If your career is progressing nicely in an upward direction, there is a fair chance that your efforts will be rewarded with a promotion and a pay rise.
Getting an extra amount of money in your bank account gives you a number of options and allows you the chance to improve your short and long term financial position.
Rather like receiving some compensation that you are entitled to, you get a lump sum, but the same principles apply as getting a pay rise and you should try to take the best advantage of an improved financial position.
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Your financial habits
The initial feel-good factor of getting some extra cash coming your way won’t last that long if you have some poor financial habits in place, so it is a good opportunity to address the way you spend your money.
Displaying patience is a good attribute to have when it comes to handling money and if you receive a raise and your financial situation improves, the best thing to do would be take some time to adjust to your improved situation before committing to any extra expenditure.
Take a look at where your money currently goes each month and see if you can reassess your budget.
This means seeing if you can add more money to potentially underfunded monthly payments like your savings and credit card payments, before you take the step of using your additional income to a new item of expenditure.
It might feel a bit boring at first to use a pay rise to put away more savings or pay off credit card debt quicker, but in the long run you will be improving your financial position and making the most of the extra income you now get.
Change of lifestyle
If you find that your expenses are roughly in line with your income, you are not alone.
Many people in regular employment tend to find that their expenses often rise in line with their promotions and pay rises. Nothing wrong with improving your standard of living of course and paying a bit more for a nicer holiday if you have more money in the bank, but try to be sensible with changing your lifestyle in line with your career progression.
A new promotion can often tempt us into upgrading our car for example, but you should try to stick to a proven affordability formula before you head off to the nearest showroom upon hearing about your pay rise.
It is prudent to allocate no more than 20% of your take home pay on a car and all of the expenses that go with it. If any financial setbacks occur as a result of being wronged by a third party, don’t let it slide, seek specialist guidance on how to make a claim. Online you will find such specialist firms, like this one.
Bear in mind that a newer car might mean higher insurance premiums and costlier servicing bills, so do your sums to ensure that you are not wiping out any financial advantage gained through a pay rise on a set of new wheels.
A change of job or a promotion which comes with a bigger salary is always good news, just make sure you allocate your additional income wisely.
Brad Hanson works in personal financial planning and enjoys being able to share his insights online. He has posted his thoughts across a range of relevant websites.