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    So you got a raise. Congrats! It feels good to be rewarded — especially when you’ve been working hard and putting in the time.

    Don’t get carried away with your celebrations, though.

    While a raise is certainly worth a “cheers” with your loved ones, it can be easy to fall into the “earn more, spend more” trap — and that basically negates getting a raise in the first place!

    Want to make sure you’re using your new income upgrade to its fullest? Here are nine ways to make it happen:

    1. Up your retirement contributions.

    If you’ve been operating on your old income, you don’t technically *need* that extra cash — at least not right now. When you might need it? That’d be after you retire

    Consider putting your extra cash toward your 401K, IRA, or another retirement account. Remember, the more you save, the more comfortable those twilight years will be. (Or maybe you could even retire early!)

    2. Pay off (or pay down) some debts.

    Since you’ve got the extra cash, consider putting a little more toward your car loan or mortgage each month. It will pare down your principal balance faster and also help reduce the amount of interest you’ll pay over time. Just make sure you tackle the highest-interest ones first (it will free up more cash to put toward those other debts later on).

    Also, just something to think about here: If you do put extra toward your debts? Then your raise is actually worth more in the long run. A year or two down the road, you could be debt-free (depending on how much debt you have), pocketing even more of that take-home pay than ever before.

    3. Put it toward your down payment.

    If you’re hoping to buy a home in the near future, you can also put some of those extra earnings in a savings account for your down payment, closing costs, moving expenses, and other items you’ll need to pay for when buying a house. 

    Make sure to compare savings accounts before you start stowing away cash, though. Interest rates vary from bank to bank and so do maintenance fees.

    4. Upgrade your house (or make repairs).

    If you own a home, pour some of those funds into repairing it, maintaining it or, better yet, improving it. If you choose wisely, you might just improve your home’s value in the process. 

    5. Stow it away for your kids’ college tuition.

    Have little ones? It’s never too early (or too late) to start saving up for college. Add some extra funds to their 529 plans, start up a savings account, or purchase a few savings bonds. Think of it as investing in their future (and the world’s, really). 

    6. Start an emergency fund.

    If you have dependents, a home, or are just getting older, having an emergency fund is more important than ever. Experts generally recommend having enough saved up to cover at least six months of housing costs and expenses, just in case (this covers you in the event you lose your job or experience a dip in income). 

    In the event you already have an emergency fund, consider adding a little more. If you haven’t started one yet, hop on it now — as soon as that first upgraded paycheck hits.

    7. Give some to charity.

    You can also do some good with your new funds. Donate it to a charity or cause you care about, or put it toward a local nonprofit group. The big perk here? You get to help people and reduce your tax burden in the process. (If your new income pushes you into a new tax bracket, this can be a huge advantage.) 

    8. Invest it.

    Your retirement accounts and kids’ college savings are great ways to use that money, but there are other ways to invest it, too. You can buy real estate, bonds, gold, silver, or even invest it in a business venture. If you go this route, consider talking to a financial advisor first just to be safe.

    9. Put it toward your career.

    Finally, think about investing your new cash in yourself. Take a new course, enroll in a graduate degree program, or brush up on your skills in some other way. It will likely lead to another rung up on that career ladder and, yes, another raise down the road. 

    Don’t Forget to Plan for Your Taxes

    As your income grows, your tax liabilities will change, too. You may even find yourself in a new tax bracket, or your new income may disqualify you for certain deductions or credits you were previously taking advantage of. Make sure you’re clear on the tax implications of your new salary before you spend (or invest) too much of those new earnings and talk to your HR department about increasing your withholdings just to be safe. 

    Are you thinking of using that extra income to buy a home? We can help. Get in touch to get pre-approved for your mortgage loan today.

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