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What is lifestyle creep, and how can you avoid this financial slippery slope?

Just because you’re earning more doesn’t mean you have to spend more too

by Balvinder Sandhu / September 22, 2022

Credit: 123rf

So you got a new job that pays more than your previous one. Or perhaps you just got a raise after surviving on a certain salary every month for a long time. We might think that, the more we earn, the more we should spend. This isn’t necessarily the wrong way to think. However, it could be the case that we end up with a lot more than we need, as we slowly but surely accumulate stuff and live in luxury like we never did before.

What we once thought of as ‘luxuries’ are now ‘necessities’ as we’ve become so used to having them. That designer handbag you always dreamed of? You can now afford more than one. Dining at restaurants run by celebrity chefs? It seems to be where you go to more often now, than the food courts you were always used to eating at before.

Spending more if you can afford it isn’t a problem. The issue is when it encroaches on your savings and financial goals.

You might feel like you deserve these things as you’ve worked hard for them. After all, if you’re not going to treat yourself, who’s going to do it? And, in the aftermath (although it’s not technically over) of the covid pandemic, you might think that you have to spend more now because you didn’t get the chance to really enjoy yourself for a year or two.

Spending more if you can afford it isn’t a problem. The issue is when it encroaches on your savings and financial goals. This is known as lifestyle creep. It’s when your income increases, but your spending increases by a greater rate. It’s when things that were formerly thought of as ‘luxuries’ are now the norm.

So, even though you’re actually earning more money now, you somehow end up counting down the days till payday as you’ve overspent. And, because your expenses tend to happen gradually over a long period of time, you might not notice it at first, as it slowly ‘creeps up’ on you.

Some signs of lifestyle creep are:

Your savings haven’t grown despite your increased income
You’re buying more things or going out more often
You’re nervous every time you check your bank balance
You have no idea where your money goes every month
You feel like you can’t go back to how you used to live

Here are seven ways you can avoid lifestyle creep:

https://www.herworld.com/gallery/women/money/what-is-lifestyle-creep-and-how-can-you-avoid-this-financial-slippery-slope/

What is lifestyle creep, and how can you avoid this financial slippery slope?

Take stock of your spending

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You need to know where your money is going every month. Make a list of everything you buy each week or month and take a look at what is necessary and what isn’t. This way, you will know how much money you can actually save each month – despite earning more – as you eliminate costs you don’t need.

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Don't spend proportionately to your income increase

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Just because you’re earning 20% more now doesn’t mean you have to spend 20% more every month too. When you make more money, you should be saving more, instead of increasing spending. Your monthly spending has to increase slower than your income, in order to have a more sustainable lifestyle. This way, you’ll have more to save and can afford bigger items like a house or car faster – or even just put more money into a savings account each month.

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Set a monthly budget

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It may sound like a boring thing to do but creating a budget is the best way to ensure that you don’t overspend. Then, make sure you stick to this budget every month. The ideal formula to follow would be to save the extra income that you’re getting now. However, we know that this is not always possible. So, decide according to what financial commitments you have and try to set aside at least a chunk of the extra money you’ll be getting each month.

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Only buy what you need

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It’s tough, we get it. Especially with the convenience of so many choices for online shopping these days. Plus, those sales! So many sales, so little time. How’s a girl to resist them? Don’t get FOMO if all your friends are telling you about their excellent purchases during sales or feel like you have to use every single voucher you receive. Spend on things you need and not just because you feel you have to get something.

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Don't make impulse purchases

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If there’s something you don’t need but you want to buy, don’t purchase it immediately. Make a list of such items and perhaps even make your selection online and add it to your cart. However, don’t buy it just yet. Give yourself some time – say, a week or a month – then go back and decide if you still want to buy it. You might find that you’re buying less when you’re not being impulsive.

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Keep an eye on existing expenses

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It’s possible that you’re less concerned about money now that you’re earning more but every dollar counts so make sure you’re getting the most of your finances. Pay attention to smaller expenses such as credit card fees or increase in any recurring monthly bills. You might be paying more than you need to so check that you’re not wasting any money on existing bills.

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Don't say no to everything

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As the saying goes, ‘everything in moderation’. You don’t have to make zero purchases. Know that it’s okay to treat yourself sometimes. But, before you do so, ask yourself if you’re buying the item just as an occasional treat or if it’s because buying things makes you happy. Know that material things aren’t the way to happiness so don’t spend money on things that won’t bring you any benefit.

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