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What to Do with a Raise (Besides Spend It All)

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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?



Setting Up House in TX

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Now that I’ve been at my parents for one week and some change. I have finally completed unloading my car and gotten my personal items organized. After a week off work, I had to hit the ground running. So my office is still under construction. (And somehow along the way, I broke my computer. Not un-useable, but well, more on that later.)

It was an exhausting and exhilarating last couple of weeks in Georgia. The house sold, all the kids came to Georgia, Princess graduated, Princess turned 21, and Mother’s Day. It was a whirlwind.

Hope and her kids at Princess college graduation

I was so ready to get settled into some sort of normalcy that I skipped my planned stop to visit friends where I went to high school. I spent 17 hours straight in the car just to get to a landing spot.

Setting Up “House”

Now I’ve begun ticking off a laundry list of “house keeping” items to get settled:

  • Get private mail box (PMB) so I have a mailing address as I begin converting things over – $168 for the year.
  • Find a good chiropractor. This is the medical care that I use regularly. My chiro back in Georgia was amazing. So again, interviewing before I have a need – $39 special for xrays, eval, and treatment plan. I won’t do the whole treatment plan, but this gave me a good feel for this particular office and I’m now comfortable having someone to call should the need arise.
  • Identify a good boarding facility. I have two weekend trips planned in the coming months so I want to be prepared. It’s a lot hotter here than Georgia, so important that I tour the facilities because my dogs are definitely not used to the heat. No luck so far. And it’s soooo hot! We were truly spoiled by the two facilities back in Georgia. Highly recommend Keller Creek and Prospect Farm if you need to board your dog in NE Georgia.
  • Continue to work with my dad to set a schedule and identify where he feels he needs the most help. We are getting there. I’m sure this will evolve over time.
  • Get into a daily routine for work and my health. I started walking again this week. 5am every day. And my sister wants to start going to the gym together, ugh! We’ve pushed that off a couple of weeks since Princess is coming to visit next week. But when we do start, I will be going as her plus one. I’m not spending the money on a gym membership.
  • Set up my office. This is a work in progress. I have a whole room, but it’s cluttered with furniture, so I’m slowly rearranging. (With my dad’s permission and support.) When I got here, he still had his Christmas tree up…that’s been taken down now. Baby steps.
  • Get prescriptions transferred in order to get refills. My doctor made sure I had enough refills to get through until my return to Georgia in September when I already have a follow up visit.
  • Organize my bedroom. Done!

Once I get myself organized, I will start on more organizing and purging at my parents’ house. Even now, my car is already full of a load to take to donation. This consists of things I’ve gathered in the last 6 months visits, but wanted to allow my siblings plenty of time to grab anything they wanted.

The cost of this move were minimal. But I know I will have some additional costs over the course of the year as I slowly transfer things to TX. Most will happen toward the end of the year, after the wedding which is my last planned extended trip to Georgia.