Whether you’ve finally clinched that promotion or you’ve managed to come into a windfall from some other means, what you do with this extra money will inform how successful you are with your financial goals. Here are seven considerations to keep in mind when you start making more money.
1. Adjust Your Budget
Remember to create a new budget that reflects your salary. Don’t allocate too much to frivolous spending; the goal should be finding ways to pay for the necessities more comfortably while setting money aside for savings.
2. Avoid Lifestyle Creep
It’s going to be so unbelievably tempting to get new furniture, buy brand-name foods, and go out to eat all the time. And while we’d never argue against someone using their newfound wealth to improve their lives and have more fun, it’s shockingly easy to go overboard. Lifestyle creep, or the idea that your baseline for having a comfortable life increases with your income, is very real and something you don’t want to have happen to you if you want to stay happy and grateful.
3. Debt Should Be a Priority
Paying off debt should always be a priority, but it should be even more so once you start making more money. Debt is one of the most crippling things for your financial goals, and getting rid of it with your new income should be high on your priority list. Also, removing debt is one thing, but this is also when you should keep up with payments to avoid any future debt.
4. Remember Your Emergency Fund
Most Americans don’t even have an emergency fund; they either feel they can’t afford it or don’t prioritize it. If you’re reading this, you’re likely in a comfortable enough situation where you don’t want to be caught unawares by drastic life changes or events. Investing in an emergency fund is the ideal way to curb this and give you peace of mind knowing your finances won’t be gutted by a blindsiding life event.
5. Brush Up on Your Financial Literacy
Being responsible with your finances gets significantly more manageable once you focus more on using the resources available to you. Once you start making more money, the best thing to do for yourself is to teach yourself about financial literacy and weigh your options.
6. Focus On Building Credit
Paying off debt is one way to improve your credit score, but pulling your credit scores and learning more about your rewards credit card options can help you improve them even more. Building credit is instrumental in helping you when you need to make bigger money moves, like buying a home.
7. Focus on the Future
Now is an excellent time to start investing in your financial future. This can include everything from putting more money into a retirement account to putting more money into a savings account for a large purchase. But now that you’re making more money, you should make more sweeping decisions to secure a more comfortable future for you and your family.
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