The 3 Smartest Things to Do With Your 2024 Raise

Getting a raise isn't a given. If your paycheck is about to get larger in the coming weeks, consider yourself fortunate. 

If you're in line for a raise in 2024, it's important to put that money to good use. Here are a few smart things to do with your upcoming pay bump.

1. Build or boost your emergency fund

An astonishing 63% of Americans don't have enough money to cover an unplanned $500 expense, says SecureSave. If you're getting a raise and don't have a stocked emergency fund (or any emergency fund at all), then make sure to send that money straight into your savings. 

Your best bet is to set up an automatic transfer out of your checking account and into your savings account so you don't have a chance to spend the extra money. If you tell yourself you'll do your best to transfer funds into savings at the end of the month, you might fall short.

Now, when we talk about a completely funded emergency fund, that generally means having enough cash to cover at least three full months of essential expenses. But if that target seems way out of reach, aim lower. Set a goal of saving enough to cover one month of bills and take it from there if you need to. That'll at least buy you some protection. 

2. Pay off lingering credit card debt

Maybe you racked up a credit card balance over the holidays. Or maybe you took on some debt last year when your car needed repairs and you didn't have the money in your savings account to cover them. 

Either way, the sooner you pay off a lingering credit card balance, the more interest you can keep from accruing. So once you're done building your emergency fund, use your raise to tackle this important task.

In fact, it's a good idea to continue sending money into your savings automatically every month if you're trying to pay off credit cards. That way, you'll have funds to tap for that purpose, and you won't run the risk of accidentally spending money that was supposed to be earmarked for debt payoff purposes.

3. Set up an automatic transfer to your IRA

You may be many years away from retirement. But eventually, you're going to need money to live on in the absence of a paycheck from work. So the sooner you start funding your IRA, the better. 

This year, savers under age 50 can put up to $7,000 into an IRA. If you're 50 or older, that limit rises to $8,000. And if you're funding a traditional IRA, every dollar you contribute is a dollar of earnings the IRS can't tax you on this year, as long as you're under the income limits.

Meanwhile, a modest IRA contribution could go a long way over time. The stock market's average annual return over the past 50 years has been 10%. 

So let's imagine you contribute $5,000 to an IRA in 2024 and don't retire until 2054. With that return, in 30 years, you're looking at a nest egg worth about $87,200. And while that figure alone may not be quite enough to retire on, it's a pretty large sum of money to result from one year's worth of contributions alone.

Now, just as it's a good idea to set up an automatic transfer from checking to savings when you're trying to build an emergency fund, so too should you employ this tactic in the course of funding an IRA. That way, you're more likely to stay on track.

Getting a raise in 2024 could do a lot of great things for your personal finances. The key, however, is to make these moves before you get used to having extra money in your paychecks. So set up your automatic transfer now rather than wait.