Sep 24, 2020
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You’re Finally Making More Money. Now What?

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Since you purchased your first job you ve likely been pinching pennies whittling away at your debt and attempting to save for the future. After a promotion or two you re finally making extra money and your budget has some breathing room. So what do you have to do with that additional money? Being responsible with money means being in charge of it said Claudio Gambin a financial advisor with Northwestern Mutual

 

It’s easy to begin spending all of the additional money you have coming in. But in case you don t discipline yourself early you ll always live paycheck to paycheck. Here are four tips that will help you take control of your money that you can enjoy what you re earning while still growing and protecting your assets

 

1. Envision your future. It’s difficult to prioritize from a financial perspective in case you haven t set goals for what you want to do together with your money. Do you want to buy a car or house? Do you want to travel? Do you have or want kids? Do you want to dedicate a portion of your income to charity? Your goals might help guide your spending and saving decisions

 

Once you determine what s important to you then you are able to begin to budget and save based on those goals. 2. Splurge and enjoy (some of it). While it s important to put aside money for the longer term it s okay to spend a number of your extra income on yourself now

 

But be careful—make sure you put limits. Gambin recommends giving yourself an allowance like you purchased as a kid for the belongings you want. In case you tend to spend money once you have it give yourself a weekly allowance instead of monthly in order that in case you deplete your funds you have to make it through only a couple days not weeks

 

Learn more about the way to set a budget by downloading Northwestern Mutual s free guide: Your Guide to Money Management. 3. Make saving a habit. Gambin compares saving money to working out. When you join a gym on January 1 and workout everyday for 2 weeks you will be sore exhausted and more likely to fall off the wagon

 

But in case you start slow and work your way up you ll build a habit for life. Start by saving a percentage of your income. Through the years increase that quantity regularly including when you get a raise. In case you get unexpected money like a tax refund gift or bonus consider saving a portion of it

 

In case you don t have already got one create an emergency fund. Gambin recommends saving a minimum of six months of living expenses to cover emergencies like medical bills or car repairs. In case you dip into your emergency savings refill it before saving elsewhere. In case you re not already saving for retirement start

 

And if you’re attempt to increase the quantity you re saving on a minimum of a yearly basis. If your employer matches 401(k) contributions attempt to save a minimum of the quantity that is matched so you don t leave free money on the table. Next begin saving for short- and middle-term goals

 

Your short-term savings would be for purchases within the next year including a vacation. Your middle-term savings would be for purchases within the next 5 to 10 years including a home. 4. Protect yourself. Make sure the unexpected doesn t derail your goals. When you have car insurance to protect you in case you re ever in an accident

 

In case you own a home you likely have insurance for that as well. But what in case you became disabled and couldn t work? Most employers offer disability income insurance to assist pay expenses in case you become disabled. But employer plans often cover only a percentage of what you were making

 

Gambin recommends considering the acquisition of additional disability insurance. Your ability to earn money is your no 1 asset Gambin said. In an identical way that homeowner s insurance protects your home disability income insurance protects a portion your paycheck. Do you have employer-sponsored life insurance? How much does it cover? Even if you don t have a spouse or children you ll want enough to repay your debts and cover funeral expenses

 

You may desire to consider permanent life insurance which builds cash value that may eventually become a source of funding for emergencies or maybe retirement if the death benefit is not needed It s a great feeling when you advance in your career and feature extra money coming in. And while it s nice to spend and enjoy a number of those extra dollars it s also important to create strong financial habits which will put you in a good financial position for years to come

 

A financial professional might help translate your goals into dollars and create a financial statement that might help achieve them. By being deliberate about how you spend and save the extra money you have coming in you are able to confidently enjoy what you re spending today knowing you have planned for the future

 

Get more insights like this at Northwestern Mutual Insights & Ideas. The Northwestern MutualVoice Team is a collection of execs who share insights and opinions from experts and industry leaders across the enterprise. Our vision is to inspire others to take action and plan for their financial future through topics starting from financial planning retirement planning and distribution strategies wealth accumulation and preservation to leadership philanthropy and innovation

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