Asking for a raise at work is one of the most awkward money conversations you’ll have. It’s right up there with asking someone you’re dating if they have debt and talking to your parents about their retirement plans. But, if you want to increase your earning potential, you’ve got to bite the bullet and advocate for yourself.
I asked for a raise last year. I followed most of the guidelines for successful salary negotiating:
- I outlined my achievements over the past year
- I highlighted how my role within the organization had evolved
- I listed the new skills I’d learned
- I even had stats about average earnings for my field
Unfortunately, the company I work for was heading into its slow season, so there would be no raise, but my manager assured me that when things picked up, that would change.
He was right, and two weeks ago when I was in New Brunswick I got the exciting news that I was getting a raise. A big one. In fact, I got a 10% increase over my current salary.
Needless to say, I was super pumped. I love making more money, but without a raise, I’ve had work on the side to increase my income. Making more money without adding hours to my day is far more preferable.
How I’m Going to Save My Raise
For most people, a raise represents a chance to improve their life in some way.Maybe they’ll finally replace that aging car with a shiny new, financed vehicle.
Maybe they’ll finally replace that aging car with a shiny new, financed vehicle.
Maybe they’ll use the money to eat out one extra night a week, or go shopping more often.
Most people use raises to inflate their current standard of living in some way. That’s called lifestyle inflation, and it’s a savvy saver’s worst enemy.
To be honest, I did briefly consider the things I could do with the extra cash flow my raise provides. I could move into a better apartment, one that doesn’t have pigeons lurking above my door or three flights of stairs to carry my bike up. I could finally afford a new couch and television that my husband and I have been wanting for almost three years. The possibilities for lifestyle inflation are almost endless.
But then I looked around at my life, and you know what? I’m happy. In fact, I’m the most content with my life that I’ve been in a long time, and spending a little more money isn’t going to make a big difference.
So instead, I’m avoiding lifestyle inflation and saving my raise. Here’s where the money is going.
Boosting Retirement Contributions
Every month since November 2013, I have put $500 into my RRSP for retirement, for a total of $6,000 per year. I’m invested in Tangerine Investment Funds, which are low-cost index funds. Based on my conservative retirement projections, my $6,000 per year should net me a bit over a million by the time I’m ready to retire. That would be an ok amount of money to retire on, but I’d rather retire with a lot of money, instead of a little.
So I’m adding $50 per month to my contributions, for a total of $6,600 per year. That will add about $100,000 to my bottom line at retirement age. I plan on boosting this contribution more after I buy a home, but for now, I’m content with this amount.
Padding My Car Fund
Ok, so I am going to spend a little of this raise, but it’s not going to consumption of useless goods. First, my car gas and maintenance fund is a little low. With the trips back and forth to New Brunswick costing a pretty penny in fuel and a few unexpected repairs, I’ve been scraping the bottom of this fund for awhile. I also know that my car’s tires will need to be replaced soon, so I need to budget for that. I’ve siphoned off a little from my raise to help get this fund back onto solid footing.
Boosting My House Down Payment
The rest of my raise is going towards my house down payment. I’m now going save $760 per month directly from my budgeted income, not including freelance or extra paycheques. This is good news because after I found out how small my tax return would be, I wasn’t sure if I could make my goal of saving $35,000 by the end of the year. This new raise makes up for my underwhelming income tax return and keeps this goal in reach.
I’m Now Saving 35% of My Income
Finally, the best part of this raise is that the proportions of my budget look much better.
I’m spending around 33% on housing (down from 35%), saving 35% (up from 33%) and spending less than 6% on transportation.
I’m always looking for ways to boost my savings rate and decrease my expenses as a proportion of my overall income, so this raise shifted my budget in a positive way.
I’m super happy that I received a raise and I can’t wait to start seeing the positive effects it will have on my finances!
Have you gotten a raise recently? Did you save or spend it? I want to know!