Everyone loves to get a pay raise because more money always makes life easier, right? Sadly, that isn't always the case for us. Over the years my husband has gotten his fair share of pay increases, and for a while we began budgeting the money into our expenses right away. That is until I woke up and realized we were doing things all wrong. This is why we ignore pay raises, how we manage our finances without the money, and what we do with the additional income now.
Why we ignore raises.
In the past, when my husband received a pay increase the money was immediately added into our budget to cover expenses. However, it wasn't long until we noticed a disturbing pattern that was revealing itself; the more money he made, the more we spent. It seemed like a never ending cycle. Shortly after the money started coming in, we would find a new place to spend it. For example, we once took on a data plan for our wireless phones, and another time we added expensive features to our cable TV plan. The result was always the same, we would quickly go from having a little extra money to running short on funds again, and I knew that wasn't the way it should be.
How we manage our finances without the extra money.
My friends often ask me if managing our finances would be easier if we used the money from raises to make ends meet. The truth is, yes, things might be a little less stressful if we accounted for the extra income; however, we aren't defaulting on any accounts with our current budget, so I think it's safe to leave things the way they are. In fact, we've recently paid off our auto loan and we are close to paying off our final credit card balance. All of which we've done without factoring in my husband's last pay increase.
What we actually do with the additional income.
My husband has had two pay raises since we made the change. We initially decided to move all the extra money into our savings account, but after a few months we ditched that plan. Currently, the money sits in our checking account where it earns a very small amount of interest. I know it would make more sense to put it in our savings account, but since it isn't actually savings, I don't want to mix the two just yet.
We do have a plan for some of our "savings." We planning to start upgrading parts of our home next year, so some of the additional income will be used to fund a portion of those renovations.
I credit a well-thought-out budget, smart spending, and self-control for getting us to a place where we are secure enough financially to allow this plan to work. I'm positive that if we keep on our current path we will not only meet, but will also surpass all of our financial goals.
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