Ignoring raises is a great method to save a little more each month. When you get a raise, try to continue living on the money you were making before the raise. You might splurge for a celebratory dinner, or allow yourself to spend the portion of your raise equal to inflation, but otherwise you could refrain from an increased standard of living. If you were surviving on your prior paycheck, then you should be able to use the increase to pad your savings, pay down any debt, or increase your investments.
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March 21st, 2008 at 2:22 am
As an avid saver, I can personally verify that this strategy works. Not following a strategy like this is what gets many people in trouble. When they get a raise they just increase their lifestyle (new car, new clothes, new residence). While it is fun to enjoy some of the “finer” things in life, it feels even better to know that if something important came up you will have the cash to cover it. Even better, with the increased savings, you will be that much closer to retirement!
Currently I am making $13/hour pre-tax and I manage to put $200/month into a savings account. I also make my maximum IRA contributions each month, which equates to about $416/month.
So yeah, that is my little “you can do it too” message!
PS: I am doing this while living in Seattle (one of the highest cost of living cities in the US).
March 21st, 2008 at 7:16 am
DP: It’s great to see actual numbers showing how effective this method can be. The fact that you live in an expensive area makes it even more impressive. Congrats!