Here's what to do when you get a salary increment
By James Yeo
For many workers, a salary increment gets us pumped and gives us a sense of accomplishment.
Not only does it show that we are being rewarded for our efforts, it also makes us feel more financially secure, as it helps us to keep up with the inflation rate.
That said, upon getting a raise, many people get carried away and go on a shopping spree, which may exceed any meagre increment there is. Thus, we have earmarked four things to do for those who want this little pay raise to actually pay off big time in the future.
1) Find out your ‘actual’ increment
One simple fact you must be know is that, with the increase in your salary, the amount you pay in taxes also increases. Adding in the higher costs of living (i.e. the prices of mooncake keeps rising), you would realise that your raise was not as high as you thought it was.
As such, it is possible that your take-home pay does not change at all, especially if your increment is minimal. Therefore, it would be a good time to evaluate your financial situation and list out how your increased income could benefit you, and whether or not you are stepping over the line in your expenditure.
2) Change your mentality
As previously mentioned, a pay raise entices you to spend more.
However, try to reassess your options before you increase your spending. It is wise to sit on your salary for a while (a few months or so) until you figure out how to spend it.
If you keep your spending habits under control as though you did not get a raise, you may even subconsciously ignore any increment you have and retain the excess as savings.
3) Save more and repay your debts
While it may sound cliché, repaying your debt and saving more is the cornerstone of building your retirement nest egg.
Many young working adults are plagued by a combination of education loans, renovation loans and property loans. Thus, the first thing to do is actually to work toward paying off your debt.
Be smart in how you pay off your loans as well. Aim to tackle the smaller ones first so that you can be relieved of the pressure as you clear them off one by one.
If you have no outstanding debt, you can aim to develop a habit of increasing your savings to achieve bigger goals in future. Put the extra money into stocks or a high-yielding savings account to make your money work harder for you.
4) Celebrate yourself but do not overdo it
Celebrating your success is only fair, but you should not overdo it.
Most people tend to take a pay raise for granted and upgrade their lifestyle without assessing the impact on their financial health.
An increase in your salary does not mean you can party with your friends every night or go on a cruise trip over the weekends every now and then. Make sure your spending is in line with your income.
Conclusion
All in all, you can embrace your mini-victory and celebrate it once or twice with your family and friends. Beyond that, avoid spending the money excessively and plan for a better future by ensuring your hard earned money works as hard as you did.
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