Well it seems that I have stumbled upon some good luck as of yesterday, getting notice from my boss that I would be receiving a 6% raise. But I’d like to think it was also having to do with all the hard work I’ve put in, after all we do create our own luck, don’t we? My salary will now be bumped up to $53,000 from the $50,000 that I had started from. Needless to say, I’m still thrilled – just the $50,000 I had started at was more money than I could have ever imagined to be making in one year in my life and I know I am extremely lucky to be in the position I am in, even if it includes all of this debt.
So what effect will this have on my finances? I’m thinking that it wont be too big of an effect – but it definitely will be large enough to notice. My current monthly net income is around $2,800 and now I estimate it will be at around $2,900 after receiving this raise and making a few changes. The raise will take effect starting the month of July and I receive two paychecks a month, one on the 15th and one at the end of the month. That should be around $100 more a month, or $1200 a year. Maybe it will end up going to my student loans?
The few changes that I plan on making are towards my 401k contributions with my employer. I’m currently contributing 6% of my salary pre-tax to my employer 401k, and they match 50% up to 6% – so I’m taking full advantage of that 3% free match. I’ve decided that because of this raise I’m going to up my contribution to 8%. I’ll still only receive a 3% match, but I figure I’m still getting a raise this way and contributing more to my future at the same time. My take home pay might have been closer to $3,000 a month without increasing my contribution rate, but I don’t mind this at all in my current situation.
You might argue that it would be smarter to keep putting as much money towards my loans at the current interest rate they are at, the chances of me earning more on the market in my 401k are slim. Paying off my loans are guaranteed interest. The reasonable side of me would definitely tend to agree with you! Unfortunately the psychological side of me does not agree with that…I enjoy seeing my loans go down, but I also like to see my wealth grow on the other end of the scale too.
It already kind of sucks watching most of my paycheck going to pay most of my loans instead of being able to take advantage of the years of compound interest, so this is my compromise to myself. I’m working on getting my huge “emergency” fund down, maybe the next step will be to increase my loan payments even more! I’m definitely trying to target $1500+ to my loans each month though, and will stick to my budget. For now I’ll just enjoy my raise, and stick to the new plan I have outlined – saving more money and maybe putting a little extra towards my loans as well.
Photo Credits for this post: Stockvault.net