What should you do with a pay raise so you actually feel it?
I'm Luca, Oslo's banknote, and this year I showed up a little bigger. Before you get used to spending me, here's what to do with your raise so it really changes your month.
LucaYour accounts and everything that comes in.
Updated
Why a raise sometimes disappears
When your pay goes up, spending tends to follow: a slightly better plan, more food deliveries, an extra night out. None of it looks big, but within two or three months the raise is spread across new expenses and you feel short again. You didn't do anything wrong: it's what happens when nobody decides where the new money goes.
Also, the raise that matters is the one that reaches your account, not the one in the letter. Check your pay slip: mandatory deductions, like health or pension contributions in many countries, are usually calculated on your salary, so they go up too. Do your math with the net raise.
Step 1: update what's due
Rent and utilities can also go up at the start of the year, and so can transport, your phone plan, insurance or tuition. Before deciding what to do with the raise, bring everything that's due up to date: write down the new amount of each payment with its date.
This step avoids the most common surprise: feeling like you earn more and discovering mid-month that your fixed costs ate a good part of the difference. What's left after updating them is your real raise.
Step 2: raise your savings first
Part of the raise goes straight to your goal, before you get used to spending it. The moment is now, with the first paycheck at the new salary: you don't miss money you never got to spend. If you were already setting something aside each month, increase it; if you weren't, the raise is the perfect excuse to start.
It doesn't have to be all of it. Choose a split that feels fair, for example half of the net raise for your goal or emergency cushion, and keep the rest to live a little better. What matters is making the decision before the money arrives.
Step 3: look at what you have left
With everything updated and your savings set aside, look at how much is truly yours until your next payday. That number, not your bank balance, tells you how much you can spend without throwing your month off.
And enjoy the part you kept for yourself. A raise is also meant to be felt in your life: a night out, something you'd been putting off, a treat with a number on it. The difference is that now you choose it, instead of the expenses that sneaked in on their own.
A common mistake: committing the raise before it arrives, with an installment purchase or a new loan “because now I can afford it”. Wait at least for the first paycheck at the new salary, do the full math with your updated expenses and decide after that.
Frequently asked questions
How much of a raise should I save?
There's no single figure, but it helps to decide before your first paycheck at the new salary. A simple approach is to split the net raise in two: one part for your goal or emergency cushion and one part to live a little better. Update your fixed costs first, because whatever they go up also comes out of the raise.
Why am I still short of money after getting a raise?
Usually for two reasons: your fixed costs went up too, like rent, utilities or transport, and small new expenses appeared and ate the difference. Review what's due with the new amounts, compare this month's spending with your spending before the raise, and decide where the extra money goes before it disappears.
Which expenses usually go up at the start of the year?
It depends on your country and your contracts, but rent, utilities, public transport, insurance, phone and internet plans, and school fees are often updated around the start of the year. Check your contracts and January bills, and write down the new amounts before deciding what to do with your raise.
This is financial education, not advice: Oslo doesn't recommend loans or investments. Decisions about your money are yours.
