Whether your monetary increase is from one big drop of cash or as a monthly increase in pay, it’s important to think about your current goals, the long term and how you can make your money work best for you.

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Monthly Increase

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Most likely, this means you’ve just got a hefty pay rise. It can be so exciting to know you’ll have a little bit (or a lot!) of extra money coming in each month, but that can sometimes lead to a bit of overspending. Now there’s nothing wrong with treating yourself, especially if you worked your butt off for this pay increase, but once you’ve had your celebrations, it’s good to take a step back and figure out how this is going to impact your finances.

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Lump Sum

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So, you’ve received a lump sum of money - maybe through inheritance, a bonus at work or even a lottery win (fingers crossed!). You’re overwhelmed, excited and quite possibly, you may have mixed feelings if this is part of an inheritance.

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Take a breath. By breaking down what this money actually means to you, you can figure out how to deal with it.

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Plan Ahead

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It is never too early to plan. Whether you think you could be in line for a big promotion in a couple of months or you know that at some point you’ll be inheriting a bit of cash, you need to know what to do with it. If you don’t plan ahead, you’ll be faced with an extra £1000 in your monthly budget with no idea what to do with it. So, what happens? You splurge. Whereas, if you’ve already thought about what you do with an extra £200, £400 or £1000 a month, you won’t get carried away.

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Focus on Your Goals

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What are your financial goals right now? Are you saving for a holiday or your first home? Do you want to start going to the gym but can’t fit that into your budget right now? Are you putting some money aside into a Stocks and Shares ISA and want to up your investments? List them out and keep them at the forefront of your mind when that extra money comes in. Before you spend any, really think about how it could benefit both the present and future you.

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Beware of Lifestyle Creep

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Lifestyle creep is when your spending increases just because your income does. You could be influenced to upgrade your car, buy a whole new wardrobe and splash out when in reality, you can’t really afford it. It can be easily done if you tend to avoid looking at your bank account, especially when you know you’re getting more money than usual. By outlining your goals and combining them with your new income, you can reconfigure your budget to work best for you. That way, you can enjoy the perks of your extra income, while avoiding the cycle of overspending.

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