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How To Spend Less Even When You Earn More

The natural thing to do when you receive a pay raise is to spend more. We tend to possess more when we are capable of buying more. It may be a house, a new car or so on. We associate quality of life with the things we possess. We then forget that there comes a time when we reach a slippery slope and we will have nowhere else to run to. Owing to this, it is very crucial for each of us to think about saving our extra income rather than spending it. It must be used to further financial security rather than financial instability. If you find this a hard thing to do, try the tips below to keep your money in your pocket.

1.   Do the math before doing a mega splurge.

If your boss offers you a $12000 annual raise, consider how much goes to your paycheck each month before you purchase a new luxury. Given this example, you will receive about $1000 each month. That is still not inclusive of taxes so perhaps you will get a lesser amount – maybe just about $500. Such is not too big to make major purchases.

By being aware of how much really goes to your bank account each month after a raise, you will have a realistic and healthy view of your finances which will force you to save rather than spend.

2.   Go for long-lived happiness rather than short-lived highs

Of course, you deserve a treat after getting a pay raise. But it does not mean you have to spend your bonus on short-lived highs like a new car, new bags or new clothes. Rather, go for purchases that will give you lasting memories like a vacation. Taking holidays with the whole family instead of splurging on temporary stuffs tend to bring lasting happiness. New bags, new pairs of shoes, new TV set and so on will only give you momentary happiness. You will just be burning your money for nothing.

3.   Use your raise to pay your outstanding obligations

If you have an outstanding debt, like Mississauga bad credit personal loans or mortgages, settle them first before having “add ons”. By primarily clearing yourself of debts, you will be bringing yourself one step closer to financial security. This is what responsible people do. They pay what needs to be paid first before adding extras which tends to burden them in the long run. Once you’ve paid your obligations, give yourself a pat on the back and on then can you buy a small present to reward yourself.