Have you saved salary increases?

[n_vizion]

How many of you are saving your salary increases and continuing the same standard of living year after year. I want to know how difficult or easy it was to do that.

[disneysteve]

Salary increase? What's that? My hourly wage hasn't changed for about 3 years.

Seriously, though, when my income has increased, we have increased our savings rate and pretty much maintained our lifestyle the same. There has certainly been some "lifestyle inflation" over the years but at a much slower rate than income has increased.

When we first got married in 1992, we were saving 6% of our take-home pay. We now save 18% of our gross income. That's a huge difference. When my wife was working at her last job, we were saving 80% of her gross, which made our total savings about 26% of gross household income. She's at a new job now, part-time, and 50% of her gross goes to the 401K plan. I wanted to do 100% but 50% is the maximum allowed.

[plumpossum]

My first few pay increases I didn't because I was so incredibly broke and used the money to make some breathing room.

My most recent raise ($0.66/hr- I mention that because while I get 2-3 raises a year, they're never very much) I locked all up. I increased my retirement contribution (457 plan) by $15 biweekly (from $35 to $50) and set up a direct deposit of $40 biweekly into my savings account through my credit union.

When I crunched all the numbers I found that I was putting about 5% of my income in my 457 plan (this is other than my pension, which will be 80% of my highest earning year's income upon my retirement in 25 years) and another 4% in additional savings. The additional savings will likely go toward an intitial payment of tuition, which I will be reimbursed for at the end of the quarter and will use the reimbursement money for the next quarter's tuition, etc. Once I pay off this round of tuition, that savings account is going to be for emergencies.

And no, I don't even miss the increased take-home pay. The way I see it, sending it directly to savings is a lot better because I won't be "surprised" by the tuition bill or crappy retirement lifestyle later on If I had it deposited in my checking account first, and had to see it sitting around, I would probably never even think to transfer it to my savings.

[MonkeyMama]

We pretty much have - it was very easy. Of course on the flip side my pay has gone from $10k to the $70k range in the last decade which certainly helps.

We actually both saved most of our "raise" when we got out of college so we could get into the housing market in an insanely expensive area. Meaning we both saved close to $20k of our $30k wage after college. I still lived with roommates (the rent was a steal for the area) and drove my old car. I remember eating out almost every day at work (was out at varying clients every day and was pretty much expected, harder to bring lunch). But thinking back I also go a lot of auto reimbursements as well as dinner per diems which I used to pay for all the eating out, so that was about the only part of my lifestyle that changed. I was working far too much to be tempted to spend money I guess - which is something else I find. The more I work the less free time I have to spend money. I mean hell I might have given myself a $1k raise in spending money that first year out of college which was QUITE the windfall to me back then. Like a 10% raise! Plus I was no longer shelling out $200/month for college expenses. It was easy to revel in my newfound $300/month and put the rest in the bank.

We upped our lifestyle considerably to get into a home (from $400 month rent to $2k/month with mortgage, HOA, etc.). However within months we both got a $10k raise which was nice. We bought a new TV and a new couch and saved the rest. Probably some of the biggest purchases of our life. But I remember that's all we bought once we were welcomed into a combined $100k income. We kept driving our old cars.

Mostly once we were married we never relied on a second income, which is much of the same as saving raises (but easier/faster). So we moved and I took a pay cut and dh got laid off but it didn't really make much difference to our budget. I took significant time off work to have kids and dh stayed home, etc.

I received a pretty decent raise when I was pregnant with my second, but it didn't really hit me until I made $40k 1 year while home much of the year, and the following year I made $70k with overtime. I never expected to make so much money on my income alone so we went a little crazy. We bought a newer car (I was 29 and figured I could finally toss the old clunker), new furniture for my son, a new energy efficiency washer/dryer, laptop, and upgraded much of dh's computer/electronics, etc. We went a little crazy. Oh yeah and hired the gardener and put my son in preschool.

It freaked me out how quickly we lived up to our income. Was around then I joined SA and decided I just need to save my next few raises. I am not sure if I will get these raises forever so I might as well use them wisely. IT is also interesting that when dh and I both were even keeled in our earnings I did not mind being the sole breadwinner in the least. Suddenly my pay has almost doubled as my career zooms ahead, and I am not even sure if he could get paid much more than 1/2, being out of the workforce so long. I rather rely on a wage that I know that either of us can receive. I think for the most part we are okay. But we have certainly become accustomed to a nicer lifestyle. We tend to slowly upgrade our lifestyle for the most part and I see nothing wrong with that. It took us quite a few years out of school to get nicer cars than the clunkers we drove at 16. Most of the furniture in our house are still old hand-me-downs or cast offs. We've only upgraded what we have REALLY wanted to over the years and slowly at that. We have a very nice house, but we moved 2 hours and took a pay cut to be able to afford it. We could have never afforded something like this on raises alone, where we come from.

Anyway, no complaints about our lifestyle and I am expecting in 18 months I will have enough raise to fund dh's IRA. Our lifestyle is tenfold what it was the college years, but we didn't need to have that all at once.

I had some raises the first few years on one income but they barely covered out health insurance increase and I think we had a bit of a negative cash flow back then. We might find the same thing going forward, but we have the whole second income thing to fall back on for now. Frankly I feel like a moron kind of going crazy when I should have put that money to savings/retirement. Then again I thought dh would return to work soon so it wouldn't matter. Since then we have revamped our goals and are trying to fund all of our retirement and savings on my income. When he returns to work if we can pay off the mortgage in a few short years it is something we are considering. We used to rely on his income for most of our savings (though I have always put 10% to retirement no matter what), but with my raises over time we have saved most of them so I could cover more of our aggressive savings goals my own paycheck.

There is no way we would be financially well off today as we are if we had ever relied fully on 2 incomes or hadn't of saved so aggressively to get into our first home. Yet I find it pretty much the easiest way to save money. It doesn't take a lot of effort to pretend like you didn't get that raise. It takes a hell of a lot more effort to trim the budget and lower your lifestyle.

[MonkeyMama]

P.S. once our retirement is maxed (in a year or 2) my goal is to save my raises so that I can eventually support my family on a part-time income.

Would I rather have a new car or retire to part-time work by the age of 40? Hmmmmm... Makes it an easy choice.

[Aleta]

Our salaries here don't increase that much either because my husband is self-employed. We usually increase it when bills go up. You normally have some inflation every year so you should be adding money to our allocated items as well unless you can keep your payouts the same and you can save the increase. Then, its probably a good idea to just keep it in a savings. Some use it to pay off debt.

[SnoopyCool]

The most recent raise went to an "escrow" for our bills that only hit a few times a year (car insurance, DHs tuition).

[Joel]

How many of you are saving your salary increases and continuing the same standard of living year after year. I want to know how difficult or easy it was to do that.

The biggest of our "salary increases" have come from me changing jobs. For us, we've used a good portion of that to pay down debt which has been more beneficial for our "monthly" budget than the salary increases. One other thing we've done (except for my current job) is we've typically claimed 0 instead of the 2-4 we could claim. Yes, that means we're "loaning the government money" but at the same time, we've used those large refund checks to pay off lots of debt including our old minivan and nearly 15K of credit card debt in two years.

With our recent move to NW Wyoming (and a lower cost of living) for my wife's job, we're hoping to live on my salary and use hers for faster debt reduction AND saving some money for a new house.

[DebbieL]

My wage increases are laughable. They are just matched to what the cpi says the cost of living increase was that year (and they don't include a lot of important items such as housing, etc.). Whoopdie do. 2.2% doesn't get you far (especially when my rent goes up 4% a year, etc. So no - I don't save the difference because the cost of living takes care of that for me.

[n_vizion]

I love the idea of saving increases for retirment purposes. That is awesome. Hats off to you guys. Truly inspirational.

[aurielle]

I am saving all of this year's raise. I got an 8% raise, 5% of it is helping to fund my EF, and the other 3% is going to my Roth IRA. When I get my next raise in January, it will all be going to my Roth.

[LivingAlmostLarge]

Sort of.

[Bookie]

I've saved the increases in my income for the past several years (not that it's that much money). I've also saved any "windfalls" that have come my way.

It currently amounts to about 25% of my annual gross.

[Cassandra]

Yes. I went from $7.35/hour to $9.00 when I changed jobs.

When I was making $7.35/hour I put $125 from each paycheck into checking. When I switched jobs and started makin $9.00/hour I began putting $100/paycheck into checking.

Cassandra

[Joel]

Yes. I went from $7.35/hour to $9.00 when I changed jobs.

When I was making $7.35/hour I put $125 from each paycheck into checking. When I switched jobs and started makin $9.00/hour I began putting $100/paycheck into checking.

Cassandra

I'm assuming this means you put the extra $25 into a savings account?