Blogging Away Debt Our Journeys to a Debt-Free Life

by Ashley

I’m expecting a 10% raise this July when the new fiscal year begins, and I’ve been thinking seriously about how to handle it.

In the early days of my career, every raise was immediately absorbed into our budget. We were living paycheck-to-paycheck, and even the smallest increase felt like a lifeline – helping cover bills or make an extra debt payment.

But now? We’re in a different place. Raises are still exciting (who doesn’t love a bit more breathing room?), but we don’t need the money to survive. That changes the conversation.

A friend recently told me that every time she or her husband gets a raise, they automatically save or invest 50% and allow the other 50% to flow into their budget. I love the thoughtfulness behind that approach – it’s purposeful, yet still leaves room for enjoying the fruits of your labor.

That got me wondering: what other strategies are out there for handling raises with intention? Here’s what I found.

The 50/50 Rule

This is what my friend does. She saves or invests 50% of the raise, and the other 50% is added to the budget. I like the balance here in still allowing for a little bit of lifestyle creep (it feels deserved when you’ve worked hard for the raise!), without going overboard.

Pretend You Didn’t Get a Raise

With this strategy, you keep your expenses exactly as-is, and put 100% of the raise into savings, investment, and/or debt payoff. I have a longer-term goal to live off one income, so part of me wonders if I should try to do this strategy. Like I said, the extra money is nice, but we don’t need it to survive….so perhaps this would be a good goal.

Raise-to-Goal Strategy

This is when you use all of your raise to fund a specific goal. It might be about maxing out a Roth IRA or increasing 401(k) contributions. But it could be a vacation or tackling a home project you’ve been putting off, too

Personally, I’d love to add a backsplash to our kitchen (right now it’s just a painted wall that’s seen one too many spaghetti sauce splatters). I’ve also been thinking about adding a paver walkway from our backyard to the front curb – just to make wheeling the trash can a little less of a pain.

Debt Snowball

This used to be my go-to strategy:  throw every extra penny at debt. These days, our only remaining debts are the mortgage and my student loans. I’m on the Public Service Loan Forgiveness program, and the loans should be forgiven next year. We’re already paying extra on the mortgage. So while this used to be front-and-center, it doesn’t quite apply to our current situation.

1% Rule for Retirement

With this strategy, you increase your retirement contributions by 1% each time you get a raise. We’ve already maxed out our retirement contributions so this option doesn’t really apply to us, though we could do some sort of modified version where we put 1% into a different (non-retirement) investment account.

What Will We Do?

Honestly, I think ALL of the above are good options in that each of them requires some level of thought and intentionality (remember how peace, purpose, and planning are my words for the year?) For much of my past, we were just barely scraping by and did not have the luxury of being intentional – every dollar had a job and most were tied to survival or digging out of debt!

I’m grateful to be a in a place now where we can be more deliberate. Right now, I’m leaning toward a combo of the 50/50 Rule and the Raise-to-Goal strategy. Maybe:

• 50% automatically saved (investments or cash savings)
• 25% for the household budget (a little extra is certainly nice!)
• 25% set aside for a specific goal (my eye is on the backsplash first!)

It ends up being a blend of multiple strategies: part lifestyle improvement, part long-term planning, and part pretending like we didn’t get a raise at all since 75% is put away with my current plan.

I’d love to hear from you!

Have you ever handled a raise with intention? Do you follow one of these strategies, or do you have a different approach? If a raise is coming your way, how would you like to use it?

Ashley

Hi, I’m Ashley! Arizonan on paper, Texan at heart. Lover of running, blogging, and all things cheeeeese. Early 40s, married mother of two, working in academia. Trying to finally (finally!) pay off that ridiculous 6-digit student loan debt!