Lifestyle creep, also known as lifestyle inflation, is the gradual increase of what you are spending as your income also increases. As we begin to spend more money, we slow begin to live outside our means, sometimes even subconsciously. Here are some steps on how to avoid lifestyle creep.
Any time you receive a raise or bonus at work, one of the first things you should do is modify your budget to reflect your new income. This is especially important as you may feel more comfortable with making impulse purchases now that you are making more money, but it may only take a few of these to drive your budget off course.
PREPARE FOR FUTURE
If you aren’t already, now is a great time to take some of the extra money you’re earning and pay yourself first. This means putting a little extra towards your retirement or emergency savings. While it’s not super flashy, your future self will thank you.
When it comes to making changes in your spending habits, if you try to change everything at once, you are more likely to fail. Pick one aspect of your finances you would like to change and focus on that for at least three months. Once you get into a habit, you can start adding more aspects, one at a time, until everything is where you want it to be.
PLAN FOR FUN
Being smart with your money doesn’t mean you can’t have any fun. Leaving room for items such as dining out, shopping, vacations, etc. is imperative to a successful budget. However, you need to pick and choose which is most important to you when it comes to having fun or rewarding yourself and make that your priority. For example, you may be making enough now to take that vacation you’ve been dreaming of for the past few years, but that may mean not being able to upgrade your phone for a bit.