6 Best Ways To Save Money After Getting a Pay Rise
Getting a raise is the best thing for an employee. However, the feeling of being financially well off can lead to poor spending habits.
Mercy Cherono* had a salary raise of 30% to Kshs. 65, 000. She had been earning 50, 000 earlier on and with the salary raise she started spending on unnecessary things such as designer clothes and fast foods from all joints in Nairobi. She is now in debt and wondering where she went wrong.
Tips to help you manage money after getting a pay raise
1. Stick to your original budget
Just because you are earning more money does not mean you should shop for vegetables in the supermarket instead of city market or ‘marikiti’.
“It is a common mistake for people to expand their budgets to fit their new salary. I do not advocate for this because it adds unnecessary expenses on to your budget. Sticking to that budget restricts you from overspending,” says Boniface Njuguna, a Financial Analyst at The East Africa Breweries Limited.
2. Save! Save! Save!
As cliché as it is, saving is important for you. Alison Green, a job search and career advice with HR experience says that savings provide you with a piece of mind when disaster strikes. For example, if you lose a job, you can use your savings to pay rent and provide for your basic needs.
“A common mistake people make when they get a big raise is that they raise their expenses commensurately — and as a result they don’t really better their financial security. Don’t do that,” cautions Ms. Green.
4.Pay off debts to help you manage money after getting a pay raise
A larger percentage of Kenyan graduates are struggling to pay their HELB Loans. If you are in this situation, it is advisable to pay off a larger amount than before.
This allows you to take care of other financial responsibilities which were previously limited because you are paying off your student loan.
5. Think of investment ideas.
“If you have been saving, do not let the money idle in your savings account. After you have established a solid financial base, start making investments with it. It keeps more money coming into your account,” adds Mr. Njuguna.
6. Avoid expensive hobbies
Recently, a survey by PricewaterhouseCoooper (PwC) revealed that Nairobi residents had the fastest growing spending on entertainment in Africa. The youth spends a considerable amount of money in Coffee shops, restaurants and fast-food joints.
While this will make you appear cool, Andrew Makhulo, an Accountant at MGK Consultants says that it will leave you broke.
“One can reconsider these kinds of activities and see what other options they may have or cut down on the amount of money they invest in such activities,” advices Mr. Makhulo.
Did you get a pay raise or are you anticipating one? Use the following tips to manage your money.