I recently got a fairly large raise at work and immediately breathed a huge sigh of relief knowing that it would make a huge difference in our debt pay-off journey, especially on top of the money I make freelancing. You see, my freelancing money is basically a windfall for me – it’s money I haven’t budgeted for because I don’t require it. No matter your financial situation, it’s smart to have a plan in place for the extra money your budget says you don’t need, otherwise you will never know where it went. Maybe that extra money is a raise. Maybe it’s a windfall – a one-time financial pick-me-up like a tax return, bonus, or inheritance. Having a plan for that money will ensure that you continue to achieve your financial goals and achieve them more quickly.
What you do with a raise really depends upon your individual financial situation (this is why it’s called personal finance). Are you in debt payoff mode or savings mode? If you are in savings mode – are you close to retirement or are your kids close to college? Now is the time to step back and reassess your goals and the steps you want take to achieve those goals.
Check Your Budget
As you reassess your goals, it’s a great time to just double check your budget. You might have a need to invest in yourself, so to speak. Make sure you know where all your money is going to and if you are short in a category, now is the time to add in some funds to bring your budget back into balance. For example, I knew we were pretty short in our personal care category, especially given that our daycare has refused to use cloth diapers, which I had initially budgeted on. With my raise, I can add some money into that category to make sure I have enough money to buy diapers.
Check Your Emergency Fund
Next, check your emergency fund. Maybe you established your fund a long time ago and have left it alone, believing it’s enough. But now that you have rechecked your budget, do you really still have 3-6 month living expenses in that fund? Have you dipped into it here or there without realizing it? Or maybe your needs have grown and you didn’t account for that in your fund. Now is the time to take care of that.
Check Your Debt Status
Your budget is solid. You know you have plenty of money in your emergency fund. Are all your debts paid off – even the doctor bills and other nonrecurring charges? If you have any debts at all, put the rest of your money toward the debt. You’ll end up richer in the long run by not paying all the interest, so avoid the temptation to run out and treat yourself (or at least don’t keep treating yourself).
Check Your Savings
So you are a financial rock star – your budget is in good shape, emergency fund is solid, and even your debts are paid off. That means you are in saving/investing mode. You are probably throwing a little party, knowing that your raise can be put straight toward those goals. For everyone else, just know that this is where you will be one day if you continue to handle your pay increases wisely.
First Loan Payoff!
For us, I have rechecked our budget, shored up a few categories, and now I am looking at paying off the first of our student loans this year. No, it’s not as fun as booking a trip to Paris, but paying off our first loan feels much more satisfying!
[Source:everythingfinanceblog.com]Sourse: Thefinancebucks.com
0 comments:
Post a Comment