Congratulations! You got that big raise or new job, creating a surge of income for the household. Before you toast to your success, though, take a moment to think about how it’s really affecting your finances: Are you better off or has your spending outpaced your extra income?
Many people facing debt believe that higher income will automatically lead to a better debt management plan, since they have more money to pay off loans, credit cards, and other debt sources.
However, as incomes rise, debt can sometimes begin to grow out of control because there’s a sense of being able to “afford” more, leading to significantly more spending. Consider the fact that lottery winners declare bankruptcy at twice the rate of the general population; sudden wealth can lead to dizzying spending sprees that cause more money to go out than come in. Here are some tips for keeping it under control.
continue reading »