The average worker can expect about a 3 percent pay raise in 2015, according to a 2014/2015 compensation planning survey released by consultancy Mercer. While that’s good news for many employees, getting a raise is only half the battle. The other half? Knowing what to do with it.
The worst thing you can do is increase your level of existing debt by financing something new, like a car or boat, or even a house, before you’re ready. “Increasing the money you spend on lifestyle choices, like going out to dinner more or taking another vacation, don’t usually benefit us in the long term or give us more financial peace,” said Andrew McFadden, certified financial planner and founder of Panoramic Financial Advice.
But I Want to Use My Salary Raise to Have Some Fun!
There’s nothing wrong with spending some of your raise. McFadden suggests a 50-50 split. “Balance the reward with delaying gratification by paying down debt,” he said. “Use 50 percent toward discretionary spending so you get to realize some of that raise upfront, but then use the other half to reach your financial goal.”continue reading »