How to Put Your Raise to Work

Getting a raise is exciting. A higher income can open new possibilities such as moving into a nicer place or even taking a trip. While those choices can be exciting, it’s a good idea to pause and think about your current financial situation before increasing your spending. Although it may not be as fun as a tropical adventure, updating your budget, boosting your retirement contributions, and avoiding overspending may help you in the long run.

Be Intentional With Your New Income 

Lifestyle inflation, also known as lifestyle creep, happens when your income goes up and your spending rises with it. It usually doesn’t happen all at once. Instead, it starts with small upgrades like ordering more takeout, buying nicer clothes, or moving into a more expensive apartment. These choices seem fine at the time, but often come from a shift in mindset. Since you earn more, you feel like you can spend more. According to Fidelity, the problem is that even though income increases, expenses also rise, and savings often stay the same. 

A raise or promotion is a great chance to break old financial habits and build stronger ones. Simple steps such as reviewing your budget, increasing your automatic savings, and adjusting any debt repayments can go a long way toward making your higher income strengthen your financial future instead of raising your expenses.

Review Your Budget 

One of the first things to do when you get a raise is figure out your new take-home pay. Raises are usually reflected as gross pay (before taxes), not net income (the amount you receive after taxes). Knowing the difference can help with more accurate budget decisions based on your new income. By reviewing your paystub, you’ll see two boxes: one for gross income and one for net income. Once you know your new net income and how much more money you have, you can begin updating your budget.

Automate Your Savings 

Two of the simplest ways to avoid lifestyle inflation and stay intentional with your new income are by automating transfers to savings and increasing savings contributions, according to Ask The Money Coach. When you automate your savings by putting part of your paycheck directly into a savings account or using tools like automatic roundups, you pay yourself first before spending on anything else. It also gives you time to think about how you want to use the rest of your extra income instead of spending it without a plan, which gives you the ability to strengthen your financial foundation.  

Automating your savings contributes to a better peace of mind by ensuring your expenses don’t rise with your income allowing you to save more. It takes the guessing and labor out of saving and accelerates progress toward your future financial goals while preparing you for possible increases to costs of living. 

Boost Your Retirement Savings 

A recent Investopedia survey found that between 20% to 46% of Americans have no retirement savings at all. If you’re a member of the PERA Defined Benefit (DB) Plan, this is one worry you don’t have. You and your employer contribute to PERA every time you get paid, and you’ll receive monthly income for life when you retire.  

The PERA DB Plan gives you a strong foundation, but you can take additional steps to be even more prepared for retirement by participating in the optional PERAPlus 401(k) and 457 Plans if you aren’t already. These plans let you save extra money in tax-advantaged accounts and are a great way to boost your long-term savings. Go into your PERA account, select the forms tabs, then select the “PERAPlus 401(K)/457 tab,” and select the 401(k) Contribution Authorization Form. A helpful tip is to change the dollar sign in the contribution bars to a percentage of your income. This allows you to invest your extra income in your retirement without changing anything within your PERA account. 

Small Choices Strengthen Your Financial Foundation 

After you get a raise, it can be tempting to spend the extra money right away, which oftentimes does not support long-term financial stability. By reviewing and following your budget, automating your savings increases, and boosting retirement contributions, you can help build a stronger foundation for your financial future.

Sources:

• Fidelity Investments. “5 Ways to Outsmart Lifestyle Creep.” Fidelity Viewpoints (February 20, 2026). doi: https://www.fidelity.com/learning-center/personal-finance/lifestyle-creep. 
• Liberto, Daniel. “Alarming Figures Reveal How Many Americans Lack Any Retirement Savings.” Investopedia (September 10, 2025). doi: https://www.investopedia.com/americans-with-no-retirement-savings-11804319. 
• Qadeer, Abdul. “Lifestyle Creep Prevention: How to Stop Overspending When Your Income Rises.” Ask The Money Coach (accessed April 6, 2026). doi: https://askthemoneycoach.com/lifestyle-creep-prevention/.