When you get a significant raise at work or suddenly come into a lot more money, it can be exciting. You may feel less worried about money matters if this happens. While it can be nice to reward yourself, it’s easy to experience lifestyle creep. As your income rises, you may adjust your spending to meet that new financial standard. But before you realize it, you may be spending most or all of your extra income.
Lifestyle creep is when your standard of living rises as you make more money. While celebrating a new job or an income raise can be fun, you want to avoid too much lifestyle creep. You may decide to adjust your budget to buy healthier food or to get some new wardrobe items for your new work role. But you probably want to avoid upgrading all areas of your life — because that gets expensive. For example, buying a car, going out to eat several nights a week, and treating your friends when you go out for drinks can drain your funds quickly. This can make it hard to save any of the extra money you’ve made.
Luckily, there are steps you can take to avoid lifestyle creep. Here are some suggestions.
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1. Automate your savings
Saving money is a great personal finance priority. Coming in to extra funds is often the perfect time to get a jump on your financial goals, like saving for emergencies, investing for the future, or putting away cash for a car or home.
When you automate your savings, there’s no excuse for forgetting to save. It’s easy to automate your savings weekly, bi-weekly, or monthly, and you can have those funds put directly into your savings account. This can help ensure that you don’t spend your money on fun stuff before prioritizing your savings goals.
2. Avoid making big life changes
You can avoid lifestyle creep by holding off on making big life changes — like upgrading your rental to a fancy apartment, buying a pricey home, or getting a new luxury vehicle. Fight the urge to do these things soon after you start making more money. Instead, take the time to plan out any significant life changes and expensive purchases. For example, you might consider planning a big purchase at least three to six months in advance — and evaluate whether the purchase is still worth it as time passes. Doing this also gives you more time to save up for the expense and can help ensure that you have enough extra money for your other needs, too.
3. Don’t get rid of your budget
If you were budgeting before your income boost, keep doing it. You may need to adjust some aspects — like increasing your savings goals — but don’t assume that you no longer need to follow a budget just because you have more money. Set a budget and stick to your plan.
4. Treat yourself — sometimes
Instead of feeling the need to rush out and spend all of your newfound money, consider spending some of it to treat yourself on occasion. For example, you might do a monthly activity or buy a fun gift for yourself each quarter. This way, you can celebrate your successes and spend some of your money on yourself — but there’s less worry about going overboard and spending too much.
5. Choose upgrades that will better your life
If you feel the urge to upgrade some areas of your life, you might consider paying for items or experiences that will make your life better somehow. Think about whether the upgrade will feel rewarding to you, while still not busting your budget. You might consider investing in lifestyle changes that help you:
- Reduce your stress
- Improve your relationships
- Save time
- Have more genuine happiness
- Improve your skills
- Reach your health goals
- Work toward long-term financial goals (like saving for a down payment)
6. Who you spend time with matters
Consider who you’re spending your time with and their impact on your finances. If you’re hanging out with friends who love to spend money all the time or who have expensive tastes, that may not be the most conducive way for you to save your own hard-earned funds. It’s certainly OK to be friends with people who have a higher income than you do, but make sure you’re not feeling pressured to spend more or change your lifestyle habits. If you are feeling pressured, it may be a sign that it’s time to socialize with different people.
By following these tips, you can keep better control over your finances and avoid lifestyle creep. Making extra money can be great, but be sure you’re spending it in ways that help make your life better and support your personal goals. If you’d like to read more financial tips, check out our personal finance resources.