Great day at work–you got a raise. But before you start celebrating with new shoes, start planning how you will save that extra money. If you, don’t you might just blow your raise.
Raises are on the horizon for many. Aon Hewitt’s 2016 U.S. Salary Increase Survey of more than 1,000 companies, found that base pay will increase an average of 2.8 percent this year, and 3.0 percent in 2017. “And that’s on top of the 5.2% boost in median household income—up to $56,516 in 2015—that the U.S. Census Bureau recently reported,” reported USA Today.
Here are a few ideas on how to use your bump in pay to your full financial advantage:
–Finally get that emergency savings up and running. If you are one of a whopping 66 million Americans who have not saved anything for emergencies such as car repairs, the time is now to save funds.
–Put more into your retirement fund. Sure you may have a retirement fund through your employer, but a little extra cash for when you stop working is a great idea–and a tax break. “In addition to building a nest egg for the future, you’re getting a tax break today,” said Charles Sizemore, chief investment officer of Sizemore Capital Management, since contributions to a 401(k) lower your total taxable income and IRA deductions are tax deductible.
–Pay off some of those bills, especially high-interest-rate loans. “Paying down a 16 percent credit card balance is a risk-free return of 16 percent,” said Greg McBride, chief financial analyst at Bankrate.com.