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Sooner or later, there comes a time when we make more money. Whether it is because we got a raise or because we found an additional income stream, it is something everyone will experience. Most of us start spending more money when these events happen because we feel that we can afford the extra expenses. However, if we want to achieve financial freedom, I suggest doing the following instead.

401k and IRAs - We should increase our 401k contributions and IRAs! Since we just got a raise, we wouldn’t feel much of a difference since we can probably increase our contribution rate and still get a higher take home pay!

Savings and Investments - Exactly the same as above. If you get a raise of 5%, why not put most of it into savings and investments? You won’t feel a difference and you will be much happier down the road. Save more, keep more and get to retire earlier.

Spend Some, But Delay It - When we increase our income, we should save the money and start spending it in a year. That way, you give your money time to accumulate and start earning interest. If you stick to this plan, you might be able to just live off the extra interest that you are earning!

Of course we should celebrate when we get an increase in income, but we should do it responsibly! Work hard, spend with discipline and live happily!!