How to Handle a Big Salary Increase

salary increase

money-932401_640Have you recently received a large raise? Congratulations! There is nothing quite like a bump in pay to keep you motivated as you move forward in your career. While there is more to work than just your salary, it is the major driver in keeping you focused on your long-term goals. Also, it is nice to know that your efforts are being appreciated ? and rewarded ? by your superiors.

However, along with that big salary increase comes some new responsibility. It is easy to waste money, so you might find that you are blowing through your newfound income quicker than you imagined. It is important that you understand how to manage your larger income so that you can make good decisions which position you for a successful future.

No Immediate Changes

Assuming you were successfully making ends meet at your previous salary, the best way to handle an increase in income is to to nothing at all. That?s right ? even though you are making more money, resist the temptation to spend that money on things you don?t need.

For the first month or two, simply put all of your ?extra? money into your savings account and let it sit there for a while. Most likely, you will enjoy the feeling of putting your money away for later, and you will likely continue this habit on into the future instead of giving in to lifestyle inflation.

Bigger Purchases

Of course, you don?t have to save all of your money, as it is acceptable to spend some of it on certain things you want or need. One example of this kind of purchase would be a new car. Even if your current car is still running, you may decide that you can now afford to upgrade your wheels without denting your budget too severely.

Before making this kind of purchase, do all of the necessary math and make sure you will still be well within your comfort zone in terms of a monthly budget. Also, this may be a good time to use some of that saved up money to make a large down payment which can cut the amount of interest you wind up paying on the purchase as a whole.

Nothing is Forever

Don?t make the mistake of thinking that you are guaranteed to make this much money for the rest of your career without interruption. Things will eventually change as businesses go through hard times, and people lose their jobs on occasion. It is important to keep the real world in perspective even in the face of success, so you can position yourself properly for the future.

Put away as much money as possible while still living a comfortable lifestyle so you will be able to take care of yourself and your family even if your career doesn?t exactly follow the path that you had expected. With the right attitude and a smart savings plan, you should be able to parlay your new salary into a secure financial future.


When’s the last time you got a large salary increase? Did you give in to lifestyle inflation??How could you use a salary increase to get ahead financially?


Photo courtesy of: tookapic

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  1. My uncle learned the hard way on salary increase. Last year, his company offered him a big salary increase and he moved to a bigger house, of course with a bigger mortgage to pay every month. But now, his company told him that they have a financial problem and can’t continue to give him a salary the same last year.

  2. When I get this salary increase, I still remain as my usual, no sudden change in terms of budget and expenses. All money from that increase would just be saved for investment. Nothing should change because I have my goals to achieve, and I can attain it by just having a frugal, minimalistic life.

  3. I received a significant salary increase last month. I’ve never been one to give in to lifestyle inflation though. If I do treat myself, it’s relatively small. What I usually try to do, is put some of that extra money towards my retirement account.
    I agree with you 100% on that, you can’t guarantee that you will be making that amount of money forever and that you always need to prepare yourself for the worst. Nobody can predict the future.

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