Congratulations, you got a pay rise! Someone looked at your work, decided you were worth more, and now more money will hit your account every payday. Or maybe it was an annual step increase or cost-of-living adjustment, whatever, just read on.
Let me ask you… where’s it going?
If you’re like most people, the honest answer is ‘you have no idea.‘ It just sort of… absorbed into life. An extra coffee here, an extra dinner out there, a streaming service you forgot to cancel. Before you know it, the raise is gone, and you’ve got nothing to show for it. This sneaky phenomenon even has a name – lifestyle creep. And it is absolutely relentless.
But you know what? You, my dear reader, already know how to live on your current salary. You’ve been doing it. So why not keep doing exactly that, and redirect every dollar of your raise somewhere intentional?
The simplest raise strategy you’ll ever hear
When I get a pay increase, I increase my automatic savings by the exact same amount, the very same month it kicks in. Not “I’ll get around to it.” Not “I’ll save the extra after expenses.” The same dollar amount, immediately redirected to savings.
The logic is beautifully simple, I was already living on the old amount, so nothing in my life needs to change. My savings rate just quietly goes up, and future-me gets a little richer while present-me notices absolutely nothing.
Why this works (when good intentions don’t)
We’re wired to spend what’s available. It’s not weakness that we have as an individual, it’s just how human brains work. If the money lands in your chequing account, it will find a reason to leave. But if it never arrives in spendable form in the first place, you won’t miss it.
This is the same logic behind automatic savings and pension contributions: remove the decision, remove the temptation.
How to actually do it
- Find out the exact after-tax amount of your raise. (Your pay stub will show you — compare the new net amount to the old one.)
- Log into your bank and increase your automatic transfer to savings by that exact amount – as soon as you get your pay stub!
- Set the transfer date to land right after payday, so the money moves before you can think about it. Or if you’re already doing this, just increase the amount accordingly. It doesn’t matter if it’s a random number although you could consider rounding up to the nearest $10, $50, or $100… just an idea.
- Done. Genuinely, that’s it.
If you don’t have an automatic savings transfer set up yet, this is a perfect moment to start one. Even a small amount — whatever your raise works out to — builds the habit.
Where should the extra savings go?
That’s up to you, and honestly, the fact that you’re saving it at all puts you ahead of most people. But if you want some direction:
- Emergency fund: If you don’t have three to six months of expenses saved, start here.
- TFSA: In Canada, this is one of the most flexible savings vehicles we have. Your money grows tax-free, and you can take it out anytime without penalty. Great for medium-term goals.
- RRSP: If your income is rising, your tax bracket might be too, meaning RRSP contributions are becoming more valuable to you.
- Debt: A pay rise is a great time to throw more at high-interest debt. Think of it as a guaranteed return equal to whatever your interest rate is.
The uncomfortable truth about raises
Most people feel they deserve to spend their raise. And okay, maybe you do! Treating yourself occasionally is fine. But there’s a difference between a deliberate, intentional treat and accidentally spending an entire pay rise on nothing you can point to. And it’s really not very satisfying knowing you’ve just frittered the extra away.
You worked for that money, so make it work back for you.
One last thought
The version of you who got this raise made it happen through effort and skill, presumably. That person deserves more than having their hard work evaporate into lifestyle inflation. Give the raise a job before it goes looking for one.
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MONEY SAVING TIP OF THE MONTH… 😂 😉
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