Where did my raise go?

By Paul Saunders

For this week’s No More Ls column, we’re looking at how a raise doesn’t always mean earning and saving more money.

A raise feels like a significant milestone. More money, more breathing room and maybe even a chance to glow up your lifestyle. It can be thrilling at the moment, but quickly it feels like nothing. Your bank account doesn’t look meaningfully different and you’re left to wonder if raises even matter.

It’s a feeling that many people experience after a raise: “Where did it all go?” This article examines the two main reasons why this happens but also tries to help reframe your approach and attitude to these events.

“In many cases, the extra income quietly disappears,” says Kyle Young, owner of Kyle Young Financial Services, who often works with Canadians early in their careers. “I have had clients who earned fairly significant raises and a promotion in title. It’s great news for them, but it can increase the pressure to elevate their lifestyle to match their new title.” 

Here are two reasons that a recent raise seems to disappear?

Reason #1: Taxes and deductions take a big bite

You’ve been knocking it out of the park at work, and your manager rewarded you with a raise. It is hard not to focus on the dollar number, but this is the gross amount of your raise, not the net amount that hits your bank account. 

Your raise, just like all income, is subject to federal and provincial income taxes, in addition to various deductions for things like EI (employment insurance), CPP (Canada Pension Plan). You may also pay for medical and dental plan deductions, corporate pension plans or investment programs. That means it’s not unusual for roughly 30% of your raise to never make it to your bank account. (Read about why you suddenly pay more taxes.)

Say your raise is $5,000 a year (or about $2.50 an hour at a full-time job). Using this example, you’ll get paid roughly $3,400 to $3,500 net income annually after taxes and deductions. Of course you don’t get paid that money as a lump sum; it’s spread across the year. On a bi-monthly paycheque, you’ll see roughly $145 more. 

Depending on your annual income, a raise can potentially elevate you into a higher tax bracket, meaning some of your raise is taxed at a higher marginal rate.

No one is turning away a raise, but it’s hard not to feel a little underwhelmed at the impact it really makes, especially with a rising cost of living.

Reason #2: Lifestyle creep can happen without fanfare

If you treat yourself because you got a raise, you know where that money is going. But the raise can also disappear in less noticeable but very reasonable ways. Maybe you start going to a better grocery store, eat out with friends more, upgrade your phone plan, or say yes to more experience-based purchases. (Read why concert tickets are getting expensive.) None of these things seem very reckless at surface level. 

But that’s the problem. It is a series of small decisions that seamlessly blends into your normal spending patterns to the point where your “before raise” and “after raise” budgets look almost identical.

“There is that perception of having to ‘keep up with the Joneses’, which means new watches or designer clothes to help look the part,” says Young, speaking of some early-career clients who’ve struggled to manage raises. “Ironically, they find themselves making more money than ever before, but are still financially stressed because of overspending.”

Making your next raise count

The good news: maintaining a good financial plan for a raise doesn’t require extreme budgeting or self denial. You just need to decide where the money is going before it shows up. It’s called paying yourself first.

Young advises his clients to decide on a strategy before the new raise—or even bonus money—is paid. “Determine a portion to automatically divert into savings, investments or debt repayment,” he says. “The balance can then be used as a guilt-free lifestyle reward.” Everyone deserves to treat themselves for hard work, but a more purposeful approach to raises can reward both your current and future self.

You don’t need the perfect plan. You just need a straightforward one you can commit to. Young recommends tracking monthly cash flow to look for lifestyle creep (that’s when your expenses increase in step with your pay, and you don’t end up saving more money). And as your life priorities change over time, reassess your overall plan on a regular basis, say every year or every six months. (Find out if downloading a budgeting template is worth it.)

Getting a raise isn’t only about spending more, it can be about building the momentum to save. When you use that extra cash to strengthen your spending plan and reduce stress, even the most modest raise can have a big impact on your long-term progress.

That’s when a raise finally stops disappearing.

Paul Saunders is a Toronto-based marketing consultant and writer with over 20 years’ experience in the Canadian investment industry.

Read more from this issue of The Get:

1. Canada’s economy: Looks great on paper, but how does it feel to you?
2. MVP: ​​Actor Robert Bazzocchi opens up on flipping the script on success 
3. When can I receive my CPP and OAS benefits?
4. True or False: You can turn your hobby into a side hustle

-----------------------------------------------------------------------------------

The Get is owned by Neo Financial Technologies Inc. and the content it produces is for informational purposes only. Any views and opinions expressed are those of the individual authors or The Get editorial team and do not necessarily reflect the official policy or position of Neo Financial Technologies Inc. or any of its partners or affiliates.

Nothing in this newsletter is intended to constitute professional financial, legal, or tax advice, and should not be the sole source for making any financial decisions. Past performance is not a guarantee of future results. Neo Financial Technologies Inc. does not endorse any third-party views referenced in this content. Always do your due diligence before deciding what to do with your money.

© 2026 Neo Financial Technologies Inc. All rights reserved.