Got a pay bump? How to manage the extra cash

globalnews.ca:

Finally some good news — you’ve landed a major promotion with a huge pay bump, or you’ve finished many years of education and entered a high-paying profession.

Either way, you have some extra cash, and perhaps little else, aside from a student loan.

The act of seeking out advice — or even just starting the conversation with yourself — is worthy of praise, says Brian Himmelman, president and financial planner at Himmelman & Associates Financial Advisors in Halifax.

Now is the time to decide what is important to you, says Brandon Wiebe, a fee-only financial planner with Money Helps, based in Saskatoon. The first financial conversations involve setting priorities for the near- and long-term, and involving partners, if you have one.

At this early stage, Wiebe says, a tax-free savings account can offer flexibility for someone who wants to save and have tax-sheltered growth, but might change their mind on their priorities in the future. Paying down student loans and other debt is another goal that may be high priority — or not, he says.

For some, paying down student debt slower but investing sooner is the smarter move.

Both Himmelman and Wiebe favour the “bucket” approach, where disposable income is branched off into various areas, from debt repayment to saving, from investing to spending.

These buckets can change over time, just as priorities shift throughout life.

For a younger person with a certain amount of extra income every month, Himmelman says one possible arrangement could include three buckets: student loans, saving for a down payment, and retirement. Factoring in their age and goals, roughly 25 per cent extra could be dropped monthly on the loan, 50 per cent goes to the future house, and the last 25 per cent is put