There’s nothing like getting a raise.  More money coming into your home means more room in your wallet.  After finding out their getting a raise, most people start thinking of all the things they can now afford to buy.  A new tv, new wardrobe, new car…

By all means you should enjoy your raise, but spending it on consumable goods, isn’t the wisest thing.  If you’re already living comfortably, it’s actually stupid to just spend the money.  You’ll unnecessarily inflate your standard of living making it nearly impossible to realize you’ve gotten a raise.

Dumb things to do with a raise

  • Buy a new car, especially a larger, gas-guzzling one
  • Go on an extra vacation
  • Buy more expensive clothes
  • Hide it under your mattress
  • Spend it before it shows up in your paycheck

Smart things to do with a raise

Pay Off Debt

When you get extra money, put it toward your debt, especially high interest credit cards and loans.  Stretching out your payments means you pay more interest to the banks than you would if you’d paid the debt sooner.  Paying off debt sooner rather than later saves you money in the long run.

Invest and Save

It only makes sense to put your money toward something that will make more money, rather than something that will only cost more money.  Put your raise in a high-yield investment or savings account.  Let’s say your raise gives you an extra $250 a month and you put it into an investment that gives you 7% a year.  After 5 years, you’d have $21,477.  If you spent that money, after 5 years, you’d have $0.