Do You Increase Your Expenses When You Get A Raise?

What do you do with that extra money after a raise or a promotion? It can be so tempting to buy a new car, TV, furniture, or go on a shopping spree. I am not saying you shouldn't treat yourself after a raise or a promotion, but I do think it's more important to delay gratification by using that extra money to pay down debt and increase your savings before going on a shopping spree.

I remember when I use to work at the bank and I would come across customers who would apply for a mortgage based on the raise that was yet to come. These people were wanting to spend money they didn't even get yet. Why on earth would you want to do that to yourself. I mean seriously, that kind of pressure is just crazy. Why wouldn't they want to put that money into a savings account to have a cushion just in case an emergency happens. What's even more crazy is I would come across customers who would do this kind of thing being the only bread winner. Huh! So you know what would happen if that person's hours at work were to get reduced or if they got laid off. That family would be screwed.

Getting out of debt and investing is the best thing you could do for yourself and your family when more money comes your way. There are so many unpredictable things that can happen in life. Imagine having $500,000 worth of debt, minimal or no savings and finding out that you're about to have a baby, or that your spouse has an illness causing him to no longer be able to work, or if you or both you and your spouse loose your job. The truth is these things happen to people every single day.

Now imagine if one of these things happened and you had no debt and $500,000 in savings. Your situation wouldn't look as bad at all, in fact your stress level would be reduced significantly. Dealing with money problems on top of an unexpected pregnancy or a job loss can be devastating. Why even consider putting yourself through that. The more you plan for those emergencies, the less of an emergency it actually is.