If you follow me on Twitter, you may have seen that I got some good news early last week:
Better late than never, but it is frustrating to wait 17 days to know how much more money you are making. If any of you are in HR, don’t torture your employees! Get that information in front of them on time.
It was late………. but Mrs. AE and I both got awesome yearly raises. Adding in the 5% she got, we almost topped our 2017 goal of a combined 6% increase. I have a feeling she will be making a move this year so we might be smashing that goal.
This was the best year-end raise I have gotten in my close to 6 year working career, beating the previous high of 5%. It feels good to have my work validated and appreciated.
So, what are we going to do with our influx of money?
Don’t Squander your Raise – Bank It
For the last few years, we have been banking 100% of our raises. In fact, that very night I logged into our 401K servicer portal and increased my 401K contribution the same amount I would be taking home. As soon as Mrs. AE goes back to work we will be doing the same with at least half of hers (the other half will be going to daycare for Little AE).
The best part about using your salary increase:
It’s not even learning to live on less, it’s living on the same.
Since you have proven that you can get by on your current salary, resist the urge to inflate your lifestyle and bank the excess. You don’t even need to cut out the morning coffee run.
It doesn’t need to go to your 401K, you can use the excess to do a variety of things that improve your financial situation:
- Pay Down Debt – Turn that raise into a guaranteed return
- Open a Roth IRA – Never heard someone say “I have too many retirement accounts”
- Start an Emergency Fund – Be. Prepared.
Take Action Today
If you got your raise earlier in the year, it’s not too late to take advantage of the opportunity. Look at your pay history, figure out how much more you are making, and start banking the difference today.
Try Banking 100%
If you can’t do 100%, Bank 75%
If you can’t do 75%, Bank 50%
You get the point, the only wrong answer is doing nothing.
If you aren’t convinced try answering this question: What are you going to spend the money on?
My guess is that money is going to flow into your checking account ever 2 weeks. You aren’t going to notice the increase, and it’s going to get squandered on something you won’t remember 2 days later.
Put it to work paying off debt or multiplying itself – it’s that easy
After you do this for a few yearly raises and a promotion or two, you will be saving a significant portion of your salary. Future you will be happy.
So tell me, are you banking your raise?