I just received my yearly merit increase: a whopping 3% to stay right in line with inflation. Don’t get me wrong, I’m very appreciative of the extra money, but in the grand scheme of things, how much will this improve my life? Will I be able to buy more, spend more, save more?
In the same week, I also got my tax refund from the government: $1,500. This is actually less than 3% of my salary, but for some reason it feels like a significant chunk of change! Now let’s figure out what to do with all this money.
The most mundane option would be to save all this money. But I think it’s important to set realistic goals. I know it would be easy to spend this on a big impulse purchase but I think a compromise is the best option. Save half your refund and spend the rest on something you actually need. Personally, I get a strange satisfaction out of saving money, so I’ll probably save the entire amount, but that might not be feasible for everyone.
If you’ve been following this blog, you know I’ve provided you with several money saving tactics. Don’t go and blow all your hard work on one frivolous purchase. This situation reminds me of people who are trying to lose weight. They work out so hard during the week, eat healthy and then load up on their cheat day and take a huge step back. Don’t be that person!
Boost Your Retirement Accounts
I’ve already increased my 401k contribution from 15 to 18%. I always recommend increasing your retirement savings by whatever percent raise you get. A 3% difference in after-tax income will hardly be noticed on a single paycheck. But this is probably the easiest way to steadily increase your retirement contribution. If you’re fortunate enough to get a raise or yearly merit increases, raise your 401k contribution amount ASAP.
A lot of people think they would be happier making just 5 or 10% more. But the truth is, as your income grows, so does your lifestyle. Most people prefer the illusion of wealth; they would rather look wealthy than be wealthy. Why else would so many Americans be inundated with such high debt? Set your goals so that your lifestyle will lag your income. When your return on your assets is greater than your contributions you will have achieved ‘Financial Happiness.’
Readers, what are you going to do with your refund checks? Anyone else get a raise this year?
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