- When I had a day job, I sometimes got raises or bonuses. My salary rose by $10,000 when I changed jobs.
- Instead of allowing my spending to catch up with my paycheck, though, I kept my lifestyle the same.
- I took the extra money I earned and saved it towards my goals, like retirement and an emergency fund.
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My parents couldn’t be more different when it comes to habits around money. My mom is incredibly generous, even when she can’t afford to be. She is the kind of person who, if she could, would give you the clothes off her back. My dad, on the other hand, is the ultimate penny-pincher. Although they’ve always been pretty different, they share one belief about money: it’s hard to come by.
When I started working and bringing in my own income, I shared their belief that a penny saved was a penny earned. So anytime I received a raise or bonus at work, I followed their example and didn’t let my living expenses didn’t go up. Instead, I changed nothing about my lifestyle and put every extra dollar I earned towards my savings goals, helping me reach my goals even faster.
Keeping my living expenses in check
Truth be told, back when I had a day job, my raises at work weren’t anything major. Most years I received a 3% raise, which was barely enough to meet inflation. The few times I received an end-of-year bonus, it was an additional $500 to $1,000.
However, there were a few times when I received a 5% raise at work, and when I job-hopped I started making $10,000 a year more. While it was tempting to spend more because I was earning more, I decided not to change the way I lived or how I spent my money. I stayed in the same one-bedroom apartment where I was paying about $900 a month, I didn’t add on any streaming services, and I didn’t spend more on clothes or going out with friends. Instead, I saved my money.
I set up separate accounts for my savings goals
To make reaching my savings goals easy, I set up separate savings accounts through Capital One. I was saving towards an emergency fund, a vacation fund, a new laptop, and a new car, and I had an account for each goal.
Having separate savings accounts helped me see how much progress I was making and kept me motivated to reach my goals. Plus, keeping my savings accounts with a different bank than my checking account meant it typically took a few days to transfer funds between accounts, so it was less tempting to pull money out of my savings.
I put more toward retirement savings
I also wanted to save more towards retirement through both my workplace retirement plan and my own Roth IRA. Before I bumped up my contributions on my 401(k), I took a good look at my spending plan to make sure I could afford to. Because I was keeping my standard of living and expenses relatively the same, I was able to put in a little more toward my nest egg. When I got a 3% raise, I increased my retirement contributions by at least 1%. The rest went toward my other money goals.
This was on top of a Roth IRA, which I set up on my own and auto-contributed the same amount to each month. I aimed to save the max amount every year. For instance, in 2020, individuals under 50 could contribute up to $6,000. (If you’re over 50, you can add an extra catch-up contribution of $1,000). So I auto-saved $500 every month to hit the cap.
I treated myself to something small
With bonuses, I did treat myself to a reward for my hard work. For instance, if I received a $1,000 end-of-year bonus, I would treat myself to a nice dinner or a pair of shoes I’d been eyeing. I was always careful not to go overboard (as it can be so easy to do), and only spent a small percentage of any “extra” money.
Nowadays, I have a designated “splurge fund” where I can indulge in the occasional spur-of-the moment purchase. Having such a fund has helped me stay on track with my longer-term savings goals, such as socking money away into an emergency fund, or toward a down payment on a new car.
While it sounds boring, not really doing anything differently with my spending when I received a raise or bonus helped me speed up progress toward my savings goals.