What to Do (and Not Do) When You Get a Yearly Raise

First: Treat a Raise as an Opportunity, Not an Obligation

A raise doesn’t mean you suddenly need more things. It simply gives you more options. The goal isn’t to restrict yourself—it’s to use the increase intentionally so your future benefits from it too.

What to Do With a Raise

1. Pay Yourself First (Before You Get Used to the Money)

One of the most powerful moves you can make is to direct part of your raise before it ever hits your checking account.

That might mean:

• Increasing retirement contributions

• Adding to an emergency fund

• Investing in a taxable brokerage account

Because this money was never part of your previous budget, you’re far less likely to miss it. Small increases here can quietly compound into meaningful progress over time.

2. Tackle High-Interest Debt

If you’re carrying credit card debt or other high-interest balances, a raise can be a chance to finally make a dent.

Using part of your raise to:

• Accelerate payments

• Pay off a balance completely

• Reduce interest costs

…can create long-term relief that feels better than any short-term purchase.

3. Create a Small “Fun Money” Category

Being responsible doesn’t mean being joyless.

Setting aside a modest portion of your raise for fun helps prevent burnout and resentment. This might look like:

• Occasional meals out

• A hobby you enjoy

• Small upgrades you truly value

The key is intention. Fun money works best when it’s planned, not accidental.

4. Consider Donating a Portion

If you’re able, giving some of your raise away can be incredibly grounding.

It doesn’t have to be a large amount—just enough to remind you that money can be a tool for good, not just consumption. Donations can reflect your values and add meaning to your financial growth.

What Not to Do With a Raise

1. Don’t Let Lifestyle Creep Take Over

Lifestyle creep happens quietly:

• Slightly nicer groceries

• More convenience purchases

• Subscriptions you barely notice

None of these things are inherently bad, but when they all grow together, your raise disappears—and your financial position stays the same.

The goal isn’t to freeze your life in place, but to upgrade selectively, not automatically.

2. Don’t Commit to New Fixed Expenses Right Away

A raise can make long-term commitments feel affordable:

• Higher rent or mortgage

• Car upgrades

• Ongoing monthly subscriptions

Before increasing fixed costs, give yourself time to see how the raise fits into your overall financial picture. Flexibility is one of the most valuable things extra income can buy.

3. Don’t Assume a Raise Will Fix Everything

A raise can help—but it won’t replace good habits.

Without intention, more income often leads to more spending. Real financial progress comes from consistency, awareness, and patience—not just higher pay.

A Balanced Approach Works Best

You don’t have to choose between being responsible and enjoying your life. A thoughtful raise plan can include:

• Saving and investing

• Debt reduction

• A little fun

• Giving back

That balance is what makes progress sustainable.

Final Thoughts

A yearly raise is one of the few times you get to reshape your finances without changing your lifestyle overnight. Used wisely, it can move you closer to security, freedom, and peace of mind.

Instead of asking, “What can I buy now?”
Try asking, “What kind of future can this raise help me build?”

Small decisions today add up to big changes later.

This blog is just one piece of the journey.
On my Jen’s Clutter-Free Wallet YouTube channel, I share honest conversations and practical strategies around frugality, minimalism, and building a life with less stress and more intention.
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