I recieved a raise yesterday. What should I do with the extra money?

Question

I was making $26.47/hr. Tommorrow, I start making $28.01/hr
Should I increase my contribution to my 403B? Should I increase my contribution to my savings account or should I just spend it on my bills?
I am really stupid when it comes to money. Do I make more then the average person or do I make less? Would you consider me to be better off than most people or poor?
I own my own home, my 2 kids are grown up. I have been divorced since 1989 and I am 42 yrs old.

Answer 1

Congrats on the raise. Well if you have debt pay it down. Its only an extra $3000 per year which is $250 per month but it all adds up and helps you. The sooner you can get completely debt free the better. Then start saving in a good track record professionally managed mutual fund. Within your 403B if you can for the added tax benefit outside if you can't for the higher growth than most conservative investments people are put into. To see if you are doing well or not you need to ask yourself some questions.

1)How much would I need to earn a year today if I were to retire in todays dollars. Let's say $36,000 annually if house is paid off and its just you.

2)What age do you realistically wish to retire at? Lets say 55

3)We need to project inflation over the next 13 years so based on the past 3% annually would be a fairly good guess.

4)convert todays dollar amount to the inflation adjusted amount needed at age 55. That would be $53,145

5)Now multiply that number by 10 so that we have the total amount of money that you should have set aside at retirement time that invested at 10% will pay you the inflation adjusted annual income needed. Obviously the more you have the better. But $532,000 should be enough to allow you to retire at 55 and last you till you die living at a current dollar income of $36,000

6)next question is how much do you currently set aside for retirement? If you have over 1/2 a million now you may be able to retire now. Chances are you don't but if you have a large lump sum now that could grow to the needed amount in the next 13 years then you wouldn't need to save any more if you couldn't afford to. If you had $146,000 now growing at 10% in a tax sheltered investment you would be fine. Or $245,000 if not tax sheltered. These are just rough estimates and not carved in stone but just to give you an idea of what is needed.

If you have nothing saved now then you would need to start saving $2,260 monthly now not taking into account any work benefit plans, 403B or 401k so don't get excited it won't be this harsh. Maybe retiring at 60 would be more realistic at $1,375 or at age 65 saving $900 monthly until then. Obviously the younger you are the easier it is.

If you have a 20 year old who wants to retire at 60 they would have 40 years to montly save up their large amount which would only take a commitment of $267 but their retirement lumpsum due to inflation would be larger than $532,000 almost double so $500 may be closer to what they need montly. Again this is firstly assuming an open taxable investment if they got a higher rate of return or were able to shelter the monthy investments it would be dramatically less and secondly that they have no work, 403B or 401k benefits. This is just to help you understand why most people retire broke in North America and how important saving for the future is.

Answer 2

You make a decent income for your age assuming you do not live in a big city.

Here's a really good retirement calculator
http://moneycentral.msn.com/retire/planner.aspx

Your retirement is really important but so is your debt. Get a sense of how you are situated for retirement from the above link. If you are comfortable or close to comfortable for retirement, look at your debt.

Your highest priority bills should be the ones with the highest interest rate.



Your raise will not give you much more a month however. Less than 200 a month after tax.. probably under 150.

Answer 3

Invest it in a book called, "My Total Money Makeover" by Dave Ramsey.
It has helped me and thousands of others get "financial fit".
It is easy to follow, and not just another, get rich book.
It is a book and method that helps you take control of your finances.

go to : https://www.mytotalmoneymakeover.com/index.cfm
for more info.

Congratulations on the raise and taking care of you family!

If you were to add that you are beautiful to your "question" it would sound like a resume for dating service. You make good money unless you live in NY, L.A., or someother high priced area.
Is the home paid off or mortgaged?

Answer 4

You should put it where it will earn the most interest, or into the debt that charges the most interest. The key issue being interest, unless you happen to have a lot of debt, then I would put it into the bills.

Answer 5

where do u work ? pharmacy feild ? company veteran? anyway if youre 42 you shouldve picked up some tricks along the way, but still if i were you id put it into my savings, you never know when you might want a laser skin peel or a tummy tuck (my mom is 43 this year) lol so save it for a rainy day, you can also put it into a life insurance plan if you dont have one and plan for your future that way, if you know wat i mean ♥

Answer 6

put it in your retirement plan
an extra dollar every day means at least $365 at the end of each year that you'll probably end up splurging on anyway

Answer 7

u should save every increase in your IRA account. If you have, if not, put it in an Income/Growth fund.

Answer 8

put it in savings....
or you could send a piece to everybody here....hahahaha just kidding....

put it in savings...you know that rainy day will be here before you know it.

good luck