Congratulations! You just received a raise from your employer. Maybe you worked up the courage to ask your boss for it, or perhaps it’s a merit increase you get every year. Either way, you should take the time to decide what you want to do with your increase in income.
If you are looking for different options to put your money to good use, check out our suggestions below to figure out the best way to spend your hard-earned raise.
Save Up for a Purchase
With some extra money coming to you each month, it may be the perfect opportunity to save up for a project you’ve always wanted to accomplish. Whether it’s a home renovation, starting your own business, or going on your dream vacation, you can set aside the difference in your paycheck in preparation for your new idea.
Spending time and money on your home is not only satisfying, but it can also mean increasing the value of your property. Renovations on kitchens, bathrooms, and living spaces will make your home easier to sell as these updated features could be more attractive to prospective buyers. After receiving your raise, you could invest in your house by completing a renovation project or purchasing a home warranty. Either option can be extremely beneficial if you plan on selling your home in the near future. A warranty policy can cover repairs or replacements for small appliances or larger systems like your plumbing, which many future homeowners may appreciate.
For an inspiring entrepreneur, you may even be considering starting a side hustle. To launch your own business, create a plan for finding new clients, hiring employees, and delivering products. Depending on the type of business you want to create, you may need to save up a significant amount of money to help you get by in tough situations. Running your own business can be challenging, but by creating a strategic plan on dealing with difficult scenarios you will have a better chance of being successful.
Of course, you can always set aside your earnings for other bucket list items like going on a family vacation or visiting an exotic location you’ve always wanted to see. No matter what type of trip you decide to spend your paycheck on, make sure you take plenty of time to research the area before purchasing plane tickets or booking reservations. While traveling still might be on hold for certain locations, you should still take the opportunity to plan out an itinerary and budget for your future trips.
Donate to Your Favorite Charity
Besides saving or spending your money on a project, you can donate to your favorite charity. With so many good causes to choose from, it may be hard to decide who you should give money to. To make your choice simpler, you should check with your employer to see if they have any programs to match donations. Some companies will encourage their employees to donate a portion of their paycheck by matching their contributions to a particular charity. Donating to a foundation will also allow you to claim a tax break on your yearly return.
Learn How to Invest
Figuring out how and where to invest your additional income may seem intimidating, especially if you are new to the idea. However, by researching available resources and asking for professional advice, you can create a deeper understanding of the market while reaching your financial goals quicker.
Purchasing stocks in a company is an easy and effective way to start investing. As you acquire shares, you are buying into the company as a stockholder. This means you own a small portion of the business, and as its profits grow, the value of your stocks will too. You may also receive dividends from the company based on the number of shares you own. Once you are ready to liquidate your investments, you can simply sell your stocks and make a profit to save for the future or to be reinvested in another company.
Additionally, you can invest your money by purchasing bonds. Unlike stocks, obtaining bonds doesn't signify owning a portion of a company. Bonds are more like loaning your money to an organization for a set amount of time. Once that loan is finished, you can then reclaim your investment with some additional interest. Since bonds don’t rely on a company’s profits or performance for its value, they are less risky than stocks.
If you are looking to invest a more significant amount of money, a mutual fund might be a better option. Instead of purchasing a single stock at a time, a mutual fund allows you to buy a group of stocks from different companies in one transaction. Most funds also have managers that will help you decide what stocks to choose. Though this is helpful for new investors, managers take a percentage of your earnings as a commission.
No matter what you decide to do with your raise, you must analyze your options to make the best choice for your lifestyle. Whether you save your money for a passion project, donate it to a charity, or invest in the stock market, make sure to take the time to research and decide on an option that will make you happy.