How To Avoid Lifestyle Creep And Invest In Your Future

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avoid lifestyle creepYou’ve done it. You’ve secured a better paying job, you’re earning bonuses, or maybe you just got an increase in your income. And yet, when you look at your bank account, you still don’t see the rewards of your hard work and efforts to earn more money. That means that you, my friend, are experiencing the dreaded lifestyle creep. It’s time to learn how to avoid lifestyle creep…and by doing so, become wealthy.

How to Avoid Lifestyle Creep and Invest in Your Future

This post has been written by our staff writer, Kimberly Studdard.

What is lifestyle creep? The simple definition is when an individual changes their standard of living due to their income rising. So, something that was once a former luxury now becomes a necessity. Examples may be getting a bigger apartment or house because you can “afford” higher payments, joining an expensive gym, or even something as simple as eating out a lot more because you can. However, it’s important to avoid lifestyle creep, and instead, invest in your future. Here’s why, and how, to do that.

Why You Should Avoid Lifestyle Creep

The reason why you should avoid lifestyle creep is simple. You’ll never get ahead if you’re constantly adjusting your lifestyle to fit your income. The real wealth builders keep their expenses lower, much lower, than their income. If you want to retire comfortably, or even retire at all, it’s important to avoid lifestyle creep and instead, invest in your future. Here are 7 ways to do that.

1) Get A Budget In Place

Everyone needs a budget, whether they’re making minimum wage or 6-figures a year. Always have a simple budget in place that includes:

  • your needs,
  • bills,
  • and even some wants.

By having a budget, you’ll be able to easily see where your money is going, including if you’re spending too much of it in one place. This will also keep you from spending money unnecessarily.

Related: How Much Should You Spend on That?

2) Save The Extra

Get a bonus? Save it.

Get a raise when you weren’t expecting to? Save it.

If you can, I highly recommend telling your employer to take whatever extra you’re going to be making, and automatically transfer it to your savings account. Out of sight, out of mind. If you think you’ll be tempted to spend the extra that comes in before you save, make it easy on yourself and have your employer do it automatically.

If your employer can’t or won’t transfer the extra for you, you may be able to set it up with your bank. For example, Chime allows you to have your paycheck split any way you want it. So if you get a raise of $200 a month, have Chime transfer the $200 for you when you get paid.

3) Invest More

Now that you’ve got the opportunity to invest, do it! You can use a robo-advisor, or even set up a 401(k) through your employer if they offer something like that to you. Even if it’s simply setting up a Roth IRA and depositing the max that you can, it’s better than not investing anything at all.

Related: How Much Should You Invest in Your 401k?

4) Say No

I get it, you have a social life. And most likely, you’ve told friends and family about your new raise, job, or bonus. And most likely, they want to celebrate and may even expect you to be able to go out more, treat yourself more, and essentially spend more money. While it’s nothing personal, it’s important to stick to your guns and tell them no.

5) Set Milestones

Do you have an emergency fund set up? Have you saved up 6-12 months of expenses yet? It’s easy to want to buy more and spend more when you increase your income, but instead, take some time to set financial milestones that you want to reach.

Want to start saving for a new car? Write it down.

Want to buy a home? Write that down too.

Keep these milestones where you can see them so you’re less tempted to spend the extra money. You can even create charts that you can color in when you’re getting close to your goal!

Related: 5 Goals to Have After Getting Out of Debt

6) Have A “Fun Fund”

Getting an increase in income is fun, and you should be able to enjoy it! And the best way to do that is to create a fun fund. Just like you’re saving money and investing it, you should also set aside money for yourself to spend however you’d like, guilt-free.

Look at your budget and see how much you can realistically spend every month on eating out, shopping, etc. Then, set up your fun fund and add it to your budget! Having your fun fund as a budget line can help keep you from going overboard and spending your extra cash.

7) Treat Yourself In Moderation

I know I’ve talked about how to save all of your hard working money, and investing and saving money isn’t necessarily as fun as spending it. But now that you know the best ways to avoid lifestyle creep, it’s time to treat yourself!

It can be as simple as going out to dinner with your friends more often or getting a massage once a month. As long as you can afford it, it’s budgeted for, and from your “fun fund”, you should be able to enjoy these treats guilt free! Just remember that you still have goals and dreams, and you should be saving for those as well. However, as long as you’re saving and investing a portion of your money, treating yourself shouldn’t be too hard.

In the words of Dave Ramsey, “If you will live like no one else, later you can live like no one else.” So, instead of spending more when you make more, and increasing your lifestyle just because others have, avoid lifestyle creep and be a little different! Your savings (and retirement) will thank you.

Are you prepared to avoid lifestyle creep? Which of the above ideas have you implemented in your life?

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7 comments to How To Avoid Lifestyle Creep And Invest In Your Future

  • Lifestyle creep is such a huge issue! Because it’s so prevalent, many people don’t even notice. I see it ALL THE TIME in the real estate business–a person’s best month ever becomes the “new standard” by which they live and spend money. It’s crazy, especially because real estate is cyclical and seasonal. There’s no guarantee that the next month will produce anywhere close to as much. It’s best to commit to a budget, as you stated.

    • My wife and I just upgraded homes – mainly because she wants horses in the next couple years. But, we’ll have this house paid off in less than a year and we’ll be earning more than $100k a year. Oh, and we don’t plan on moving again any time soon. I can see us living here for decades and banking a bunch of money while we do it.

  • When I was drowning in debt and didn’t know anything about finances, I realized that lifestyle creep was real! Every raise or bonus was used to buy more toys! Now that I’m debt free, I can’t wait to throw any extra money into an investment account, sinking fund for a future expense, or donations to a charity! Every dollar has a purpose now!

    • Ha, yeah. That’s where it gets dangerous – when you’re living on payments and suddenly you realize you can afford more payments! It’s a quick way to get yourself deeply in debt! Glad you’re out of the cycle, Mike!!

  • These are all great tips. I do think people in their 20s should plan for some increases in spending as they enter their 30s because their priorities in life will change.

    I saved a ton in my 20s and even paid off my mortgage, but my expenses have certainly gone up as I’ve aged.

    • Very true. I’m so glad I bought my $75,000 house. It wasn’t a “forever” house, but it was cheap, I was able to pay it off quickly, and I’m now married with kids and live in a much nicer house with acreage (which by the way, we’ll pay off in less than a year). It’s a great idea to keep your expenses low when you’re young because you won’t know your true adult wants until your mid-30’s or later. ie. Don’t buy that $60,000 BMW…. It’s a waste of money.

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