Six Wise Ways to Spend a Raise

[sweeps]

Link: Ask Kim: Six Wise Ways to Spend a Raise

1. Pay off high-interest debt.
2. Build an emergency fund.
3. Add to your retirement savings.
4. Contribute to a flexible-spending account.
5. Add the extra money to your mortgage payments.
6. Use the money to beef up your kids' college fund.

[PRICEPLUS]

Makes a good deal of sense although each of us has a different set of priorities due to our individual financial situations!

[CraigThor]

I just started putting mine and my wifes raises into savings not much but it should add up in the long run.

[vishenda]

Most people always put their raises in retirement funds.

[vsjhoc]

Originally Posted by vishenda

Most people always put their raises in retirement funds.

Unfortunately, I think most people always spend up to their raises.

[rduell]

I'm getting a pretty decent raise at the beginning of the year and that list is pretty much how I'm going to approach things. Thanks Sweepsplayer!

[creditcardfree]

Well, I think since I have 1-4 taken care of, I will do #5 with my hubby's next raise!! We just moved and took on a larger mortgage...house prices are higher here...so that would be the best place for it. Very timely for me.

[Ima saver]

Save, save, save, save, save, and save! I am going to get a raise soon and I plan to save every bit of it.

[aleish]

thanks Sweepsplayers! maybe i will build an emergency fund soon..

[bjl584]

I have a raise/promotion in my near future. I'm planning on adding to my 401K and my personal savings account with all of it.

[vishenda]

one, two and three in that order. Get rid of debt and keep it gone. This interest is not deductible and therefore costs much more than you think. For example if you are in a 30% tax bracket and you are paying 18% interest you are really paying 25.75% interest because you have to pay after tax dollars to pay a nondeductible debt.
An emergency fund of three to six months would go a longer way to keep your peace of mind stable.
retirement and college savings are important. If needbe you can tap IRA's for education.

[TBH]

I got a 3% raise this year and put 1% of it toward my retirement savings. The other 2% I am spending.

I like the idea of putting the entire raise in the retirement account, but it's not called a cost-of-living increase for nothing. The cost of living goes up (health insurance premiums, daycare tuition, food, property taxes, etc) and I need to be able to apply at least part of my raise to those increased costs.

[ren]

Originally Posted by vishenda

one, two and three in that order. Get rid of debt and keep it gone. This interest is not deductible and therefore costs much more than you think. For example if you are in a 30% tax bracket and you are paying 18% interest you are really paying 25.75% interest because you have to pay after tax dollars to pay a nondeductible debt.
An emergency fund of three to six months would go a longer way to keep your peace of mind stable.
retirement and college savings are important. If needbe you can tap IRA's for education.

(bolding added)

I wanted to point out that, while most interest isn't deductible, some is -- interest on a mortgage/home equity loan and interest on student loans. So if you have a credit card that is slightly lower than your mortgage (say, 4.99% credit card vs 5.5% mortgage), smart money would be paid on the credit card.

[ChimbleySweep]

What great timing! I just got news that I got promoted and will be earning 500-600 more per month. I have a few ideas where to put it (on my stupid CCs)!

[tinapbeana]

Originally Posted by ChimbleySweep

What great timing! I just got news that I got promoted and will be earning 500-600 more per month. I have a few ideas where to put it (on my stupid CCs)!

congrats on the promotion! now about the new SavingAdvice.com membership fee...

[aurielle]

In two weeks I'll be done with #1. On to #2 starting in January. I get my yearly raise in January (a pittance, but every lil bit helps). Then #3. DH is signing up for #4 this month, and #5 & 6 are not applicable to us.

[laceshawl]

Sometimes you might need to spend at least some of a raise, eg if your car was always breaking down it might be cheaper in the long run to buy a better one even if you had to take on monthly payments. Or you might need to do house repairs you'd had to put off in order to keep the property value up. These are ways of investing even if it's not putting money in the bank.

[rduell]

I've been thinking of how I'm going to use my raise I get in January. I finally decided last night that half is going toward gasoline because I'm ending up overbudget on that because of running kids back and forth to college and all the activities the younger ones are in. The other half is going toward the debt snowball.

[Armywife]

Since our debt has a few years to turn into a high interest debt (furniture at 0% until 2008), we have established a savings account which we will use to pay off the items right before it gets ugly. Hubby's raise just added a few hundred bucks into the pot so we're actually a couple of months ahead of the game

[rusty@saving]

i have a raise coming in 1 1/2 months, we are going to be saving it for as long as we can.