Ask HN: How do you change your budget around a big raise?

Nice! I&#x27;ve been in similar shoes before, for a different reason. But I remember it feeling like a really weird and dicey situation. I wasn&#x27;t sure how to trust myself.<p>Here&#x27;s what I learned to do, that worked for me:<p>- Make a cool spreadsheet for yourself and run little experiments to see what works. Never trust a single, fixed number for savings, spending, anything. Life and emotions are way more nuanced than that, and part of you (especially the I&#x27;m My Own Person Now part) will practically yearn to disobey those unreasonably-fixed orders.<p>- The spreadsheet should include projections, so you can adjust some numbers and see the results as they would turn out in a year or so.<p>- When you notice lifestyle-overage issues, or shortfalls, accept it, make adjustments to the spreadsheet logic that may help, and don&#x27;t scold yourself too much.<p>- Splurge, always splurge to some degree. Splurge early and often.<p>- When your splurging is over and you&#x27;re going &quot;why did I do that, man what a stupid day&#x2F;week&#x2F;month&quot; that&#x27;s the perfect time to head to the spreadsheet and set some very simple guardrails that may be helpful next time.<p>- Some guardrails that can help a lot are things like automatic reinvestments and automatic withdrawals to places like brokerages.<p>Just some ideas from my own experience, in case they help. Good luck...and congrats!

Haven’t seen much advice like this on HN but there are financial sub reddits related to this, which I would recommend looking into if you haven’t before. Typically the order of operations, from a high level, for a windfall or large cash flow increase is: Pay off all debt &lt; 6 month + emergency fund &lt; invest &lt; …? Best of luck to you<p>Edit: the above didn’t really answer your specific question about “how much” to allocate to saving vs spending. Kind of a tough thing to put a number on but save more than spend

I think trying to save money is the wrong mindset. Life should continue as is. Put aside what you don&#x27;t need.<p>If you start spending, you&#x27;ll keep spending. Once you taste the fancy butter and breakfast on organic non-bleached sourdough, going back to margarine on toast makes you <i>unhappy</i>.<p>Money, like food, is dangerous. If you&#x27;re comfortable, more of it just makes you &#x27;fat&#x27;. It&#x27;s harder to dial back to being acsetic later.<p>However, going through the journey of opulence is something people should try. Buy the expensive chocolates, eat the steaks with gold leaf, sleep at top hotels for absolutely no reason, buy flights to visit the crowded wonders of the world. Just manage expectations that this indulgence is not the peak of your life, but rather a low point.

Seems to me that the new money can be used to set up an emergency fund and adding to your retirement fund. If you have kids set up a college fund.<p>Once you get that out of the way, use the money to fund activities that will add to your well being. Careful with adding stuff to your life. Ultimately you will need to take care of it. Many people become slaves to it and the more you have the more you will have to take care of.

In general, paying off debt (if any) first is good.<p>If you have money left after paying off debt, pick a % of the temporary windfall that you are comfortable spending and spend it (doesn&#x27;t matter what categories you want to spend them as long as they are meaningful to you).<p>Take the remaining and save it. Since you say you are already saving, just add this on to those same saving instruments.<p>You can apply this principle to any incremental dollar received over your average base income eg: annual raises, bonuses, cash gifts, winnings, inheritance etc.,<p>Your saving (or investment) pattern i.e., which savings&#x2F;investment instruments you choose depends on your risk profile.

If you have a new-ish mortgage, then overpaying it is OP. If you&#x27;re only overpaying the principal, it reduces not only the repayment period, but also interest the bank would accrue.

Congrats! I am asking myself the same question after getting a nice raise as well. Here is where my thinking is currently:<p>1. Don&#x27;t make any sudden changes! Think for a least a month before making any big purchase, sometimes it still is desirable after waiting, sometimes it is not! You got this far without it so far, so another month isn&#x27;t a big deal.<p>2. Use a tool like projectionlab.com or a spreadsheet to calculate how much you want to be saving for retirement. If you&#x27;re maxing out tax-advantaged accounts that is pretty good already, but it is good to have a target for how much to save each year on top of that.<p>3. Try to keep your &quot;burn rate&quot; low. I think it is better to try and keep your long term recurring costs based off of your old salary as long as possible. Pay cash for any fun things, so if you lost your job tomorrow you don&#x27;t have big obligations like a huge mortgage or lease payments.<p>The term I heard is HENRY - High Earner, Not Rich Yet! A lot of people spend it as soon as they make it and never accumulate wealth.

Wouldn’t do anything in the short term. Sure have a bit of fun here and there, but focus should be on early retirement, maybe Uni for the kids. Don’t take on a lot of bills or you’ll end up like MC Hammer. :-D

What I’d recommend isn’t to be perfect, but to put a piece of it in useful places with automatic payments. This way the system is easy to setup once and will be pretty good over a long term. So if you’re in the US pay off all cc debt and then max your retirement options (401k and Roth both). This reduces taxable earnings. If you have more after that do a monthly contribution to an index fund. This will be a good starting point and will keep your bank account looking more like it has to this point.

In addition to all of the very good saving and investing advice you’ve received so far (which should be followed), remember that some experiences are easier and more enjoyable while young. You could invest it all and live a very comfortable life in retirement, but things like traveling and other physical activities get harder to do and you likely have less time to check off your bucket list. Use some to enjoy life now, if that’s what you want.

budget the same, 3 months isn&#x27;t enough to say its going to stay there for a year.<p>Good dinners are more affordable than fancy ones (even if you eat out for both, you get more for your money at an &quot;average&quot; restaurant than a top class one that exists only to show other people how much money one has).<p>I&#x27;d mainly focus on the things that take up at minimum 1&#x2F;5th of your lives: Bed quality is nice to improve, keyboard&#x2F;mouse&#x2F;screen&#x2F;computer, shoes, etc.<p>whatever amount spent, just make sure your savings are always increasing, the faster the better, but don&#x27;t feel the need to over-do it.<p>but past that, invest a portion of your savings, since banks rarely meet inflation rates.<p>Index funds, housing, crypto if you feel daring, etc, don&#x27;t invest too much (especially if monkeypox becomes a full-blown thing), but also don&#x27;t invest too little, (or you are basically losing money over time)<p>and then through that, your retirement will arrive earlier

Pretend I never got a raise, set the new portion of my salary to go straight into savings so I don&#x27;t see it in my paycheck, stash it away and keep living frugally.<p>Maybe enjoy some extra travel but otherwise I try to be pretty anti-consumption soas not to get swept up in the hedonistic treadmill involved with keeping up with the Joneses.

Since I&#x27;m happy with my current lifestyle, I simply increase the fixed amount that I invest in broad index funds.

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i would spend 50-50 i.e. 50% on splurge and 50% on investments. On splurging fancy dinner, cleaning services are ok but taking new car is not ok as it increases the budget year over year so go for one time things like vacation etc. but avoid permanent lifestyle upgrade with the uncertain windfall.

Get into modular synths and you won&#x27;t have to worry about the extra money.