After working tirelessly and dedicating yourself entirely on all the assignments that your boss had thrown you and completing them on time, you are now finally a good raise from your company. Indeed, this is good news and you must be on cloud nine right now and thinking of all the possible things that you could now and how the raise will improve your life now. However, the most successful men always stick to their root and never get carried away no matter how high their income gets.
You and all your family members must be really happy and now, you might think of putting an end to your long-awaited vacation or execute the plan of shifting to a bigger apartment. Well, you should know that doing this is nothing than a common pitfall and sooner or later you will find yourself in the same situation where you were before you got the raise. If you keep increasing your expenses with an increase in your income, then you won’t be ever able to attend financial stability in life.
Yes, you deserve to celebrate this happiness by treating you and your family but make sure that you don’t get carried away. You have to focus on your financial goals that you have set for your future as well rather than draining all your money on other things. Here, in this blog, we have prepared a list of common mistakes that you must avoid after getting a raise. So, let us see them one by one.
Mistake 1:- Indulging in lifestyle inflation
The concept of lifestyle inflation refers to the process where people start spending more after generating more income. This lands them in the same situation or even worse as changing the lifestyle brings lots of expenses along with it, which can be difficult to manage. There are even people who start seeing their favourite car before even they are handed over the paycheck. But if you keep draining all your income in making these bigger expenses, then you will not be left with any money in your pocket which makes you prone to a financial crisis. Thus, it is important that you resist such temptation of making a bigger purchase and keep the money directly into your saving account.
Mistake 2:- Not handling your debt well
Another major mistake that many people commit is not handling their debt properly whether they get a raise or not. Debt is something that you cannot escape with, so hiding your bills and debt notice under the desk is not going to solve your problem. Though, it might make the situation worse by damaging your credit score, a major factor that most financial institute considers from the client. For a moment, you might feel like to put down your debt repayment or reduce the amount and use it on other things, but this might create a problem for you, especially when you are dealing with high- interest debt. Somehow, if you any debt or bill that yet to be cleared and you just lack the fund, then you can apply for cheap short term loans to complete the repayment. You can later easily pay the amount by using your raised amount.
Mistake 3:- Not focusing on retirement planning
Everyone wishes to live a happy and relaxed retirement life where they can easily sit at the porch with their rocking chair and watch the setting sun. To make it a reality, you will have to start putting efforts from the very start and prepare everything in advance. Unfortunately, many people just keep the topic of their retirement for the later part of their life even they get a raise. So, if you have a retirement account, then start saving in it as soon as possible. Remember, the more you will be saving now, the more secure will be your future. Thus, if somehow you are falling behind in your retirement planning and having a balanced cash flow, then you can contribute the amount of raise that you have received in your saving account.
Wrapping up, if you are getting a raise, then you should make a plan to spend it wisely rather than spending it blindly on making an unnecessary purchase.