Independent, Fee-Only Financial Advisor
Thursday, February 14, 2013
What to do with that raise!
Everyone is buzzing about the potential for the minimum wage to be raised to $9 from $7.25/hr. This is exciting news for anyone making less than, or maybe just near $9 as they would see their wages increase immediately. What is the best use of all that newfound pay?
It is always important to have money saved for a rainy day (or a disaster, or recession really). Regardless of your wage level, a raise is an opportunity to save more money that you weren't even spending before. A cash savings account is important for short term needs.
A raise shrinks your debt when compared to your income. This personal inflation is good for you if you have a balance left to pay on a credit card or other revolving debt. As long as your spending doesn't increase proportionally, the extra income puts you in a much better position to save. While mortgage and other fixed rates are low right now, credit card balances can always do with lowering.
Reducing debt, increasing savings and spending should be a good thing for the economy. While all of the extra money may create some inflation, it would do more to bolster the positive economic trends we have already.
Posted by Ryder Taff, CFA