What should I do with the extra money the first month after a pay raise?

Decide where the raise goes before it hits your account, so it does not quietly disappear into everyday spending. A simple approach is to bump your automatic retirement contribution by a percentage point or two first, especially if you were not maxing an employer match, then direct a chunk toward any high-interest debt or a still-thin emergency fund. Give yourself a modest lifestyle reward from the rest so the plan feels sustainable, not punishing. Because the money was automated away immediately, you never adjust to spending it. Redirecting even half of every raise this way, sometimes called banking your raises, dramatically accelerates your goals over a career while still letting your lifestyle rise gradually. Set the new contribution the same week the raise takes effect.