The Smart Money Move to Make When Your Income Changes

Whether you're just starting a new job, launching a career, or getting a raise at your current gig, there's one crucial step to take first with your newfound income: Decide your non-negotiable monthly savings goal before budgeting for anything else.

Too often when people's income level increases, the typical move is to start spending more on nicer housing, a fancier car, and lifestyle upgrades. But the wiser path is to put saving on autopilot first.

Here's why prioritizing saving is so important when your income rises, and how to put it into practice:

Why Saving Should Come First When you get a raise or start earning more, it's easy to get caught up in an inflated lifestyle. The dopamine hit of rewards like a luxury car or apartment can override the slower-burning satisfaction of saving for the future.

But saving needs to be locked in as the top priority for a few key reasons:

1. Paying yourself first through saving forces you to live on the remaining money, avoiding lifestyle inflation.
2. The sooner you can turbocharge your savings and investing, the more you'll benefit from compound growth over time.
3. Having a healthy cash reserve provides a buffer for unpredictable expenses and life's inevitable curveballs.

How to Make Saving the Top Priority So how do you actually implement this strategy when your income increases? Follow these simple steps:

1. Determine a reasonable but aggressive monthly savings goal as a set dollar amount or percentage of your new income. Aim to save 15-30%+ if possible.
2. Set up automated transfers to funnel this savings amount directly from each paycheck into investment/savings accounts.
3. With this top priority covered, you now know exactly how much take-home pay remains to budget for expenses like housing, transportation, etc.

This forces you to work backwards to find affordable options that allow you to live comfortably within your means, while still prioritizing saving and investing for your future self.

A Honda You Can Afford > BMW You Can't

The perfect example that illustrates this philosophy: It's better money management to purchase the Honda you can actually afford than overextend for the BMW you really want but can't sustain while still saving appropriately.

Having a $500 car payment but still religiously saving $1,000 per month is the way to build real wealth over time. The alternative of a $1,000 car payment that doesn't allow any saving is a recipe for forever living paycheck-to-paycheck.

So when that next job offer, raise, or opportunity for increased income comes along, lock in your saving goal first before adjusting your lifestyle. Your future self will thank you for prioritizing sustainable wealth-building over the instant gratification of splurging.