Northwestern Mutual: How to Make the Most of a Big Raise

A raise is an exciting accomplishment—proof of the value someone has added to their company. Plus, a bigger paycheck could make a meaningful difference in individuals’ and families’ daily lives. A raise is worth celebrating, but how much of it should someone save, invest, or splurge? Read on to learn about some money moves, savings tips, and worthwhile purchases to make the most of a raise.

Update the budget.

A solid budget should account for major financial changes, including a substantial salary increase. “After a big raise, employees should take time to reevaluate their budgets,” said Northwestern Mutual Wealth Management Advisor James Wheeler in Greensboro, N.C. “The boost may make it possible to meet existing financial goals more quickly, like repaying debts, buying a car, or even moving into a larger space.” Some families may choose to start saving more or spend more on things they weren’t able to previously. Wherever the additional money is allocated, reassessing the budget can make it easier to see how a raise fits into the bigger financial picture.

Increase retirement contributions.

In the early years of someone’s career, they may only have the resources to make minimal retirement contributions. Those small investments are important. However, a higher income can be an opportunity for employees to contribute more to retirement—whether they’re contributing the same percentage of their income as before, or opting for a larger proportion. The right amount depends on an individual’s circumstances and income following the raise.

Get life insurance.

While life insurance may not be the first thing that comes to mind, a raise can be a good reason for professionals to reevaluate their coverage. This is an opportunity for professionals to consider whether they need more coverage to match their new, higher salary, and look into whether it’s worth getting more whole life insurance in order to take advantage of the additional benefits it offers like accumulating cash value, which you can access during your lifetime.

Enjoy it.

Earning a significant raise takes commitment, time, and hard work. It’s worthwhile to honor that achievement by celebrating. “Whether a vacation, a night out, or a purchase they’ve been eyeing for a while, professionals should take time to reward themselves and enjoy their accomplishment,” said Wheeler.

Go back to school.

Whether it’s an advanced degree or a short online course, further education can be expensive. However, the payoff could include more earning potential and a more robust skillset, increased self-confidence, better job opportunities, and personal growth. It’s common to delay earning a degree or taking a fascinating course until it fits more neatly into one’s budget, and a big raise could provide the financial opportunity to go back to school.

The bottom line

A significant raise is an exciting career milestone that comes with new opportunities and responsibilities. It’s also vital to spend and save wisely. Fortunately, careful budgeting makes investing in tomorrow possible without sacrificing the opportunity to celebrate the accomplishment today.

Northwestern Mutual is the marketing name for The Northwestern Mutual Life Insurance
Company (NM) and its subsidiaries in Milwaukee, WI.

Source: Northwestern Mutual