Ask HN: How do you change your budget around a big raise?

#1

Post by mainedotpy » Fri, Jul 29, 2022, 12:43 AM UTC

Recently a side hustle went from 20% of my main job salary to about 100% and has held steady at this level for 3 months. The actual increase in work is trivial.

Our lifestyle was already pretty comfortable and we were saving. I am struggling with how much of this extra cash we should feel good spending on unnecessary-but-joyful splurges such as fancy dinners, cleaning services etc vs how much of this windfall I should just be saving.

I grew up lower middle class and do not have a great financial background.

Re: Ask HN: How do you change your budget around a big raise?

#2

Post by dieselgate » Fri, Jul 29, 2022, 12:52 AM UTC

Haven’t seen much advice like this on HN but there are financial sub reddits related to this, which I would recommend looking into if you haven’t before. Typically the order of operations, from a high level, for a windfall or large cash flow increase is: Pay off all debt Edit: the above didn’t really answer your specific question about “how much” to allocate to saving vs spending. Kind of a tough thing to put a number on but save more than spend

Re: Ask HN: How do you change your budget around a big raise?

#3

Post by RicoElectrico » Fri, Jul 29, 2022, 12:53 AM UTC

If you have a new-ish mortgage, then overpaying it is OP. If you're only overpaying the principal, it reduces not only the repayment period, but also interest the bank would accrue.

Re: Ask HN: How do you change your budget around a big raise?

#4

Post by mixmastamyk » Fri, Jul 29, 2022, 12:54 AM UTC

Wouldn’t do anything in the short term. Sure have a bit of fun here and there, but focus should be on early retirement, maybe Uni for the kids. Don’t take on a lot of bills or you’ll end up like MC Hammer. :-D

Re: Ask HN: How do you change your budget around a big raise?

#5

Post by themodelplumber » Fri, Jul 29, 2022, 12:55 AM UTC

Nice! I've been in similar shoes before, for a different reason. But I remember it feeling like a really weird and dicey situation. I wasn't sure how to trust myself.

Here's what I learned to do, that worked for me:

- Make a cool spreadsheet for yourself and run little experiments to see what works. Never trust a single, fixed number for savings, spending, anything. Life and emotions are way more nuanced than that, and part of you (especially the I'm My Own Person Now part) will practically yearn to disobey those unreasonably-fixed orders.

- The spreadsheet should include projections, so you can adjust some numbers and see the results as they would turn out in a year or so.

- When you notice lifestyle-overage issues, or shortfalls, accept it, make adjustments to the spreadsheet logic that may help, and don't scold yourself too much.

- Splurge, always splurge to some degree. Splurge early and often.

- When your splurging is over and you're going "why did I do that, man what a stupid day/week/month" that's the perfect time to head to the spreadsheet and set some very simple guardrails that may be helpful next time.

- Some guardrails that can help a lot are things like automatic reinvestments and automatic withdrawals to places like brokerages.

Just some ideas from my own experience, in case they help. Good luck...and congrats!

Re: Ask HN: How do you change your budget around a big raise?

#6

Post by asojfdowgh » Fri, Jul 29, 2022, 12:58 AM UTC

budget the same, 3 months isn't enough to say its going to stay there for a year.

Good dinners are more affordable than fancy ones (even if you eat out for both, you get more for your money at an "average" restaurant than a top class one that exists only to show other people how much money one has).

I'd mainly focus on the things that take up at minimum 1/5th of your lives: Bed quality is nice to improve, keyboard/mouse/screen/computer, shoes, etc.

whatever amount spent, just make sure your savings are always increasing, the faster the better, but don't feel the need to over-do it.

but past that, invest a portion of your savings, since banks rarely meet inflation rates.

Index funds, housing, crypto if you feel daring, etc, don't invest too much (especially if monkeypox becomes a full-blown thing), but also don't invest too little, (or you are basically losing money over time)

and then through that, your retirement will arrive earlier

Re: Ask HN: How do you change your budget around a big raise?

#7

Post by Fargoan » Fri, Jul 29, 2022, 1:00 AM UTC

Get into modular synths and you won't have to worry about the extra money.

Re: Ask HN: How do you change your budget around a big raise?

#8

Post by alhirzel » Fri, Jul 29, 2022, 1:02 AM UTC

Read Mr. Money Mustache - https://www.mrmoneymustache.com/category/mmm-classics/

Re: Ask HN: How do you change your budget around a big raise?

#9

Post by paulpauper » Fri, Jul 29, 2022, 1:06 AM UTC

dieselgate wrote: post #2

Haven’t seen much advice like this on HN but there are financial sub reddits related to this, which I would recommend looking into if you haven’t before. Typically the order of operations, from a high level, for a windfall or large cash flow increase is: Pay off all debt Edit: the above didn’t really answer your specific question about “how much” to allocate to saving vs spending. Kind of a tough thing to put a numbe…

6 months seems like too much. You're sacrificing long-term market returns that could be invested.

Re: Ask HN: How do you change your budget around a big raise?

#10

Post by mainedotpy » Fri, Jul 29, 2022, 1:07 AM UTC

alhirzel wrote: post #8

Read Mr. Money Mustache - https://www.mrmoneymustache.com/category/mmm-classics/

Great recommendation overall. I love his stuff.

I’m not in the extreme thrift camp but we have no debt aside from mortgage and aren’t into conspicuous consumption. Our van is an 03.