Despite uneasy feelings about the economy, many working Americans are enjoying higher salaries. Nearly two-thirds (64%) of working Americans reported getting a pay increase at some point in the past 12 months, according to a new Bankrate survey.

Being proactive with a pay raise is key to financial success. Instead of letting the extra cash slip through your fingers, devise a plan and allocate at least a portion of the money toward your biggest financial priorities, such as paying off debt or saving for retirement.

If you’re feeling stuck, a financial advisor can offer personalized guidance and help you make informed decisions that align with your goals.

“Getting in the habit of paying yourself first — no matter how much money it is — is one of the best financial habits you can build,” says Sarah Foster, a principal writer and analyst with Bankrate. “After all, time in the market and compound interest pay the biggest dividends for your finances.”

While strengthening savings and investments is important, redirecting a new pay raise toward debt repayment can help build a stronger financial foundation. Prioritizing high-interest debts, especially credit card debt, can reduce how much you pay in interest over time and improve your credit score.

With interest rates at their highest point in over 15 years, it’s more expensive than ever to carry a credit card balance. Yet 47% of credit cardholders are carrying debt from month to month, according to a recent Bankrate survey.

Paying off debt often draws money away from other financial goals, such as investing. For Americans expecting their finances to stay the same or get worse in 2024, 19% say debt is holding them back.

An emergency fund is a financial safety net that allows you to weather job loss, medical emergencies and other unexpected events without jeopardizing long-term goals or racking up high-interest debt. Financial experts recommend saving at least three to six months worth of living expenses to build a strong financial buffer.

Yet, 81% of Americans didn’t increase their emergency savings in 2023, according to a recent Bankrate survey, and a majority feel like they’re behind on achieving this goal.

Inflation and high housing costs challenge saving efforts, leaving less discretionary income to build an emergency fund. More than half (57%) of Americans who haven’t boosted their emergency savings or have no savings at all say inflation is keeping them from saving more, while 38% cite having too many expenses as the reason why they haven’t increased their savings.

“High inflation feels a bit like taking a pay cut, and it might be one reason why Americans suggest the economy isn’t as strong as it looks on paper,” says Foster.

When your income changes, it’s smart to update your budget and take a hard look at where your money is going. About 13% of Americans cited budgeting their spending better as their main financial goal for 2024, according to a recent Bankrate survey.

Bankrate.com/Tribune News Service