If you want to be wise about your money, you need to be cautious about your financial moves. Every decision that you make today, big and small, will influence the type of life that you will have in the future. That is how powerful your finances can be. To set yourself up for financial success, you need to start early. You have to be careful about how you will use your money so you can continuously improve your net worth.
Most people try to improve themselves so they can enjoy an income increase. They believe that having enough money is the key to financial success. While having more money will definitely increase your chances and make wealth building easier, it will not guarantee that you will be successful. The key to building real wealth and monetary success lies in your financial moves.
The way you react to money, especially with a paycheck raise, will determine how successful you will be in the future. While it is your every right to use it as you wish, you need to consider how this salary increase should be used to improve your future. Do not be too quick to celebrate and splurge on that new TV or car. Do not start looking for a second home – unless you intend to use it for business. Think carefully about how you will use your money. A raise in your income will open a lot of doors – but it is up to you to choose which one will lead to opportunities and the ones that will end up as your financial demise.
3 moves you need to make after getting a salary increase
A salary raise is a great thing. But the extent of the improvement that it will bring to your life will depend on how you will make your financial moves after receiving it. If you do not react to it the right way, the positive effect that it will have on your finances will only be temporary. However, if your next move is the right one, then it can propel you towards financial greatness.
According to an article published on CNN.com, the pay raises for this year, at least for the rank-and-file, will be an average of 3%. This data was taken from a survey of large employers – more than 1,000 of them. This increase is the same as the rate in 2015. While it may not seem like a lot, experts are revealing that this is still ahead of the inflation rate – which is 0.1%. In case you exclude the food and gas prices, it will be marked at 1.7%. An even greater news is that most companies in the survey plan to offer a raise. Only 1.9% of the companies that participated in the survey revealed that they do not have plans of giving their employees a raise.
This statistic means you have a high chance of getting a raise this 2016. Once you are given that paycheck raise, what financial moves should you do? Here are three that we think are the smartest moves that you can do.
Continue living like nothing happened.
The first option that you have is to do nothing. Act like nothing happened to your finances. Continue using the same budget. Keep on spending the same amount each month. Do not add expenses and do not buy anything new. Do not do anything different that will make your expenses higher than it was the previous month. If you do not change anything and you act like you did not get a raise, you can put that increase in your savings account. You will not really miss anything because you will be living as you did before. Saving will not be too much of a burden.
Invest in yourself.
This may seem vague and difficult to measure when compared to other financial moves that you can do. But if you choose carefully, you can opt to use your raise to invest in yourself. Just make sure that the investment that you will do is something that will help you earn more. The most obvious is putting your money in the stock market. Or you can opt for other investments. For instance, if you think that you will function better at work if you buy a new gadget, then do it. Reward yourself. If you think that enrolling in a course will help you get a promotion or another raise, then invest in that. When you choose this financial move, make sure that you will choose an investment that will not compromise your other expenses. Be honest with yourself – especially with what you believe will be beneficial to your well-being. If it will help you earn more, then invest in it. The only way that you can grow your personal wealth is by investing.
Be aggressive in paying off debt.
In case you are confused about paying off debt or saving money, think about the interest rate of both. If you notice, the interest of your debt is usually bigger than that of your savings account. If you pay off your balance, that would save you more money in the long run. In case you got a lump sum increase, you may want to consider using debt settlement to wipe out your credit card balance. You can use this money to negotiate with your creditors. Ask them to allow you to pay only a portion of your debts in lump sum and have the rest forgiven. This is possible if you use debt settlement as your debt solution. Look at the amount that you got from your raise and then start negotiating with your creditors. In case your income increase is reflected in a higher monthly salary – that is okay. You can take the extra money and make your monthly contributions bigger. That way, you can get out of debt a lot faster.
How self-made millionaires react to an income increase
If you really want to make the right financial moves, you have to look at what the successful folks are doing. You need to look at how self-made millionaires have done it. To help you, here are three of the things that financially successful people do whenever they get an increase in their financial cash flow.
They set goals.
This is usually where they put their income increase. They make sure that they always have a financial goal. According to an infographic from Entrepreneur.com, 80% of those who are wealthy focus on accomplishing a goal. If they finish one, they set another. This keeps them from using their money on unnecessary expenses. It keeps them focused and consistently keeps their frame of mind on an achievement.If you want to be successful, you have to do what they do – always have a financial goal.
They think of money as a tool.
This means a lot of things. A sudden flow of income will not make them go crazy with happiness that they act like one-day millionaires. Money does not rule their life – they rule it. They will not react like an increase in income will make them superior than others. It is the tool that will make them reach their dreams and it does not define who they are or what they have accomplished in life. They keep their head grounded and that enables them to make rational decisions because of the way they view their money.
They use it to solve a problem.
Finally, if you want to make the same financial moves as the rich and famous, you need to treat your paycheck raise as a way to solve a problem. To be specific, you can use it to invest in something that will help solve something. By solving this problem, you can offer it to people who have the same issues and they will pay you for your problem solving idea. For instance, Dave Ramsey makes a living out of helping people get out of debt and manage their finances. He had an idea that solved his own problems and he shared it with the world – and he gets paid for it. According to an article published on BusinessInsider.com, millionaires generate their money from ideas that help solve a problem. If that problem is recurring, then people will keep on paying you to help solve it. If you set it up properly, you can make it a passive income so you do not have to do anything and it will keep on earning you some money.
Here are some words of wisdom from female self-made millionaires and billionaires. You may be able to get something out of them so you can make the right financial moves.