It is always a great day when you find out that you have gotten a raise. Your income has increased, you are earning more… Life is good! Many of us start thinking about what we will be earning, and look at is as a chance to celebrate and immediately go out to a nice dinner or treat ourselves to something special!
But what does the raise really mean to you? Is there any real reason for you to change your budget or lifestyle? Let’s face it: as much as budgeting and saving is important, nobody like sticking to them. It can be incredibly difficult to resist the temptation of a larger paycheck, but consider the longer-term implications.
Part of the problem is our society’s obsession with acquiring more and more. Most of us want more, but don’t want to have to make any sacrifices to get it! One of the first steps on the way to your financial health is realizing that everything takes a sacrifice of some sort.
Look at your current situation. Are you living reasonably comfortably? You know that you can live on your current income – you are doing it! Why not continue to live on the salary you had before your raise, or last year, or even before that?
Let’s say you make $50,000 per year as a nice easy-to-work-with number. Suddenly you find out you’ve gotten a raise – congratulations! You are now earning 5% more, or $52,500 per year.
After tax and similar considerations, that is a significantly smaller amount – call it around $1,700. How many nights out will that buy, especially if you are celebrating? Think about it. $25 per person in your family for food, maybe more if you have a nice bottle of wine… Running out to a fancy meal or buying a new TV could blow the whole years’ increase in a very short time!
But what if, instead, you pretend you didn’t just get that raise? Stay living on your current budget. Rather than increasing spending and adding more ‘stuff,’ keep with your current spending habits and you can ‘accidentally’ save yourself that amount! Each time your salary goes up, continue this – or at least some modicum thereof – and make your retirement that much more comfortable. If you put it into an IRA account the benefits are even better – you can deduct the amount from your taxes.
By doing this, you can live below your means – the quintessential principle of financial health. It is a simple, easy, and great way to save!
Tags: Budgeting, finances, goals, going out, happiness, health, Income, investing, IRA, long term, making money, Retirement, savings
