Getting a salary increase is a great reward for your daily grind. But before heading out to enjoy the extra cash, it’s important to first ensure your finances are in order. Try these tips to make the most of your new monthly income.
Pay off debt
The longer you have debt, the more interest you will accumulate, so using your extra cash to squash debt earlier is a good idea. This will help you to pay off debt faster (as the interest rate will decrease). Recalculate your monthly repayments and increase them to a comfortable new amount. Even an extra R200 per month can go a long way!
Review your emergency fund
Have you started an emergency fund yet? It’s important to ensure you’re covered for unexpected expenses. Consider bulking up or starting your emergency fund. This will save you from taking out loans or other debt when you need funds. Work towards stashing away at least three months’ worth of your salary.
Increase your retirement fund
Using a portion of your increase to bump up your retirement fund can reap great rewards! Increasing your fund by R200 monthly could mean an extra R2,000 per year towards your retirement! After sorting out your monthly expenses, allocate some of your extra money towards your retirement fund. Increasing your contribution by 1% yearly is a great place to start.
Invest in yourself
Upskilling could increase your earning potential. Consider putting some of your extra money aside for short courses or saving towards furthering your education. This could mean increasing knowledge about your current industry or giving yourself more career options.
Have some fun!
Money shouldn’t be all about expenses and planning. You’ve worked hard and should treat yourself! Depending on your new income, this could look like:
- saving for a year-end vacation
- treating yourself to a fancy meal or spa day
- investing in a new wardrobe
- travelling, locally or internationally
Good to know
Use this handy guide as inspiration and decide what works for you. Prioritise your financial needs when drawing up a budget with your new monthly income. This could mean saving more if you have less debt and vice versa.
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The information in this article is for information purposes only and does not constitute professional advice.