Spend some — but not all — of your raise or bonus
Every time you get a raise or bonus, you probably want to spend it. After all, you worked hard for the money — shouldn’t you enjoy it a little?
Maybe not. Each dollar you spend today kills off several dollars that you could depend on tomorrow.
And that’s no exaggeration: Each $1 invested at a 7 percent annual return becomes more than $7.50 over 30 years.
So, rather than spending a windfall, simply earmark a portion for fun now, and the rest for retirement later. For example, if you get a $3,000 bonus, take $500 and live it up. Then, invest the rest.
Choose this path, and chances are good that you will be handsomely rewarded for resisting lifestyle creep. A 7 percent annual return on $2,500 over 30 years gives you some $19,000 extra to spend in retirement.