What to do with a sudden income boost | Refresh Financial

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What To Do With A Sudden Income Boost

 What To Do With A Sudden Income Boost

Perhaps you’ve switched jobs for a significant pay increase or maybe your previously unemployed spouse has found work. You could've taken on a second job, or rented out a room or suite in your home. Whatever the reason, a sudden and significant influx of income is a great opportunity to secure your financial security for years to come. But what is the best way to do it, and how do we get the most from this new stream of income? This blog will discuss what to do with a sudden income boost.

It’s important to remember that just because you have more income doesn’t mean you should increase your expenses. Try leaving your spending the same as it was and use your surplus for the following:

1. Pay down your debts

- your debts are costing you money every month. The faster you pay them down, the less they will cost you. You can use your new stream of income in this way to increase your monthly cash flow even more. As a bonus side effect, your credit score will reflect your good new habits and you’ll unlock better interest rates as someone with good credit saving you even more money.

2. Save an emergency fund

- this is financial guru gospel and cannot be ignored. Saving an emergency fund has been the sole determining factor preventing foreclosure and bankruptcy for countless people. It’s most commonly advised to save at the very least three months worth of expenses in a savings fund. Even better is if you save it in a high-interest savings account so your money grows as you keep it tucked away.

3. Save for retirement

- This, unfortunately, is a part of life often overlooked by Canadians, but whether or not you live comfortably in retirement is entirely dependent on what you do about it now. Putting money away, steadily, will ensure you’re not just barely scraping by when you’re no longer working. You can find ways to invest this money as well, so that you see it working for you and growing as you near your retirement days.

4. Invest in cost-efficiency

- Use your newfound income stream to make your home and vehicle more energy efficient. This will save you money in the long run by lowering your bills and expenses. If you ever lose some of your income, you’ll be glad you did this when you could.

5. Invest in your career

- Maybe the only thing preventing you from getting that promotion is the lack of a certain skill or certification. Go get those skills so you can turn your increased income into even more income.

Things you shouldn’t do with the newfound income stream:

1. Don’t use it as an excuse to spend more

- All those independently wealthy financial gurus out there didn’t get that way spending money. Wealthy people who’ve made their wealth themselves are often frugal people who save, save, save no matter how much they are making.

2. Don’t use it as a reason to take on more debt

- When you’re making more money, it’s easy to tell yourself you can afford to use your credit card more but often that results in more of your credit being used, and not necessarily more of it being paid down. As such, your debts can tend to grow faster when you’re making more money.

3. Don’t use your income as a reason to get in over your head

- any new income stream is going to be a little insecure and you could lose it just as fast as you found it. Don’t buy a house or take out a loan that you can only afford with this income stream, because in the event the income goes away, you’ll really be in trouble.

It’s easy to see new money as a reason to spend, but all you’re doing when you spend now, is taking financial stability away from your future self. At some point in the future, you’re going to wish you’d saved all that money and you’ll forget all about the junk you spent it on. Make stability and security your priority and you should be able to turn this new income stream into a promising and stress-free future.

Do you have any ideas on how new income streams should be made use of? Let us know in the comments!

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