Have you recently started ordering a more expensive meal at dinner or buying electronics you don’t need since you got a raise at work? Lifestyle creep happens when your standard of living improves, and you spend more on non-essential items as your income increases.
While upgrading your life isn’t bad, failing to curb impulse purchases can strain your finances and leave you surviving from paycheck to paycheck.
Here are 11 smart tips to help you avoid lifestyle creep and achieve more financial stability
Track Your Spending Using a Budget
The only way to determine where you’re spending money is to track your spending. Knowing your expenses and how much is left will help you figure out where you’re paying too much and areas that are lacking. A budget can help curb impulse spending and allocate the rest to your savings or retirement account. Review and adjust your budget regularly to align with your financial goals.
Automate and Redirect the Extra Money to Your Savings or Investment Account
Automating your contributions and savings reduces the temptation to spend on unnecessary things. You can start by increasing your 401(K) at work or directing your employer to send a certain percentage to your savings account.
Embrace a Minimalist Lifestyle
You probably don’t need a new kitchen gadget or rent more house than you need. Adopting a minimalist lifestyle allows you to focus on things that matter over material possessions. Sticking to simplicity can reduce excessive spending and save any extra income. Opting for quality items over quantity when making purchases is also an excellent way to embrace minimalism.
Practice Delayed Gratification
Social media pressure has made it difficult to avoid lifestyle creep. There’s pressure to get the latest iPhone, purchase the most expensive Berkin, or be seen with the newest designer watch. Unfortunately, these things are costly and not worth it. Avoid falling into this trap by practicing delayed gratification. Before committing to it, determine whether a purchase aligns with your current priorities and values. That will help you avoid overspending and focus on long-term rewards like a comfortable retirement or savings that you can use for your home downpayment.
Don’t Forget To Treat Yourself
Don’t be afraid to spend on yourself if your budget allows you to treat yourself to a fancy dinner or a vacation. A special treat every once in a while will help you be more mindful of your spending and splurge on yourself consciously.
Invest a Portion of Your Raise
Each time you receive a raise, aim to save or invest a certain percentage to counteract lifestyle creep. That will help you stick to your previous budget and avoid extra expenses that might affect your income.
Live Within Your Means
It’s tempting to apply for new credit or upgrade your income when you get a raise but resist the urge. Focus on purchases that align with your values and bring you closer to your financial goals.
Pay Down Debt When You Get a Raise
Use any extra income to pay off high-interest debt. That will boost your credit score and allow you to budget your money better.
Build up an Emergency Fund
Unexpected expenses can quickly diminish your income and leave you stranded. Consider putting any additional money into an emergency fund. That will help you cover any financial emergencies if you lose your job. An emergency fund can allow you to continue enjoying your current lifestyle while looking for better opportunities.
Invest in Yourself
Don’t get carried away by large purchases; don’t forget to invest in yourself. Starting a side hustle, acquiring new skills, or pursuing higher education can set you up for new opportunities to increase your earning potential.
Remain Focused On Your Long-Term Financial Goals
Resisting the urge to overspend isn’t easy, but reminding yourself about your long-term financial goals will prevent you from taking on new debt or spending mindlessly.
Lifestyle creep can start slowly, spending more on coffee or dining out every fortnight. Before you know it, you can barely survive on your income. You can avoid lifestyle creep and achieve your financial goals by evaluating your expenses, working with a budget, and living within your means.
