Getting a raise at work is presumably a standout amongst the best feelings in the world. After all, you stumble into work at 9 a.m. every morning, work long hours, take work home, and give your 100 percent to all your professional responsibilities.
Landing a raise is, therefore, a big achievement. It makes you feel like a valuable part of your firm and helps justify the job you are doing. But a salary increase can also be a double-edged sword. Let’s face it: if the salary hike goes to your head, it may lead to some poor financial habits. However, the trick is to make the most of the extra funds by making the right financial moves.
So, if you have got a raise at work, consider these ideas for your hard-earned money:
Rework Your Budget for a Better Tomorrow
Getting a raise is a perfect time to revise your existing budget to make sure it still reflects your financial goals and values. Because, if you don’t think this through, you’re more likely to spend on unwanted things.
Understand this: nothing can affect your finances more than lifestyle creep. You might be tempted to spend your money to buy the new fancy iPhone. However, it may not be the wise thing to do, especially if you have financial obligations.
Instead, take some time to comprehend where your money can go and do the most good. For instance, getting a raise could be a great time to accelerate your efforts in eliminating debt.
Prepare for the Rainy Days
It’s never fun to think about emergencies; however, building an emergency fund is one approach to put your increased salary to work. An emergency fund can act as your financial cushion when you need money for unexpected situations like:
- Car or home repairs
- Someone in your family falls ill or loses job
Most importantly, having an emergency fund in place will give you the peace of mind knowing that you do not require dipping into your hard-earned savings. For this, keep three to six months of living expenses aside or put your funds in a savings account so that you can have easy access whenever you are in need.
Update Your Term Insurance Cover
Whenever there is a significant increase in your income, consider it as the time to revisit your life cover. The reason is your family may quickly depend on the extra money, leading to a higher household expenditure and a better lifestyle. When you update your life cover, you are looking to protect the lifestyle of your loved ones if you should pass away unexpectedly.
In case you do not have any life cover, you can buy policy online by exploring all the available options in the market. A wise step is to carry out term insurance comparison of all online plans based on the following features:
- Brand value of the insurance company
- Availability of riders
- Duration of the insurance plan
- Claim settlement ratio
While all the factors are equally important for term insurance comparison, it’s the claim settlement ratio that highlights the chances of your dependents getting the cover amount without any hassles.
Therefore, it is highly crucial to buy policy online from reputed insurer having the best track record with respect to the “Claim settlement ratio”. In this category, Max Life Insurance has the highest claim settlement ratio − 98.26%− amongst all insurers.
Save for Your Retirement
When you get a hike, you can use your windfall to invest more towards your golden years. Investing for your hay days may not seem like a whole lot fun now, but you will be thankful for this foresight as your retirement grows closer.
Adding more towards your retirement fund will help you live a comfortable life post-retirement. You can invest in tax-saving instruments like ULIPs or ELSS and put the full power of your raise towards building the desired nest egg.
Enjoy Your Success
You have worked hard to earn your raise, so don’t forget to set aside a portion of your increased income to treat yourself and your loved ones. For instance, you may take your family to the best five-star restaurant in your city or buy yourself a new pair of shoes that you were eyeing for a long time.
Yes, getting a raise at work is cause for celebration, but it’s vital to think about how you are going to handle that money and where you can spend it wisely.
Put simply; it’s all about resisting the temptation to overspend and instead, focusing on more important tasks like paying off debts, building your savings, and having adequate life cover.