Got a Pay Raise? Increase Your Investments & Not Your Spends

One of the nicer decisions in life to make is what to do with a pay rise! It is very tempting to take on a new gym membership and eat out a nicer restaurants, but with a little bit of planning that pay rise can be put to work to create more money!

Pre-pay Your Home Loan

With interest rates so low and mortgage payments higher, paying off your mortgage early makes a lot of sense. You need to check the facilities on your mortgage account first though, some banks may penalise you if you pay off more than a certain amount.

Check Your Retirement Plans

This might sound a bit dull, a brand new car would be a lot more fun, but making your retirement funds work for you is very important. A little extra money goes a long way in retirement investment terms, particularly if you have a while to go until you retire. You could use the new money to diversify your retirement portfolio, making them more future proof.

Make Sure You Create a Contingency Fund as a Safety Buffer

Having a few months’ worth of living expenses is a really wise idea. Putting your extra money into an easy access savings account will not make a lot of interest but it is guaranteed not to lose money and you can access the money easily if you need it. Remember that only the first 1 lakh in a bank is protected by the DICGC. If you plan to have more than that in an account, it is best to put it in two accounts with separate banks.

Pay Off Debt

Debts are all costing you money, especially credit and store cards. Consider consolidating your debts to get a lower interest rate and then using your extra money to pay the debt off. You will be better off in the long term!

Start an Investment Plan

If you are already paying as much as you can off of your mortgage, you have paid off your debts, your retirement plans are good and you have an easy access safety buffer, firstly, well done! You are clearly very astute with money! Secondly, you could look at an investment plan. Before investing your new cash you need to decide how much risk you are willing to take and how long you want it to be before you see a return. There are lots of types of investment plans available. Some are managed for you, others you have more responsibility over the management. Some are long term, some shorter.

While it is important to be sensible with your extra money and to make it work for you, it is also important to celebrate your achievement! So many companies are having pay freezes at the moment, some have had for years, and you have clearly done really well to get a pay rise! Go out and celebrate!

Congratulations on your new pay rise!

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