You Worked Hard For That Pay Rise, Here’s How To Make The Most Of It
Have you ever noticed how your living expenses increase the more you earn? Perhaps you’ve worked hard for a pay rise or have started a side hustle, only to realise you’re not saving any extra money than you were previously. How?!
If you can relate to this, it’s likely you’re living beyond your means.
It’s only natural to want to crank your lifestyle up a notch when you start to earn more, even though iy cancels out that extra income (do you see the irony?). It’s an easy trap to fall into. Here’s how to rein it in, and ensure you’re making every extra dollar count.
Keep your student mindset after securing your first ‘real’ job
When it comes to thrifty living, students have this down-pat. So why is it that as soon as we graduate and enter the workforce we’re scrounging for pennies the day before pay-day, despite earning more?
It’s possible we get a bit over-excited at the idea of a full-time salary. We switch the mi goreng in favour of eating out, get Ubers instead of catching the bus and boot our roommates in favour of a trendy loft-style studio.
Sure, we can’t drink cask wine and eat mac and cheese five nights a week for the rest of our lives (and what a shame, amiright?), but keeping that thrifty mindset into your 20s despite what your pay cheque says will help you save.
Resist the temptation to spend more when you earn more
When your income increases it’s tempting to spend more. You might start buying two coffees a day instead of your usual one, and adding a sourdough toastie to your order instead of making one at home.
But you earn more, so it’s OK, right? Well sure, but not if you want to save. This can quickly turn into a vicious cycle of earning more, spending more, earning more, spending more. You may now be able to afford that second coffee, but do you really need it? I can almost hear you protectively clutching your latte and screaming I NEED DIS at the screen, but let’s be honest, you probably don’t.
If you’re going to spend more each time your income increases, it defeats the purpose of earning more. Stick to your previous pre-pay-rise budget. And if you don’t have a budget yet, for the love of God, create one.
Treat yo’ self – but not too much
Increasing your income is no easy feat. You worked really hard for that pay rise, dammit, so you deserve to celebrate. So mark the occasion with a nice dinner out, buy yourself that item you’ve been eyeing off or even go nuts with a weekend away. Get it out of your system.
But after this, keep all your previous spending habits intact. Don’t treat yourself to the extent that your pay rise is completely consumed by your new lavish lifestyle. In fact, if you really want to make the most of your pay rise, you could try to pretend that you didn’t get a pay rise at all (after a weekend of treating yo’ self, of course!).
“The drinks are on me!”
We’ve all said this on a night out after a few too many when we start feeling overly-generous. Well, getting a pay rise can have the same effect as several margaritas. You’re happy and excited, and feel the need to express this by shouting your friends fancy drinks and picking up the bill at brunch.
Calm down, money-bags. If there’s one thing we’ve learned from Kanye West (and there are so, so many things) it’s that buying unnecessary gifts for others can quickly result in a $53 million debt. It could happen to anyone, OK guys.
Think about your income over one year, not one day
When you find out you’re getting a pay rise, you sit there like Mr. Krabs from SpongeBob SquarePants with dollar signs in your eyes. No matter what the figure is, you immediately imagine the whole lot in piles of cold-hard cash sitting comfortably in the bank with your name on it. Sorry to be Negative-Nancy, but this isn’t really the case.
Lets just say you get a $5000 pay rise. Realistically, after tax and your student loan comes into effect (ah, that good ol’ HECS debt we all like to pretend doesn’t exist), over a year you could only take home around $3000 or even less. That’s just over $50 a week extra, which can easily disappear if you’re shouting yourself a second coffee and toasty each day.
Using an online salary calculator to get a clear understanding of what your pay rise actual is will help motivate you to spend less. And if you’re still working on the pay-rise part, we’ve got some tips to help you out with this, too.
Alison is a banking and investment journo by day and freelance writer in her spare time. She enjoys helping others manage their finances instead of dealing with her own.