Making Your Own Raise - And How To Spend It

My boss stopped into my office this morning and said, "Oh, by the way... with everything the way it is right now, we are in a wage freeze."

I nodded and quickly donned my human resources hat. "That's okay," I said, "I don't think anyone was expecting raises. Besides we don't have anyone due for a review for awhile."

"Well, there was one person who was due for January..."

"Who?" I asked.

"You."

Ohhhh.....

I was hired in May, so that is my official anniversary, but way back when they asked me to become a manager they gave me a raise, so that became my official review date. It had somewhat slipped my mind. Of course it would have been nice to get a wage increase, but with the layoffs we just had, I certainly wasn't expecting one. In fact, Budgets Are Sexy had a post today asking if you would be willing to take a 10% paycut if it meant that other employees could keep their jobs. I absolutely would. Frankly, while a raise would have been nice, I'm just happy to have a job.

That doesn't mean that my paycheck will stay the same though... we also have a Flexible Savings Account plan where I work. I love my FSA. Each year in December we have to decide how much we want taken out of our paychecks to be put into the account. It is always a bit of a crap shoot since you want as much as possible in there for all of your medical bills that might come up, but if you don't use it, you lose it. Ever since the year where I had to run out and get a pair of prescription sunglasses to make sure I had enough reimbursements, I tend to shoot for the low side. I figure out what my approximate yearly health expenses will be, tack on a couple hundred to round it up and call it good. Almost every year I have ran out, usually in about December. I figure that is pretty good odds. I get the majority of my costs covered, no money lost, and I can usually handle any bills that come up in the last month of the year.

Last year I knew going in that I was going to have a pretty expensive year financially. On top of all the regular routine sorts of things, I had regular therapy appointments and a few other medical needs. I set my FSA as high as I have ever had it. It worked out pretty good too - in December I was down to $.92. One dentist bill later and my FSA for 2008 was wiped out. This year, however, things are bit different. My medical needs this year will be a lot lower, so I lowered the amount going into my FSA.

This reduction means that I get an extra $36.68 in each paycheck. I get paid twice a month, so then I had to decide what to do with the extra $73.36.

I thought for awhile about how I can best use that $36.68 each paycheck. The goal would be to maximize it so I get the best and most practical benefit out of it. My first thought was to funnel it into my emergency fund, since that is one of my big goals for 2009, but I've already done some work in that direction. However, the biggest goal I have and the most important one is to make my $900 goal each month. So, I decided that the best thing for me was split the money up. One $36.68 would go into my checking account to help me reach my goal. The other $36.68 would go towards my credit card.

I am currently paying $75 a month on the card. At this rate it will take me slightly over a year to pay off the balance. However, having it paid off this year is another one of my 2009 goals, so now I will bump up my monthly payments to $111.68. Now, I am looking at just 8 months. However, I am not quite done yet. I mentioned in another post that I plan on taking some of my December surplus and also applying it to my credit card balance. If I put $250 of the surplus money on the balance, now I am looking at just over 5 months of payments!

Besides finally being free of the debt that I have been carrying since my divorce, this will mean a huge bonus for me this year. As I've mentioned, my car is paid off in June and the current car payment is $307. If the credit card and car are paid off at about the same time, that means that I will have an extra $418.68 each month! Wouldn't that be wonderful?

I thought about putting the whole $73.36 towards the credit card. If it weren't for the fact I start out each month in the hole, that is exactly what I would do. However, with my situation, I need cash, simple as that. Even $36.68 makes a difference! On the other hand, I could put the whole amount towards my monthly goal, and then if I hit $900 put the surplus towards the credit card, but the problem there is that nothing gets added if I don't make the $900 each month. I feel that by splitting the money up I can get the biggest bang for my buck - if you know what I mean!