Being wise about my annual increase

Donna WillanLatest, Money cents


Wow, a 7% annual increase is awesome! The challenge now is what to do with it. Of course on pay day the kids and I had a lovely pizza evening to celebrate, but there after it will be wise spending. So what is the wisest way to handle an annual increase?

I went back and found a Just One Lap 100 second video from a year or two ago on “What to do with your salary increase” (see below). Right, so Simon advised that whatever your annual increase, there is a simple rule: take your annual increase and split it in to three; a third to spend and enjoy life just a little bit more, a third to pay off debt and a third to invest. Hey, it sounds a bit like my story to my kids about their pocket money!

But as much as I really like this approach, I think there is actually another important reality, inflation! So perhaps what I will do is this: a third of the annual increase to spend and enjoy life just a little bit more; a third to put into my home loan (which is a combination of paying off debt and saving – Simon’s points two and three combined into only one third); and the final third to cover my rising inflation-related bills (amenities, insurances, petrol etc.).

So hopefully this will take the squeeze out of all the increasing costs, go a little further to paying off the bond, and allow for a little more living (perhaps it’s time to re-upholster the couch). The bottom line is that a 7% annual increase may sound good, but in reality not much is going to change. But at least I can be pleased that I have been wise and can try to keep up with my rising monthly bills.

In my next column I’m going to explore our personal security – do we need to increase our home security, and can I afford to?


Money Cents blog

Meet the Just One Lap team at these free live events

Click here to meet the Just One Lap team at one of our live, free events.

Subscribe to Just One Lap