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8 Money Moves to Make the Moment You Get a Promotion

Celebrate your promotion if you want, but your new money is best off being used to secure your long-term financial future.


So your company finally recognized your hard work and gave you that promotion you've been wishing for. And it comes with a nice bump in pay!

See Also on Kiplinger: 14 Smart Ways to Spend or Invest $10,000

What should you do now? Do you immediately go and buy a new car? Celebrate with a trip to Saint Tropez?

No. If you'll notice, exactly none of the suggestions below involves buying any material items. Celebrate your promotion if you want, but your new money is best off being used to secure your long-term financial future. Consider addressing these eight things if and when you are fortunate enough to get a promotion.

1. Build That Emergency Fund

Are you prepared if something big happens in your life? Do you have at least three months of expenses available in liquid savings? The new income from your promotion can be partially set aside to prepare for the inevitable disaster, whether it be a health emergency, car accident, or flooded basement. Once you get that emergency fund in place, you'll be able to invest and save for larger goals with a clear mind.


2. Get More Organized

If you're not making a lot of money, it's often hard to do anything more than deposit your checks and pay your bills. But with a bump in income, it may now be possible to be more strategic about your financial situation. Rather than having just a single bank account, open distinct accounts for specific savings goals. Begin using an account aggregation platform, such as, to see a single view of your finances and track your spending. You may also benefit from meeting with a financial adviser to come up with a plan for short-term and long-term savings goals.

3. Evaluate If Your Expenses Will Increase

Getting a promotion usually involves more money, but it may also mean more expenses for you. Maybe now you will have to work longer hours, necessitating more child care expenses. Perhaps you will no longer be able to work from home, and will incur commuting costs. You may even have to spend more on professional clothing if you've moved into a high-profile position.

Make sure to take these new expenses into account when determining how much your net income will increase from the promotion.

4. Bump Up Your Retirement Contributions

If you get a raise, you should strongly consider taking all or most of your increase and boosting your regular retirement contributions. (Or begin making contributions, if you haven't started.) If you have a 401(k) but aren't contributing enough to get the full company match, see if you can get to that level. If you've been saving more but are just shy of maxing out your annual 401(k) contributions ($18,000 for most people), try and see if you can reach that threshold. The same goes for making the maximum annual contribution of $5,500 into your individual retirement account (IRA.)


Even if you can increase contributions by a mere 1% or 2%, that's additional money that can grow substantially over time.

See Also on Kiplinger: Quiz: Are You Saving Enough For Retirement?

5. Check Your Tax Situation

There's a dark side to earning more money: You may end up giving more to Uncle Sam. In some cases, a raise may even put you in a higher tax bracket, thus wiping out any salary gains. So before you go making any major lifestyle changes, check to see what your actual take-home pay will be. You may be able to avoid a big hit from Uncle Sam by boosting contributions to your 401(k), contributing to a health savings account, or making other adjustments that reduce the amount of your income that is taxed.

6. Target Your High-Interest Debt

If debt is weighing you down, now's time to start tackling it in earnest. Use your extra income to go after the debt with the highest interest rate — usually, this is a credit card. Once you have that debt paid off, keep it up. You'll be amazed at the financial freedom you'll obtain through the extra income and the reduction in debt payments. It's almost like getting two salary increases! (See also on The Fastest Way to Pay Off Credit Card Debt)


7. Ask for a Credit Limit Increase

This may seem counterintuitive, since we just suggested you get your credit cards paid off. But with new income, you can ask for a higher credit limit which will then improve your "debt to credit" ratio. That ratio compares the amount of debt you have to the amount of debt you can incur. Generally speaking, a low ratio of debt to credit is what will help your credit score, as long as you don't increase the actual amount you are spending.

8. Consider Refinancing Your Mortgage

You may have been wanting to lock in a lower interest rate on your home for some time, but found the upfront costs to doing so a hurdle. Now that you have some extra income, you might find it easier to pull the trigger on refinancing the loan, thus saving money in the long run. Interest rates are still historically very low, and your higher income may even help you get a higher credit score, making you even more attractive to lenders.

This article is from Tim Lemke of Wise Bread, an award-winning personal finance and credit card comparison website.

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This article is from Wise Bread, not the Kiplinger editorial staff.