8 Too-Common Mistakes People Make After Getting a Raise

It's one of the best moments as an employee, when you're given a raise after working hard. You may have spent years working to get ahead financially, and now you've gotten a boost to help your financial health.

But before you race off to spend that new cash, here's a look at eight common mistakes people tend to make after getting a raise.

You just got a raise, now what? Unless you make a solid plan for what to do with that extra money that'll be coming in, you might see it go out the door much faster than anticipated.

Whatever level of detail you decide to include in the plan, it's usually best to at least list where you want to start using that additional money. When you give your money a designated purpose, it reduces your chances of wasting it.

Do you know where that plan may come in handy? When you're itching to make a big purchase because you know you're going to have more money.

Sure, that new car, entertainment center, or vacation seems appealing in light of your raise, but it could quickly eat up a bunch of that new money and leave you little for things such as paying off your debt or saving for upcoming big expenses that may be related to health care or other critical needs.

It may not be the most fun idea for how to spend a raise, but taking care of your debt can be a great way to use that extra money and set yourself up for a brighter financial future.

"The logic is pretty simple: Try to take care of your existing bills before you add on new ones," explains Northwestern Mutual. If you have high-interest debt, consider paying it down with at least part of your raise.

If your raise is especially good, you may be tempted to adopt a higher standard of living. This sounds good on the surface, but it can put your financial future in serious jeopardy. This is commonly known as lifestyle creep.

It's good to raise your standard of living over time, but you should be mindful of it. Do you truly value what you're buying, or would you rather improve your financial future?

It's often said that being optimistic can be good for your mental health and your overall life. But assuming the good times will last forever when you receive a raise can be a mistake. While it's great to celebrate your achievement, the same cannot be said about assuming you'll continue receiving raises and can adjust your standard of living as such.

According to Northwestern Mutual, "This is also another good reason to keep lifestyle inflation in check — you never know when your salary trajectory will level off, or even drop, depending on your life circumstances."

Getting a raise is a great time to set up or contribute to your emergency fund, especially since it can be difficult to do so when you're struggling to live paycheck to paycheck. An emergency fund can help you avoid costly debt when life surprises you.

Part of your raise could go toward setting yourself up for a brighter retirement. Make sure you're contributing to your 401(k) to take advantage of your employer match, and then consider putting away even more into an IRA. This can offer you some tax advantages.

This isn't meant to be a depressing thought, but have you considered the trade-offs that may come with that raise?

For instance, will you earn less per hour because of longer workdays? Or, perhaps just as importantly for your bank account, is your main job now going to take up so much of your time that you can't do a side gig for extra money? 

If so, don't forget to include that in your plan for how to best spend this raise.

Getting a raise is a time to celebrate and plan. By avoiding common mistakes other people make with their raises, such as failing to create a plan, you can set yourself up in a better financial situation.

Here's one last thing to consider: Perhaps now is a time to get a financial advisor. If you don't already have a financial professional helping you with your money, getting a raise may be the boost you need to see if an advisor could give you some ideas for how to strategically use that new money to create new wealth.