So you got a raise?

Here’s what to do with the money

Whether it’s a 5% increase or a 20% bump, a pay raise is an opportunity to take charge of your financial priorities. A small raise might not seem like much, but over time, that difference in income could provide a boost to your lifestyle or be put toward other financial goals.

Whether you pay off debt, pad your safety net or treat yourself, a raise is a good time to think about the direction of your financial life.

1 Keep an eye on lifestyle creep Many personal finance experts warn against “lifestyle creep,” which is when you spend more as you earn more.

“If you get a raise and use it to buy a new car or a new home or go out every weekend, your rate of spending might surpass your new income,” says Mabel Nuñez, founder of the investing education site Girls on the Money.

Once you’ve looked at your financial situation, you might find it’s not in your best interest to increase your spending on nonessentials. But if you’re feeling good about the status of your consumer debt and savings, then you might choose to spend more money on things that will make life more enjoyable.

2 Focus on high-priority financial goals Liz Carroll, a financial life and wellness coach at Mindful Money Coaches, says that paying off consumer debt with an 8% annual percentage rate or higher should be a top priority.

Beyond debt payoff, Carroll suggests people have a financial safety net of at least a month’s worth of expenses, with the goal of working toward three to six months’ worth.

Investing for retirement is another priority to consider, such as contributing to your 401(k) or putting your money in a Roth IRA. You could also consider an index fund, which allows you to invest in a wide range of stocks all at once.

3 Treat yourself Beyond debt, savings and other future financial planning, Carroll says you should feel comfortable celebrating your accomplishments. Just keep in mind that you may want to put up some guardrails. Carroll says something that equals 5% of the total raise is a good amount to aim for if you want to treat yourself but are also paying off debt. If you don’t have debt, she says, 10% of the total raise is a good benchmark.