bills and credit cards. Deciding on whether to use the money to pay down debt will depend on a comparison between how much can be saved in interest with the benefits that can be gained by using the money for other options. Interest-bearing accounts are not the best investment for now, and reducing debt on high-interest credit accounts can lead to significant savings.
If you are not already contributing the maximum toward retirement savings accounts, it is hard to go wrong by working toward this. Putting the extra money into a tax-deferred account will make it grow over time. Retirement accounts also have the benefit of reducing your current tax burden.
Invest in Lower Bills
There are two ways to get a budget under control. You can increase income, which is the most common thing people focus on, or you can decrease bills. The latter option will deliver savings far into the future, and it may even provide tax benefits thanks to state and federal programs supporting the use of new technology. Some of the more popular and effective options are:
- Replacement of central heat and air condensers with a geothermal unit
- Installation of a wind turbine or solar array to reduce electricity costs
- Weatherizing the home with insulation, dual-pane windows, and other energy-saving fixtures
- Replacement of gas or electric water heaters with a solar powered or tankless heater
Another bill that can be lowered with a few timely purchases is the grocery bill. Kitchen appliances, like a high-quality rice steamer and box dehydrator, can make it far more convenient to prepare meals at a lower cost than prepared restaurant fare or store-bought food. An extra benefit is the food prepared at home tends to also be healthier.
General or Specific Savings
If the emergency account is currently less than enough to cover 2-3 months of expenses, it is worthwhile to get it there. Emergencies can happen to anyone at any time. Supposedly secure jobs can be lost, natural disasters can strike, and many other things can happen to pull the rug from under an otherwise comfortable lifestyle. It is best to have more than enough liquid resources to cover an emergency rather than too little.
It may also be a good idea to put the money toward a long-held goal. Graduate school, for instance, is a major investment that can return many times its cost in rewards. Dreams of starting a new business can be made more realistic by preventing the need to start with a bundle of debt.
The worst thing to do with a raise is to ignore it. Money that goes into the checking account without consideration has a way of getting lost in the monthly budget. The first step to take upon getting the good news is to figure out exactly how much extra will be coming in each month. Begin comparing options immediately in order to enjoy the most benefit from your hard-earned income.