A: “What should you do when you get a raise or bonus?” That’s always a fun question. In this day and age, both of those come along with less rarity than they did in the past. So I would say, start saving as much of those increases as you can. Take a look at that dollar amount and take a look your daily expenses. Try to figure out realistically what you can afford to put away.
Elizabeth Warren, who was a professor of bankruptcy law at Harvard before she became a U.S. Senator, developed a budgeting concept that’s used by a lot of personal finance experts. It’s called the 50/30/20 rule, because it’s an equation designed to help people achieve financial well-being. It recommends putting 50% of your take-home pay into things like your housing, mortgage, home maintenance, transportation, food, childcare, those really necessary expenses. Put 30% towards some of the fun stuff. Then put the other 20% into savings, which includes retirement savings. So out of that 20%, part should go into an emergency fund, part into a retirement fund, and if you still have debt, part into paying down debt. So that’s a formula that can help enable you to achieve a solid financial future.