Painless Saving – Save Your Raise

As a career long corporate employee I have an annual performance review followed by a raise for the next year. Part is performance and part is an inflation related increase. I save my raise each year and regardless of the amount it is painless saving. You haven’t gotten used to seeing it in your pay check nor have you put it in your budget.

When I started doing this my main goal was to make sure I didn’t quickly take for granted the new income I earned by mindlessly spending. It can be very easy to fall into the trap of spending more as you make more without noticing it. Like becoming acclimatized to your speed on the highway. You get used to going fast as everyone around you is going fast and the road makes it easy.

After graduating university and getting my first fill time salary I had more than enough to live on comfortably. I was living on a lot less while I was at university and wanted to use the opportunity to save as much as I could. I was lucky that I didn’t have student debt so my expenses could be controlled and I could save. However, if you aren’t in the position to save initially this is a great way to start saving regularly and only a year after starting to work.

Let’s use an example of the first five years of employment. I will use:

  • $50,000 base salary
  • 2% regular increase (four of the five years)
  • 10% raise when they are promoted (once during the five years)
  • 30% tax rate
  • Salary is paid monthly

Through these five years they continue to get a $50,000 salary that they have budgeted for but have been able to save $13,000 after tax without decreasing spending.

If you get a raise this year follow these three steps to saving it before you notice

  1. Find out when your raise is effective. Your manager or HR should be able to tell you the date.
  2. Calculate your tax rate. To make it undetectable subtract your expected tax from the raise. To not notice it you should save your increase minus your tax.
  3. Set up a recurring automatic payment for the day after you are paid for the amount you calculated in step 2.


Figure out your provincial and federal tax rate

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