Were you lucky enough to get a pay raise recently? If so, what are you planning to do with it? Here are 4 tips on how to make your raise pay real dividends for you now and into the future:

1) Open a savings account

Baby boomers can probably remember parents or grandparents making regular deposits to a savings account at the local bank. Our current savings rate is a measly 2.5 percent – down significantly from the 7 percent average 30 years ago.

For example: If you saved an $80.00/month raise, at the end of one year you’d have $960.00. It’s not a huge amount for some, but it’s a start. And thanks to the wonders of compound interest you can watch it grow into a nice nest egg over time, especially if you continue to add new raises to your savings.

Savings account interest rates are on the rise. The online bank, ING Direct is currently offering 2.35% APY (annual percentage yield), with no minimum deposit, no fees, and your account is FDIC insured. Visit www.ingdirect.com to learn more about their saving account plans.

2) Pay down credit card debt

The average American carries $2,627 in credit card debt, up 14.5 percent from a year ago, according to Myvesta, a nonprofit consumer education group in Rockville, Md.

Fifty-three percent of credit card companies require only a 2% minimum monthly payment, up from 43% of companies in 2003, according to the consumer advocacy group, Consumer Action.

Paying the 2% minimum due each month on a balance of $2,600.00 at 18.0% interest, it would take you MORE THAN 35 YEARS to pay it off, not to mention the $6,730.00 spent in interest charges! Instead, add your $80.00 a month raise to the minimum monthly payment and you would be paid off in 2 YEARS and pay just over $500.00 in interest charges, a huge difference!

Applying your raise toward your credit card debt will lower your debt to income ratio, improve your credit score, and help you escape from the nasty web of outrageous credit card debt.

3) Open or contribute to an Individual Retirement Account (IRA)

If you haven’t started contributing to a personal retirement account, you should, and what better time to start than with your new raise? This is exactly what I did three years ago, although I wish I would have started sooner.

If you’re counting on Social Security to take care of you in your retirement years, you’d better do

About the Author: © 2005, http://www.yourfreecreditreportnow.com Author: James H. Dimmitt James is editor of “To Your Credit” a FREE weekly newsletter focusing on managing your personal finances and credit. Subscribe and get a FREE copy of your credit report when you visit: http://www.yourfreecreditreportnow.com