Did you get a salary increase recently? Congratulations! Now it’s time to be smart with that extra money. The best time to begin building your financial wellbeing is now, so start by reducing your debt and building your wealth because investments take time to grow.
One of the best ways to take advantage of your pay increase is to be intentional about your additional income. Rather than automatically splurging on additional purchases or increasing your day-to-day expenses, come up with a plan to make the most of your success and put your money to work for you. Here are our top five recommendations to get more out of your money.
Pay Down Debt
Do you have any expensive debt? One of the first things you should do is pay down any high-interest debt you’re carrying around. Use the extra funds to chip away at debt from credit cards, personal loans, and auto loans. The sooner you’re debt-free, the less you’ll end up paying in interest, and the quicker you can start putting your money to work growing your wealth.
Add to Your 401(k)
Do you have a 401k? Retirement might feel like it’s still years away, but it should be an important investment goal no matter how old you are. One smart way to use your salary increase is to stash funds directly into retirement accounts like a 401(k). By automatically diverting your pay increase into your retirement savings upfront, you won’t even notice it’s missing.
Contributing to a retirement fund is especially important if you receive an employer match — if you don’t take advantage of those matching contributions from your employer you’re essentially leaving free money on the table.
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Start Investing $100 or More Each Week
Are you ready for an automated wealth building account? It might make sense to invest some of your salary increase. Depending on the size of your raise, investing an extra $100 per week can help you sustainably grow your wealth. Don’t believe us? See the math. If you invest just $100 a week for 40 years, you could retire a millionaire.
What you invest in is up to you and can depend on a variety of personal factors, including when you’ll need to access your investments, your age, your investment goals, and your risk tolerance. Beanstox makes it simple to automate the investing process and invest in a diverse portfolio to improve your financial health.
Save For Your Child’s Future
If you’re a parent, another savings goal is your child’s future. Whether you’re saving up for college, paying for school activities, or just want to give your child a financial safety net for when they leave the nest, consider investing some of your raise into a savings or investment account for your kid. If you think your child will attend college, consider opening a tax-advantaged 529 Plan to start saving up.
Avoid Lifestyle Inflation. Respect Your Budget!
Whether you dream of upgrading to a swanky apartment, purchasing a luxury car, or taking expensive trips, it can be tempting to use your pay raise to fund lifestyle expenses. While it’s okay to treat yourself in celebration of your raise, try to avoid lifestyle inflation and spending increases where you can. By maintaining a balanced budget and modest living expenses, you can ensure you’re setting yourself up for future financial success.
Money Spent is Gone, Money Invested Works for You
As you decide what to do with the added money in each paycheck, remember the words of Mr. Wonderful, Kevin O’Leary, “Don’t buy that crap you don’t need. Invest in you and your future.” No matter what your financial goals are, investing with Beanstox is a great way to grow your wealth over time.