Many people say I’ll pay off my debt when I get a raise all while their debt increases and sometimes spend more than they make. Don’t wait to pay off debt. Let’s say you get the rase! ! Let’s look at some things not to do:
- Do not get rid of that roommate because you’re making more money. It’s the knee jerk reaction.
- Stop making payments on your debt. Interest. Interest accrues aggressively with debt especially if we’re not covering the principle.
- Upgrade to a new apartment in an upscale part of town subsequently increasing your rent.
- Buy a new car, please don’t do this! Keep driving that same car, last thing we need are more loans dipping into our raise!
A few things you should do:
- Live below your means and throw that extra income at your debt,
- Most sources say your rent should be no more than 30% of your annual income.
- Get a side hustle walking dogs, Uber, Lyft, selling stuff.
- Maybe a second job.
- Love on yourself, self care matters!
- Maybe increase your contribution to your 401K
- Understand the numbers; net vs. gross.
- Perhaps add to the emergency fund.
- Meet with a financial planner or a financial coach.
With your raise now you can go on trips using the money you saved from your sinking fund! Treat yourself to a nice dinner or a massage as long as it’s built into the budget. That’ll allow you to spend without guilt or worry. Paying off debt is like any muscle, you have to exercise it early and often to get the most out of it. We build habits and the sooner we build and practice positive habits the easier paying debt becomes. Some people live on less when they get raises, and use the increase in income to spend more. Choose wisely.