It’s a great start to the new year. You’ve gotten back to the office to find that all of your hard work has been recognized. Congratulations — you’ve earned a raise or received a promotion with a hefty salary increase. It’s only natural to want to celebrate.
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Most people never consider these 4 financial moves — and they’re leaving thousands on the table.
But after you’ve partied like a rock star — or, you know, a professional — the next stop you should make is at your financial advisor‘s office. It’s easy to get swept up in the excitement over your success and make a few money mistakes. But if you’re not careful, those mistakes could eclipse the extra earnings you’ve worked so hard to achieve.
To help ensure your hard-earned cash stays where it belongs — with you — GOBankingRates connected with Doug Roller, owner and investment advisor representative at Crossroads Financial Group and Taylor Kovar, founder and CEO of 11 Financial. Here are their tips on how to avoid common financial pitfalls after a raise.
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Spending on Luxury Items
You’ve worked late nights and put your all into every project. Of course you deserve to reward yourself with that Birkin bag or elite camping gear you’ve been eyeing. However, if you catch yourself indulging in frequent little (or not so little) rewards, you might be inflating your sense of spending power.
Having a little extra money in your paycheck may mean you can occasionally splurge on gourmet coffee, but it doesn’t mean your grocery list should suddenly include gourmet everything. Roller calls this kind of spending “lifestyle inflation” and warns it’s one of the biggest pitfalls that people with new extra income should be wary of.
“Additional cash can lead you to believe you can splurge on luxury,” he said. Instead, you should maintain thrifty spending habits and focus on saving the extra money.
Splurging on Big-Ticket Blitzes
While some folks with a little extra in their paycheck may give themselves a financial death by a thousand cuts (or designer shoes), others might adopt a “go big or go home” approach to spending their new money. They rush to buy a bigger house, a better car, or the kinds of vacations that make people salivate when they see the pictures on Instagram.
Kovar advises steering clear of this mentality, calling it a surefire way to lose the financial freedom a higher paycheck can provide.
“Instead, I’d advise them to hold off on big spending increases and focus on investing that extra income into long-term goals like retirement savings, debt repayment, or even building an emergency fund,” he said. “This can set them up for true financial security, rather than just upgrading their lifestyle.”
Chasing the Latest Electronics
Advertising constantly bombards you with messages that you’re not productive enough, healthy enough, or good enough without the latest phone or smart home system. You feel like you can’t keep up with the demands of everyday life, let alone with the Joneses, if you don’t have the newest devices.
Roller warns that this mentality is a quick way to blow through your extra earnings. Instead, pause before making a purchase. Consider how you’ve made it this far in your life and career without becoming a regular at your electronics store or being on a first-name basis with your Amazon delivery driver. Reflect on whether the item you feel compelled to buy is truly a necessity or merely a “wouldn’t this be cool?” impulse buy.
“A lot of times these expensive gadgets are impulse buys that never get used and thus waste money that could go toward other things,” Roller said. “Over time, this can lead to financial instability as expenses rise along with income, leaving little room for savings or investments.”
Ignoring Your Taxes
As the late Notorious B.I.G. famously said, “mo’ money, mo’ problems” — at least when it comes to your tax bracket. Kovar noted that a raise could bump you into a higher tax bracket, which might come as an unwelcome surprise if you’ve forgotten to factor that into your take-home pay.
“Rather than spending the extra money right away, I’d recommend setting aside a portion to cover the potential increase in taxes,” he said. “This way, they’re not blindsided when tax time comes around.”
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He encourages you to think of your raise as more than just fun money — it’s an opportunity to build a more secure financial future.
“Whether that’s maxing out retirement contributions, paying down debt, or building up your savings, this is the perfect chance to set yourself up for success,” Kovar added.
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This article originally appeared on GOBankingRates.com: Financial Regrets To Avoid if You’re Getting a Raise in 2025
