Let’s be honest: who doesn’t enjoy earning more money? We’re always told that ‘hard work pays off’, so when you get an increase or a performance bonus, it’s only fair to celebrate and treat yourself, right?
Well, yes and no. Lifestyle creep is what happens when you start earning more and start spending more as a result. Your lifestyle ‘creeps up’ on your income. Scary! All those nice little extras that you were perfectly fine without, like streaming subscriptions and expensive groceries, now seem essential. Lifestyle creep is swiping your card without clocking the total, ordering off a menu without scanning for the cheapest item, or rewarding yourself with a fancy car that costs a fortune each month.
The problem with lifestyle creep is that once the increase in lifestyle outpaces the increase in income, you no longer have money to spare for long-term saving goals.
Here’s how to avoid it!
1. Lock in your savings
Before you start splurging on lifestyle upgrades, make sure your emergency fund is cosy, your retirement savings are on track, and you’re not loading up on new loans. Nothing beats the peace of mind of knowing you’re protected against the unexpected – and that you’ll be able to comfortably retire one day.
When you get a salary increase, or when you finally finish paying off a large debt, make sure that you assign at least some of the extra money to a savings account. Automate it: set up a debit order so you don’t give yourself any chance of spending the extra. Out of pocket, out of mind!
2. Stay loyal to your budget
If you find yourself regularly spending more than your budget allows, you might be in the danger zone. Use 22seven to make sure this never happens. Use the spending alert function so that you know when you’re getting close to your limits.
Another good hack is to use the 50/30/20 budgeting method. This enables you to stick to the same percentage split no matter how much you earn. Need a refresher course? Read this.
3. Evaluate your lifestyle
It’s normal to be a bit envious of others, or to feel fomo when you see your friends living it up on Instagram. But it’s also important to keep a level head. Look at how you’re living and decide what’s working and what might be due a little upgrade. Chances are that you’re just fine as you are – you don’t need to spend more on groceries, your cellphone or your gym membership. If you’re already happy living frugally, then direct any additional income towards your savings and long-term investments.
Final word
We’re not saying should deny yourself the occasional indulgence – that’s totally fine! But when you earn more, try to avoid lifestyle creep so that there’s less strain on your budget and more opportunity to save and invest. Because guess what? Financial freedom is the ultimate luxury.
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