Kacsper Pempel/Reuters/File
A January 2011 picture illustration shows a $100 banknote laying on $1 banknotes. A raise is an opportunity to genuinely improve your life over the long haul, Hamm writes.

Got a raise? Spend it wisely.

If you’ve just received a raise, walk away from the temptation of lifestyle inflation, Hamm writes.

A raise is something well worth being proud about. You’ve worked hard and your employer is recognizing that in the clearest way they can – with their cash.

The challenge is that when you get a raise, there’s a strong temptation to raise your spending right alongside it.

First, there’s the temptation to celebrate and reward yourself. You’ll tell yourself that you earned a goodie thanks to your hard work and you’ll pick out a nice splurge for yourself. However, that splurge takes away from other goals you might have and a big splurge often comes with costs – insurance, a data plan, and so on.

After that, there’s the temptation to live “a lifestyle matching your income.” You raise your expectations in terms of the places you eat, the vehicle you drive, and perhaps even the place you live.

The result? You find yourself right back in the same financial rut you were in before that raise, just with slightly shinier baubles around you. 

There’s a much better approach to this situation, one that can turn a raise into a lifeline to a better life.

The plan is simple. Figure out how much your raise increases your monthly take-home pay, then set up an automatic transfer to take that much out of your checking account each month.

In other words, you just continue to live on what you made before the raise. Meanwhile, the money from your raise is moved out of sight and out of mind, to be used at a later time for a well-considered purpose.

Don’t touch that money for a few months, then use it to take a big swipe at one of your debts. Don’t touch that money for a year, then use it to make an extra mortgage payment. Don’t touch that money for five years, then use it to make a large chunk of a down payment on a house.

Doing this changes nothing about your life. You’re still living exactly the same way you were before the raise. The only difference is now that raise is quietly working for you, building up and waiting for a chance to bring about permanent positive change to your life.

If you’ve just received a raise, walk away from the temptation of lifestyle inflation. Instead, look at a raise as an opportunity to genuinely improve your life over the long haul, because a raise can certainly do that if you give it that chance.

This post is part of a yearlong series called “365 Ways to Live Cheap (Revisited),” in which I’m revisiting the entries from my book “365 Ways to Live Cheap,” which is available at Amazon and at bookstores everywhere.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to CSMonitor.com.

QR Code to Got a raise? Spend it wisely.
Read this article in
QR Code to Subscription page
Start your subscription today