You Got a Raise! Now What?
A raise is always good news, but what can you do right now to ensure that you make the most of it? Try these ideas to stay mindful with your money in the new year.
Increase Your TSP Contributions
When’s the last time you looked at your TSP contributions? Getting a raise is the perfect time to review these amounts — and bump them up to take advantage of your extra income.
If you currently have no trouble making ends meet, consider putting your entire raise into your TSP. Raises have a tendency to disappear into thin air, with a latte here or a new pair of shoes there. Directing the funds into your TSP immediately is a great trick to make sure your money sticks around.
Pro Tip: TSP annual contribution limits may change each year. That means you may be able to save more this year than last — great news for anyone had maxed out!
Build Your Cash Reserves
Worried about inflation making everything in your life more expensive? You’re not alone. In case you missed it, inflation is up over 9.1% this year. If that keeps up, it basically wipes out your raise anyway.
If you’re feeling unsettled by that news — or by your weekly grocery bills — consider pushing your raise into an easy-to-access savings or money market account. This will ensure that you can get to your money if you need it for an emergency or for unexpected expenses, while still earning a little interest on it.
You can also designate your savings for a future purchase, like a down payment on a house or new car. Opening a secondary savings account that’s purpose-driven can help inspire you to build your balance faster — and keep you from dipping into the extra money without thinking about it.
Pay Down Your Debt
Got credit card bills to dispatch? You can also use your raise to increase your monthly payments on these bills to pay them off faster. This trick also works for paying off a car loan or mortgage. Instead of pushing your raise into savings, just add the monthly amount of your raise to one of your debt payments instead.
If paying down debt doesn’t seem very exciting, try a debt calculator to see how you can save by paying a little each month. Not a bad way to put that raise to good use, especially if you’re already maxed out on retirement account contributions.
New Year, New Goals
Using your raise well is all about staying mindful and really paying attention to where your money is going. The new year — and its new paycheck — is the perfect time to review your finances to make sure you know exactly what you’ve got coming in, and well as what your spending situation looks like.
When you get your first paycheck, take the time to review your monthly budget, reworking it to reflect your new income. Then, take an honest look at your spending and update those line items as needed. This will give you important insight so you can plan your financial year accordingly.
If that planning feels overwhelming or complex, now’s the time to work with a financial advisor to get a clearer picture of where you stand — and what action steps you should take to get where you want to go. The right financial plan will help you make the most of income today and give you peace of mind about your future retirement plans.
Need help understanding exactly how your TSP, pension, and benefits can all work together to fund your retirement? We specialize in financial planning for federal employees, and can’t wait to help! Get in touch today to learn more.
