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Just Got a Big Raise? Here’s How to Keep Lifestyle Creep from Erasing It

June 29, 2022 • Education

Lifestyle creep occurs when people’s standard of living improves as their income rises. It doesn’t happen overnight. Instead, it’s a money-draining cycle of earning more income followed by spending more, followed by…you get the picture. Because the more you spend, the harder you work to earn more, the cycle just keeps repeating itself.

 

Here are few spending pitfalls to avoid.

 

Buying a New Vehicle Just Because You Can

Maybe you’re showing off your new status, or maybe you’re thinking about having kids and think a larger vehicle makes more sense. You can try to justify it all you want, but if you have a perfectly good vehicle, why do you need to buy a different one? In most cases, you don’t.

 

Eating Out Because You Don’t Feel Like Cooking

On average, it’s almost five times more expensive to order restaurant delivery than it is to cook food at home.
You might also think that using a meal kit service is the answer to eating gourmet-style food while saving money. On average, these services are about three times more expensive than if you buy the ingredients at the store and prepare meals yourself.
 

Indulging Expensive Habits

Your everyday latte habit or the desire to rent the latest pay-per-view movies several times a week can add up, making for a potentially expensive spending habit. Think before you spend.

 

Buying or Renting a Larger Home Than You Need

Finding a living situation that meets your needs now, may help you save the resources you’ll need when a move to a larger or more expensive home makes more sense.

 

Picking up the Tab

You might not like to eat out alone, but footing the bill for yourself and a group of friends or coworkers a couple of times per week can add up quickly. Let your friends pay their own way and save your money for impressing a date or treating your spouse or partner to special night out.
 

Failing To Increase Your Savings When Your Income Increases

It makes perfect sense to save more as your paychecks get bigger. If you don’t, you’re missing out on an opportunity to increase your cash at hand and benefit from the interest your money could be earning.Graphic with a dollar sign, car, coffee cup and food takeout bag that says, keep lifestyle creep from erasing your raise

 

How To Avoid Lifestyle Creep

The good news is that by being mindful, you can avoid lifestyle creep and its dangers. Here are some examples to consider.

 

1. Write Down Your Financial Goals

Take the time to write down some long-term money goals. Then, find a way to keep those goals in front of you.

 

2. Look at Extra Income as an Opportunity To Save — Not Spend

When you earn a bonus, receive a tax refund or are lucky enough to gain some other type of financial windfall, make it a rule to put the majority into savings. Setting up automatic withdrawals from your checking account every payday makes it easy to save and you’ll get satisfaction seeing those balances pile up.

 

3. Budget for Large Expenses as Money Allows

For example, just because you live in a smaller home doesn’t mean you have to upgrade to a newer, bigger, more expensive one when your income increases. Set aside money for improvements to your current home and complete them as your finances permit. That can help you avoid the trap of racking up credit card debt or taking out loans you’ll have to pay back.

 

4. Allow Yourself Occasional Indulgences

It’s a mistake to restrict your spending to the point that you can never splurge. So allow for these types of things on special occasions. When you do indulge, try to spend on something of value rather than something fleeting.

 

5. Don’t Try To Keep Up With the Jones

Instead of trying to keep up with the spending habits of friends or family members — new homes, new cars, luxury vacations — try spending well within your means and saving consistently.

 

Trust Us, It’s Good For You

Avoiding lifestyle creep means you’ll have savings for emergencies and large, planned expenses alike. After a while, saving will feel like second nature, making it easier to retire on time and enjoy life on your own terms.
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