You finally got that raise at work a couple months ago, but you're still struggling to pay your bills. How is that possible?
Unfortunately, this happens to many of us. The good news is there are usually a number of things you can do to fix the situation and enjoy that raise.
1. Your Raise Kicked You Into a New Tax Bracket
Sometimes a raise is enough to kick you into a new tax bracket and when that happens, you're paying more taxes than before. This can be enough to completely eat up the raise you just earned. One way to tackle this situation is to increase the amount of money contributed to your 401k. This money is taken off before your paycheck is taxed and can make a big difference in your take home pay.
2. You Went Overboard with a Big Purchase
A very common mistake is going out and purchasing something big after getting that raise. After all, you earned it, right? While a new car may be a nice perk to that raise, it can quickly eat up any extra money you have coming in. For example, if you get a 5% raise on your previous $35,000 salary, that's only an extra $33 a week. Before you treat yourself, make sure your raise justifies the price.
3. You're Not Contributing to a Retirement Account
One of the worst mistakes you can make is not contributing to a retirement account. As stated above, money contributed to a 401k or a traditional IRA is taken off your amount earned before you're taxed. Make the most of this and contribute as much as possible.
4. You Have No Idea Where Your Money Is Going
So many people have no idea where their money goes each month. If this is the case, start recording every purchase you make for at least one month. Chances are you'll find that you're spending money on a lot of frivolous purchases, such as expensive coffees. Look over these purchases carefully and be wiser about how you spend your money.
5. You're Living Above Your Means
Last, but not least, there's a good chance you're living above your means. This happens to so many people who feel comfortable in their career and, especially, those that get regular raises. Stop making this mistake. Cut back on your expenses so that you have money left over after your bills are paid and you can put money into savings each week.
A raise doesn't always mean you're going to have a lot more money at the end of the week. In fact, some people find the opposite to be true. Whether it's taxes or poor spending habits, you may find that you're still broke after a raise. The good news is you can fix this problem.
What about you? Do you feel like you can't get ahead even after a raise?
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