Saving Raises

It may have been a while since you’ve seen your last raise due to corporate cutbacks, but things may open up shortly. It feels great to get a raise. It makes us feel like we’re being rewarded for all our hard work. It provides an incentive to keep doing a good job. And most of all, it puts more money in our pockets.

It can be tempting to start spending more money when we get a raise. Just a few extra dollars on each paycheck can make it possible to go out to eat once a week or start building up your wardrobe. But saving that extra money offers more long-lasting benefits, and it is relatively painless.

Think about it. You’ve probably been living on the pay you received prior to your raise for over a year or so, and you survived that year. It’s not much of a stretch to be able to survive another year without that extra money. Of course you wouldn’t want to turn it down, but why not put it away to build an emergency fund, a college fund for the kids or a nest egg for your retirement?

And just imagine how much money you could save if you saved your raise every year. If you received the same percentage raise each year, you could put away over twice as much out of each check next year as you did this year. The following year, you could add a little bit more to it than you did the year before. As long as you can live on the same amount of money, you can increase the amount you save each year.

While you’re saving your raises, consider adding your bonuses to your savings as well. It’s tempting to go out and spend like crazy when we get a windfall of money, but it’s smarter to save it. Bonuses are money that we usually do not include in the budget, so we probably won’t miss them.

How to Save Your Raises

There are many ways we can put money into savings. But which is the best vehicle for saving raises and bonuses? That depends on your goals.

If you’re looking for a way to save some money but can’t seem to make room in the budget, saving your raises could be the answer. Instead of adding the extra money into your budget, you can simply send it directly to savings and forget about it. In time, you can save up a substantial financial cushion.