Most financial planners advise having an emergency fund of 6 to 12 months of living expenses you can access in a worst-case scenario. If you’re able to use the money negotiated from a raise to build up this nest egg, it can have several benefits.
If there is an unexpected layoff, restructuring, or an event that eliminates your job, it won’t be the end of the world if you have that buffer. Just knowing it’s there might lessen some of the stress in your life.
Additionally, the problem with living paycheck to paycheck is that you get in the situation where you NEED your job. And when that happens, you lose a key negotiation point: leverage. Your boss could be a jerk or you may dread going to the office every morning, but if you’re 100% reliant on that paycheck, there’s not much you can do. You can’t leave.
Jim Hopkinson is an author, writer, and speaker living in New York City. His focus is on career development for the new economy, showing how new media, technology and branding are changing how people look at their career and lifestyle. Read more...