Most of us get excited about a pay raise. Pay raises recognize our hard work and contribution, giving us a sense of personal achievement. They can also improve our self-esteem and perceived social standing.
If we’re not careful, the intense emotions often accompanying pay raises can lead to irrational financial decisions. Deciding what to do with our newfound money is a conversation we should have with our spouses on a money date, mainly when emotion is low and cognition is high.
The priorities for your increased pay are simple:
Reduce or eliminate stress in your life.
Create joy and happiness in your life.
Think of this post as a checklist for your money date conversation. It will help you decide what to do with a pay raise, prioritizing eliminating stress first and then creating more joy and happiness in your life.
Celebrate Your Spouse
My wife recently earned a pay raise when she switched employers. When she shared her new salary and proposed bonus, my immediate response was,
"Well, if you factor in state and federal income taxes, it's nearly half of that because of how our progressive tax system works and where we fall in our new tax bracket."
Stupid.
Such a stupid response to lead with.
It's how my mind works, I simply move straight to financial calculator mode without pausing to reconsider what I should actually do or say first.
What I wish I would have said, and what I recommend you say, is something that reinforces your spouse's well-deserved feeling of personal achievement and self-esteem. Only after that should you worry about the financial details.
After uplifting your spouse with encouraging words, it's time to turn to the calculator.
Related: 128 Date Ideas for Married Couples
Calculate Your Net Pay Raise
Psychologically, when we hear a dollar amount, we believe that it will slide into our pockets; this is not the case. Before meeting for your money date, you can calculate the change in net pay by using this calculator.
Once your new net pay has been calculated, you're ready to move forward with the joys of using your increased earnings to improve your lives.
Outsource Tasks
One of the best decisions I made in my marriage was recommending to my wife that we use a past pay raise I had earned to hire someone to clean our house every couple of weeks. Buying time to manage household responsibilities can be a game-changer for busy dual-career couples like us.
The bottom line, it eliminated a significant stress in our lives and creating much needed time together.
Investing in services like cleaning, meal delivery, or childcare helps redistribute the workload and preserves precious time for quality interaction and personal pursuits. This strategy can significantly reduce stress and prevent burnout by alleviating the daily pressures of housework and logistics.
Moreover, it supports a healthier work-life balance, enabling both partners to focus on their careers without sacrificing their home life or relationship.
Essentially, paying for such conveniences is not just a financial transaction; it's an investment in well-being and relationship health crucial for couples navigating the complexities of managing dual careers.
Avoid Lifestyle Creep
Lifestyle creep occurs when household income rises, leading to increased spending on non-essential items and services, which in turn leads to higher living costs without corresponding savings.
Busy dual-career couples are particularly susceptible to this phenomenon since their combined incomes often justify housing, cars, dining, and entertainment upgrades. It is easy to fall into this trap because it can begin subtly with small increases in spending that feel justified by a busy, high-earning lifestyle.
Despite higher earnings, these expenses can become new norms, making it difficult to increase savings or invest for the future. Most importantly, new spending will not lead to lasting happiness, a phenomenon known as the hedonic treadmill.
Pay Down Debt
Taking advantage of a pay increase to pay down debt offers many advantages for couples. The most significant benefit is to relieve stress caused by high-interest debt or significant loan balances. And when you're less stressed about money, you can enjoy your relationship.
Of course, reducing the principal balance of your debt can save you thousands of dollars in interest which will free up money in the future to apply toward saving, investing, or improving your lifestyle. Furthermore, reducing debt can improve your credit score, allowing you to obtain better loans and credit terms in the future.
Boost Your Emergency Savings
I see emergency savings as the space between ourselves and stress. The more we have in emergency savings, the greater the distance between ourselves and stress.
Specifically, emergency savings enhance financial security by ensuring a substantial safety net available to handle unexpected events such as medical emergencies, job loss, or urgent home repairs. This buffer can prevent the need to take on high-interest debt in times of crisis.
A little secret of emergency savings is that couples can be more flexible in their career choices, possibly exploring opportunities they might not have considered due to financial constraints.
Increase Retirement Savings
If you enjoy your current lifestyle and have adequate savings, strongly consider cranking up your automatic retirement contributions. Increasing contributions to retirement accounts not only maximizes potential tax advantages but also enhances the power of compounding interest, allowing savings to grow more substantially over time.
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