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.
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.