So you got a promotion and a FAT raise, now what?
First of all, congratulations! You must be kicking butt at this work thing and you should feel really good about your accomplishment.
So celebrate a little.
But don’t buy anything you’ll still be paying for after this amazing feeling wanes.
And it will wane quicker than you think. Our emotions revert to our baseline quickly–both after good events and bad.
Celebrate with people who love to celebrate YOU. Have a special meal, spend a bit extra on your drink of choice, maybe go away for the weekend. Make it special.
But don’t go crazy. Because your real test after a promotion, isn’t whether you can succeed in your new role–obviously you can. Your real test is how much of that FAT raise you can use to create the future you want for yourself.
So once you wipe that smile off your face? What do you do?
If you don’t have an emergency fund, put the first $1,000 away in a savings account. It’s best if this savings account is at a different bank from your checking account. Make it a bit difficult to get at this money!
If you have high interest debt – where the rate is 6% or more make a plan to pay it off. Use the Debt Avalanche or the Debt Snowball or even the Debt Bonfire. Set up automatic payments and make that raise disappear.
Stop by your HR department and increase your retirement contributions. At a minimum, make sure you’re getting the full match your company offers.
Increase your emergency fund to at least three months of essential expenses.
Once your high interest debt is wiped out, make a plan to pay off any other consumer debt. This is debt other than your mortgage or student loans.
Open up an IRA and set up automatic transfers to fund that IRA completely. The limit for 2017 is $5,500 each year if you are under 50 and $6,500 if you are 50 or over.
If you’ve maxed your IRA and still have more of that FAT raise to spend, go back to HR and increase your retirement contributions some more. The limit for 2017 is $18,000 each year if you are under 50 and $24,000 if you are 50 or over.
Or if you’re planning to retire early, you’ll need some money you can get to before you turn 59 1/2. So open up a brokerage account with Vanguard, Fidelity or Schwab (I prefer Vanguard). And set up an automatic transfer to that new account from your checking account–or better yet have your employer do the transfer for you. And start investing.
Whoa, still have more? Good for you! Read my 12 Steps To a Kick A$$ Life!
Yep, I’d suggest that you should make that lovely raise disappear. And disappear quickly.
Because lifestyle creep is dangerous. It keeps you from creating the future you deserve.
Make sure that big fat raise creeps its way into your savings or retirement account or investment account.
Because success should be measured, not by your fancy new title or what you have parked in your driveway, but by what you have invested for your dreams.
Do you have a good story about a big fat raise you blew? I’d LOVE to hear it!