A higher salary means you have more money to spend, right? Not necessarily. You need to consider some of the added costs you'll be taking on with that new job.
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Budget Blonde reminds us that if your new job pays more money than your last job, you need to figure in additional costs before you go on a spending spree. For example, if your salary goes up, that could bump you into a higher tax bracket, and you'll need to factor that into your take-home estimate. Some other costs include:
- If your new job requires a move to a higher cost-of-living area, just staying in the same size and quality of home or buying the same groceries will force an increase in spending.
- You may also be losing out on some benefits that your student status conferred — think of health insurance, gym membership, subsidised entertainment, etc.
- Your new job may come with some necessary new expenses, like a wardrobe upgrade and a (reasonable!) car if you didn't already own one.
- If you practise percentage-based budgeting the way that my husband and I do, your absolute saving and giving amounts will increase, whether or not you increase your lifestyle.
Check out the link for other tips on getting an income increase — and while you're at it, check out our guide on the same topic.
What to Do with a Big Income Increase [Budget Blonde]