Counting My Pennies

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What would you do with a raise?

May 4, 2012 By Megan Smith

A friend of mine just found out that he is getting a surprise promotion.  His company is restructuring after being sold, and they’re downsizing a bit,  so he was worried that he was going to lose his job.  Instead, he’s getting a huge promotion with a big increase in responsibilities and about a 25% pay increase.

25%!

I was joking with him that now he can afford to go out to lunch twice a week instead of once a week.   But it got me to thinking.  What would I do with a substantial pay increase like that?  I’m living comfortably enough on my paycheck now.  My bills are paid.  I’m contributing about 8% of my paycheck to my TSP (government 401k – I have a match on the first 5%) and I put the full amount in my Roth IRA every year.  I’m paying my mortgage, but not paying extra.

So what would I do with that 25%?

Logically, I should and probably would increase my retirement contributions.   See if I can’t get it up to the max.  I have to admit that my returns haven’t been all that stellar, but it’s money that’s being put aside, and I have to have faith that it will grow.

But after that?  I don’t know.

Well, I’d probably think about getting a dog.  I grew up with dogs.  I desperately want a dog.  But I cannot afford a dog.  I work long hours and would need to get a dog walker.  Around here, that runs around $400 a month.  And then there are all the other costs associated with a dog (or any other pet).  Of course, it would be worth it, but right now, it’s just not financially feasible.  So I must remain content with my cats.  At least they don’t require walking.

(And before anyone says anything about getting a dog but not being home – I would adopt an older dog from a shelter.  One who just needs a home and is happy to sleep all day… which can apply to younger dogs too, in my experience.)

Would I pay extra into my mortgage?  Honestly, probably not.  Instead, I would put the money into the house.  My house was in really good shape when I bought it, but there is work to be done.  I need to replace some windows.  I need to replace the extremely rickety fence.    In the long term, there is some flooring that I would like to replace or at least refinish, and I would like to knock out a closet and enlarge the master bathroom.  Of course, these aren’t things that would happen immediately with a pay increase, and they’re something that will happen eventually, but it would just be sooner than planned.

So what would you do with a 25% pay increase?

Filed Under: spending, spending spree

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