By Tiernan Cannon
Though receiving a pay rise at work is extremely gratifying and should rightly be celebrated, it should also be approached with caution. The extra money might well lead to a sense of security that essentially makes you more financially reckless. If, however, you are smart and plan out what to do with this extra cash, you will have a greater opportunity to secure your future.
Avoid a shopping spree
With more weight in your initial pay cheque, you might be tempted to splurge on the latest console or TV. Resist the urge!
Celebrate in moderation – go for dinner or a few drinks with your partner or family and friends, rent a movie or get a takeaway. Start as you mean to go on, with the future in mind.
Stick to the budget
You might be tempted to add a few more items to your shopping trolley each week, or to stop by Starbucks on your way to work every day, but keep to your current budget as much as you can. This will leave extra breathing room to make other, more important financial changes.
Pay off existing debts
While reducing your debt load may not give you the instant gratification of a massive shopping spree, it’s certainly an option that will stand to you in future. By paying down debts as early as possible, you are wasting less money on interest and can improve your credit score. Even the idea that you are moving in the direction of being debt-free can be a major boost that a massive splurge in spending cannot provide.
One technique in tackling debt is to pay off smaller debts first, before moving on to the next one. The fact that you will have paid off a smaller debt in full can be quite the motivation, plus it gets rid of the little fees and small interest charges that can weigh your budget down. Or, if your debt is spread across several different sources, pay off the one with the higher interest rate first.
Contribute more to your retirement
If you’ve just received a raise at work, it could be the perfect time to take a closer look at your retirement portfolio. More money means you can make a higher monthly contribution, which in turn means more retirement income. You’ll thank yourself in a few decades!
Citizens Information has some useful information regarding the various pension options available, and where you can get more advice.
Plan for emergencies
Having an emergency fund in place can go a long way towards financial security during tough times. Aim to build a fund worth around six months of your salary – this could cover you in the event that you lose your job, or if your car has a major breakdown.
Invest in long-lasting items
If you want to buy a new tool or gadget for yourself, invest that bit extra now to ensure it will last longer, meaning you won’t have to replace it anytime soon – the Captain Samuel Vimes theory of how the rich remain rich.
For example, you might buy a few pairs of shoes from Penneys over the course of a year, each lasting a few months at a time, at a total cost of €50. Or you could keep an eye out for one higher quality pair at the same price that could last three or four years. Sometimes spending that little bit extra in the present makes financial sense for the future.