How to Avoid Lifestyle Creep: 5 Helpful Tips
You have worked hard in your career, and it can be a normal feeling to want to upgrade your life when receiving a raise or promotion. Whether it’s buying a new car, or wanting to eat out more, it’s entirely acceptable to reward yourself once in a while. But what most people have a hard time with is knowing when to celebrate and when to save. Don’t let lifestyle creep get you!
The more you get used to expensive spending habits, the more likely you will be tempted to use credits cards or other consumer debt. This can lead to more debt, with no emergency or retirement fund to rely on.
What is Lifestyle Creep?
Lifestyle creep, also known as lifestyle inflation, can occur when your standard of living elevates along with a raise in pay. When this happens, you often begin to see nonessentials as new necessities and start spending more, which can prevent you from starting or building an emergency fund. If you notice this happening to you, try to stay mindful. Use these tips to stop lifestyle creep from taking a hold of your budget.
- Reward yourself with intention. We all get into the attitude of “I work hard so I deserve this” or “treat yourself”. While it is important to reward yourself from time to time, it’s also vital not to squander your new income. Don’t act on every urge, instead start a list of things you’d like. Tell yourself “not right now but soon” and wait one week to a month before taking the plunge. This will help you realize what you really value. Spending mindfully can help improve your quality of life without spending all your new income.
- Revise your budget. As soon as you know a pay increase is coming, decide how to allocate it. You may add a few extra dollars into some fun money, but your bills are likely to remain the same. Take the majority of the increase and put it towards savings, retirement, debt or a goal. This way your money won’t disappear into thin air because you will have a plan. This is the best way to make sure you are on track to meet all your goals. Revising your budget based on past spending will help you evaluate where you need to shift money. Do you go over your food budget every month but under on other expenses? Try shifting that money over. Knowing where you want to be is the first step to getting there.
- Make gradual changes. With this increase in income, you may feel like you need to go out and replace your clothing, furniture, vehicle or make an overall upgrade to your life. Instead, focus on gradual improvements instead of going all out. This will prevent you from spending more than your increase and developing expensive spending habits. When you constantly give into every want, it ends up never feeling like a treat.
- Practice gratitude. You may not have the best of everything, but you should make the best of everything you have. Embrace the “Marie Kondo” mentality and surround yourself with things that spark joy in your life. Adopting this mentality could prevent you from upgrading everything you own because you’ll realize how much you already have.
- Know your financial goals. Figure out what you want out of life and know what is important to you. If you’ve been getting by on your current budget, but want to add a new car now that you have an increase in income, consider how you can make that happen if it’s important to you. Think about saving up for this goal so you can purchase the new vehicle with a significant down payment. Build excitement for the future while keeping your spending in check. Fight money
stress and create a plan for your paycheck. Having a goal in mind will help you avoid spending on
items you don’t need.
Visit our Financial Knowledge Blog to learn more tips on setting up a solid financial future or join us for Financial Wellness Wednesdays.