You’ve worked hard, and you’ve gotten the raise or promotion you wanted. Now what?
Yes, a little celebration is in order and some of your newfound income can go towards a fun dinner out or a self-care upgrade. But it’s so easy for a raise to suddenly disappear; money has a way of getting spent, whether you are deliberate about it or not -- so don’t you want to make sure it’s going somewhere you really want it to, and not just into a little more online shopping?
A raise is an opportunity to truly level up, so make sure you make the most of it.
Every professional advancement you make throughout your career is an opportunity to reinvest in yourself and your goals. How you invest and reinvest in yourself over time is critical to your progress both in your career and in your personal life.
If you want to make the most of a raise, follow the tips below to make sure it can make a life-changing difference.
Where you should invest when you get a raise/promotion
It’s shockingly easy to take a raise for granted. You’re so excited initially to see the additional dollars on your paycheck, but that fades, sometimes right away, especially if you simply start spending the extra money in a passive way.
Instead of letting this happen to you, here are 5 ways to invest your next raise or promotion so you fully benefit from the step up you worked so hard for.
1. Build or bolster your emergency fund
Though it’s not the flashiest, most exciting way to spend money from your raise, creating or improving an emergency fund is most definitely the first thing you should do with any salary increase you get.
A personal financial safety net for yourself and your family is essential. It’s recommended that you have 3-6 months’ worth of living expenses saved, which all depends on your lifestyle, monthly costs and expenses, and income. Think about what you spend on rent, groceries, gas, daycare, and other essentials every month, and then work towards having 6 months’ worth of cash saved.
This safety net is important to have, even if you don’t think you’re really in danger of losing your job. Life is full of unexpected challenges (companies downsize, worldwide pandemics happen, etc), and even if you don’t end up out of a job, there are still many situations where you can find yourself in need of significant capital on hand.
You could need an expensive medical procedure, a house repair, a new car, a last minute plane ticket -- and you don’t want to have to go into credit card debt to make these critical life choices.
If you don’t already have an emergency fund started, set up a specific account that you can automatically contribute your increased earnings to (most banks allow you to set up an additional fee-free savings account at no cost). Set up a recurring deposit every month, so that you don’t even have to think about moving the money. Your savings will slowly build without you having to lift a finger or notice a change in your lifestyle.
Grow this account until you have the equivalent of at least 6 months’ worth of expenses saved. Once you have that, you can keep saving, or look into other options, such as...
2. Automate your retirement savings
Unlike an emergency fund, which is usually held in a standard bank savings account with a relatively low interest rate, a retirement account can earn significant interest over time (especially if you contribute consistently over many years).
Automatically contributing to accounts each month is a great way to save your money before you can spend it. Putting it in a retirement account is an amazingly effective way to make your money grow, thanks to compound interest.
When you contribute to retirement accounts, the money will most likely be pre-tax dollars, lowering your taxable income. That’s a benefit right there -- plus, retirement accounts are usually invested in higher-growth options like stocks, which means you have the potential to earn much more than just basic interest in a bank account.
If your employer offers matching contributions, that’s free money! Use your raise to meet any necessary requirements to enjoy this perk fully. (That is, if your employer matches 401(k) or other retirement contributions up to 3%, make sure you are putting at least 3% of your salary into your retirement fund so that you get the full match.)
Retirement funds are not meant to be used for emergency funds or regular savings, because there are penalties if you withdraw your money early. That is why it’s important to make sure you have your emergency fund first, before you start investing in the future.
3. Revamp your office supplies
We’ve been thinking big picture so far -- but this is also an opportunity to improve your day-to-day life as well. What changes could you make to improve your work life through better tools or more comfortable surroundings?
A raise tied with a promotion is the perfect opportunity to invest in yourself through the office supplies and products you use everyday. Your new title and increased responsibilities should be reflected in the quality of the materials you use.
- The Founders Notebook or the Executive Notebook. A quality, business-focused notebook will add a professional, luxurious, and highly functional touch to your day is like a statement piece or a nice watch. The careful attention to detail you put into making yourself look the part will come through when you pull out this professional notebook.
- Lamy LX Metallic Ballpoint Pen. Invest in a pen like the Lamy LX for its sophisticated look and flawless writing. Clients and colleagues alike will take notice, and you’ll enjoy the comfort of a top-tier writing instrument.
- Palomino Blackwing Pencil. If you prefer using pencils, these iconic pencils have been used by artists around the world, including John Steinbeck.
- Kunisawa’s Find Sticky Memo Pad. A luxurious sticky note pad with copper foiling? Yes, please. With wonderfully smooth paper, this pad has the looks to grab people’s attention and the paper to make you feel like you’re living the good life. We love the attention to detail this company gives to all of its products.
- Leone Dellera Gold Plated Paper Clips. No rusting, no bending, and a sturdy shape, these paper clips come in a dispenser that is as nice as the clip, so you can quickly and easily display it on your desk. Small details like these add up to elevated desk style.
- Custom Planner/Book Sleeve. Nothing elevates your planner more than a custom planner sleeve; it’s the perfect way to carry your planner safely from meeting to meeting or simply keep it in pristine condition all year long.
4. Invest in professional attire that reflects your promotion
Using your raise to invest in professional clothing pieces that reflect your promotion will go a long way to not only making you feel confident and ready to lead, but also inspire a similar confidence in those around you. Humans are visual creatures, so these kinds of changes actually do make a difference in terms of how seriously people will take you.
Are upgraded clothes essential? No -- being good at your job is always the most important thing. But if you are stepping into a leadership role, you might find that dressing the part really does make an impact both on how you feel, how you carry yourself, and how the people around you react to you.
A side benefit of upgrading your wardrobe is that quality pieces do tend to last longer, so you are making a longer term investment in clothes that will carry you through many seasons.
5. Give your education and professional profile a boost
Build your credentials and professional skills with a class, certification, book, networking event or workshop, especially if your employer doesn’t or can’t offer reimbursement.
Expanding your educational horizons by investing in your knowledge and skills is a great way to add value to yourself. And don’t dismiss or forget about activities that tangentially support skills you use within your profession directly; for example, taking a painting or calligraphy class can enhance your creativity.
Look for resources and opportunities big and small that you can work towards over time or complete in just a day; anything that will challenge you can help boost your abilities and potential.
Alternately, you can use your raise to hire someone to review and update your resume, design business cards or a new website, or take a new professional profile picture. The higher you rise in your career, different people with different expectations will be looking for you. Make sure you meet them with the best possible resources.