Pay Yourself First - And Give Yourself Raises Too!

Pay Yourself First - And Give Yourself Raises Too! We all want raises, so why don't you give one to yourself? This post shows the different ways you can increase the amount you pay yourself.
Most - if not all - employees want bigger salaries. I know I do, and you probably do too. Even if you genuinely enjoy your job, it's a relatively safe bet that you won't last long if you don't get even a cost of living increase every now and then. And for most of us, if we had the power, we'd give ourselves big raises regularly.

But did you know you actually have that power?

Hopefully by now, we've all heard, read, or discovered that paying ourselves first is the best way to save.

So, are you paying yourself? Hopefully you are. But have you thought about giving yourself a raise?

It's very simple and well-within your power to do so. Just increase the amount you pay yourself.

We've probably heard that we should save 10% of our income. In some cases it's 20 or even 30%. But no matter how much you're saving right now, there are ways you can give yourself more.

Here in the Philippines, we typically experience an annual salary increase. Maybe because we switched to a higher-paying job. Or maybe because we got a promotion. Or it could be from a cost of living increase, which means it's just enough to sustain your lifestyle and stem the tide of inflation.

This is a perfect opportunity to give yourself a raise (after all, you just got one from your employer, no matter how small). So how do we do that, assuming you got a 5% raise, and inflation for the year was at 4%?

One way is, to take that 1% "extra" increase and place it directly to your savings account. And then the remaining 4% is distributed evenly into your budget - basically all expenses get a 4% increase.

But since you're money savvy (you are after all reading a personal finance blog), your savings are already part of your budget. This way your savings gets a double boost, without sacrificing your lifestyle.

That is of course, in theory. In practice, it might not be feasible - or even possible - to evenly distribute the remaining 4%. But at the same time a 4% inflation rate won't necessarily kill your remaining budget.

What we should do in this case is simply allocate that 4% as needed. You might find that even a 4% inflation rate doesn't impact you that much (for example, because you take public transport and are less susceptible to gas price increases).

Which brings us to an even better way of giving yourself a raise.

Just place all the increase into your savings. Even a relatively high inflation rate of 4% can be manageable, if just for a single year (until your next increase). So you may not need to increase your spending if you manage your money smartly.

Think of this as an opportunity to increase your savings without feeling the pain too much.

But what if that won't be the case? What if you will need that salary increase or additional income for your everyday expenses?

That brings us to the best, most effective way of giving yourself a raise: just increase the amount you pay yourself. It's the best, most effective move you can make - though it will take a lot of guts.

No budgeting, no planning - just go ahead and do it. But you can't go overboard and just stash away twice what you are saving now. Instead increase the amount you pay yourself by 20, 50, or 100 pesos, depending on your salary and the amount you are already saving.

It's going to seem tough, and it might not look like it's even possible on paper. But think about it: no matter what your job is there's someone who makes less than you - and they're getting by, aren't they?

And how much is 20 pesos a month, really? Even in February, that amounts to less than 72 centavos a day. You can't even buy anything with that, so why not just save it? Even 100 pesos amounts to just 3.23 pesos a day.

Just try it for a month. Automatically save whatever you are paying yourself plus 20 pesos (or 50 or 100). It's guaranteed to work. And then next month, go ahead and increase it again!

Yes, this won't work indefinitely; at some point you'll be unable to save even 20 pesos more. But you might be surprised how long you can keep it up.

And once you reach that point, give yourself a pat on the back and a reward, and rest assured that you just gave yourself a chance at the best possible future you could have.

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photo credit: jessiefish via photopin cc

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