How do I ‘work’ my payrise?

Here’s the thing. I got a pay raise (woot!). So I thought I’d look at what I was spending and now I have an increase, work out what I shall do with it…

Back in the day, the split was (on take home pay)

Before

40% on housing
16% on bill (saving for bills, strata, water, gas, electrical, and the unexpected plumber etc)
12% on savings goal (meeting my mortgage refinancing goal)
17% on ‘walking around money’ – all groceries, eating out, vanity etc.
7% on generosity
8% on slush – this would supplemental the above money if I ran short, and/or be added to various savings targets.

Nowadays:

Nowdays
37% on housing
14% on bills (savings)
11% on savings
16% on spending
7% on generosity
16% on slush

Anyone see that, there’s a doubling in slush! Best not let that go to waste or lifestyle inflation!

Oh and I just want to say, I already get 15% or so of my salary put to a retirement fund, which I contribute personally too above that as well (another 2% of my pre tax salary).

I’m thinking my options are
1. Save for a holiday
2. Save MORE for house refinancing at the end of the year (find out more in my monthly goals round up)
3. Give more away
4. Work towards the $6k I need to prepay a funeral

I’ve decided I’ll put another 13% in savings for the house refinancing (and if a holiday comes up, I’ll borrow from that fattened up account. Alternatively, I can use it for the funeral prepurchasing). That leaves 2% permitted for lifestyle inflation :p  Well really ‘fat’ for when I don’t stick to my day to day budget!  I think I’ll even ramp up the automatic savings plan, so I won’t ‘think’ about it too much.

Reality

Setting ambitious targets is the BEST way for me to achieve them. Strange but true. Otherwise I think the money is ‘leftover’ and allow myself to spend it!  Oh and I’ll feel SO much more comfortable reading all those retire young/financial free blogs now!

I’ve just branched into having a facebook page, so please follow or like me if you’re into that! See the link to the right.

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14 thoughts on “How do I ‘work’ my payrise?

  1. Nice to have this problem to solve! I bet most people in your position would be saving for more travel and vacations. I think the idea of one big saving/slush fund makes sense!

    Reply
  2. Congratulations! That is great news! 🙂

    That’s also great foresight that you’re putting extra into Super at such a young age.

    Reply
    • Thanks Fiona (school pick up again?). Yeah it’s nice to know I’m planning for the time when I might not be in the work force, and might not have super trickling in

      Reply
  3. cool pie charts! and congrats on the raise. I just put the money there, and allow myself to splurge occasionally guilt-free. I don’t need or want much more than I already have to generally most stays into savings.

    Reply
    • Thanks Pauline – love a good pie, and a good graph! Savings is always a prudent idea, especially when you something to die for and you know you can afford to dip into savings for it.

      Reply
  4. Congratulations on the raise 🙂 Sounds like a great plan for the money – I agree about setting ambitious targets and using automatic savings plans. If the money isn’t there you can’t spend it! Last year, I started putting half of the amount left in my account on payday into a separate account for a rainy day. Turns out that that rainy day never came, since I just adapted to living on what I had, so it will make a nice nest egg for when I finish my PhD and am looking for work.

    Recently I’ve had a similar dilemma, I got a scholarship to do some teaching in rural schools. I feel like I should be putting it towards my house deposit, but at the same time it feels like extra money that I could use to by a camera. I may split it in half to get the best of both worlds.

    Reply
    • Good work on the savings plan! I think the key is balancing ‘extra’ money on some savings and some whims (such as the camera). I remember I did something similar when Kevin Rudd gave us $900 – I was partly responsible, and partly reckless, and that way I didn’t feel too deprived, or too silly and frivolous!

      Reply
  5. Nice work getting the pay rise. I think it is important to increase your slush fund as you earn more money, but to do so in moderation.
    As for retirement savings, if you are talking about superannuation (which I think you might be as you are in AUS) do you worry that the government will change the rules on you and you won’t be able to access your money when you want to? My personal view is that they keep changing the rules and so I would rather have that money on call for investments away from the governments hands.

    Reply
    • I am talking about superannuation. I’m not too worried about the government changing the rules as my retirement is a LONG time away (I’m 28). I think I acknowledge my lack of experience (and laziness) when it comes to share market investing. I’d only have the ‘extra’ money in a 5% interest rate account, and that would hardly keep up with inflation over time. The other BIG risk is that I’d use the money now (even for an investment like a house or something) and then I wouldn’t have it come retirement. I suppose my view (right now), is that that money is a long way from me touching it, and the majority of it wasn’t ever ‘mine’ (in the spendable, liquid sense) as the employers just put money straight in there, so it’s a bonus if it grows, and ok otherwise (falls, gets chewed up and spat out by the govt). Sorry this is turning into a long comment – but I truly think it’s in the govt’s best interests for people to self fund their retirement – they may manipulate when, and how much etc, but at the end of the day, they don’t want a huge social security bill for retirees.

      Reply
    • Simple strategy, I like it. Sadly overpaying my mortgage more than $5k this year (or last) will penalise me. And I’m about $4500 ‘extra’ paid for this calendar year :s So more for retirement or my holiday then, on your model!

      Reply
  6. Pingback: Carnival of Financial Independence, 11th edition - Reach Financial Independence

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