If you just got a new job that pays more than your current job. Tips on what you should do with the income boost?

by reddituser0071

Most definitely don’t increase your lifestyle. Then start the following steps. Use this raise as an opportunity to accelerate your financial goals.

  • Get on a budget and give every dollar a name before the month begins.
  • Don’t add any debt.

Step 1 Save 1000$ as a starter emergency fund. This is only a small cushion between you and life to cover unexpected expenses.

Step 2 Focus all of your attention to pay off your debts by listing them in order of smallest balance first this will give a psychological win every time you pay something down. This is the Debt Snowball method. Others will recommend the Avalanche Method

Step 3 Once you have paid off all your debt except a mortgage (if applicable) Increase that 1000$ starter emergency account to 3-6 months worth of expenses.

Step 3b (optional) You are out of debt and have a nice fully emergency fund. If you need to save to upgrade cars, renovations or save for a down payment for a home.

Step 4 Invest 15% of your household income into retirement accounts. Take advantage of matches that’s free money! After matches look at accounts that don’t require you to pay taxes upon withdrawal.

Step 5 Save money for kids college (if applicable)

Step 6 Put any extra money towards paying off your house. Paying off your house is a guaranteed return on investment equal to your mortgage rate.

Step 7 Once the house is paid off max out all tax advantaged accounts and build wealth.

More info : Dave Ramsey Baby Steps

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