U.S. employers plan to raise workers’ salaries by an average of 4% this year, according to a July global survey by consulting firm Willis Towers Watson. If you’re getting a pay bump, congrats. Just lookout for lifestyle inflation, aka lifestyle creep — when a boost in income just turns into higher spending on non-essentials. While that’s tempting, and it’s OK to spend some of your hard-earned raise to treat yourself, make sure to use some of the money to improve your finances with these three moves:
- Fast-track paying off high-interest debt. Put more money toward paying off your credit cards each month or toward loan principal to save money on interest payments. Someone with a $20,000 auto loan, for example, with 5% interest and making monthly payments of $250 would pay a total of $4,378 in interest. But paying an extra $100 per month would get rid of the loan about two and a half years faster and save $1,488 in interest.
- Invest more. Investing can be a powerful way to grow your money long term. Start with tax-advantaged retirement accounts, like your 401(k) or an IRA. You can contribute $7,000 to an IRA in 2024 — $145.83 per week starting in February will max out your account by the end of the year.
- Build your emergency savings. Set aside money for unexpected expenses. It can help you avoid using a credit card (and possibly going into debt) the next time an appliance breaks or you get a surprise medical bill. A high-yield savings account can help these funds grow faster, too. Several offer APYs higher than 5% and still allow you to access your money at any time.
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