Making the Most of Your Pay Raise
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Making the Most of Your Pay Raise

March 19, 2021 | 4 min. read

The 50/50 Plan accounts for both immediate gratification and your long-term financial health.

We’ve all experienced it before. The initial happiness and enthusiasm that accompany a pay raise quickly fade as the additional money seems to be swallowed up by our ever-escalating financial obligations. But there is a way to avoid that, and it’s by developing and immediately implementing a purposeful plan for allocating the new money you earned with your pay raise.


At First Command, more than 60 years of helping service members and their families plan for and pursue financial security have convinced us of the merits of what we refer to as the 50/50 Plan. Its beauty lies in its balance and its simplicity. The idea is to allocate half of every pay raise to upgrading your current lifestyle and the other half to your financial future. For example, you could choose to save half of the additional money every paycheck for a vacation you’ve been dreaming about and invest the other half in your Thrift Savings Plan (TSP) account or Individual Retirement Account (IRA). By dividing the money between the present and the future, you avoid the possibility not only of falling behind in the pursuit of your long-term goals, but also of growing resentful of too much deferred gratification.


One more thing: it’s essential that you act immediately to implement your 50/50 Plan. Determine exactly how much additional after-tax income you will have in every paycheck after your raise becomes effective. Then, set up an allotment or bank draft to automatically direct the extra money to the appropriate accounts.

If we use the previous example of splitting the money between vacation savings and investing for retirement, that would mean increasing the amount of your allotment to the TSP and directing the other half of the money to a bank account.  Just don’t make the mistake of sending the money intended to pay for your vacation to the checking account you use to pay all your monthly bills. If you do, you’ll be wondering what happened to the extra money six months from now!

Your Financial Advisor  can help you allocate the additional funds from your pay raise as part of your overall financial plan. That way, you can feel good about saving for both a short-term win and contributing toward the goal of long-term financial security.

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At First Command we’ve spent over 60 years helping newly commissioned officers plan their financial futures. In fact, four out of five of our Financial Advisors are veterans or military spouses, and we offer complimentary financial plans to active duty military. To speak with a Financial Advisor near you, visit our Get Started page.

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