Life is full of distractions, so it’s easy to get sucked into the lure of the latest fad, gadget, or fashion trend. It’s hard to resist the siren’s song of a shiny pair of boots or a new handbag, or the promise of a better, more active life. It’s easy to get caught up in the moment and lose track of our long-term goals, commitments, and values. By living in the moment, we can have a better life, but it’s not easy to recognise when we’re being pulled into a false sense of ‘lifestyle creep’.
A few years ago, I wrote a post called “How to avoid lifestyle creep” that has since racked up 6,000 hits. The post was pretty simple: it contained tips on how to avoid falling into the trap of slowly spiraling into a cycle of debt. In the years since, I’ve revisited the subject a few times to see what has changed, and how I can help others avoid these lifestyle traps. Lifestyle creep is always a good topic; it’s a topic I cannot avoid because it’s always happening to me.
The lifestyle creep I’m referring to is the act of slowly becoming a different person. By the time you realize the change, you’re too far along to stop it and too embarrassed to admit to yourself that you’ve gone from the person you once were. You started out wanting to do something positive and healthy, but, before you realized it, you were doing the opposite. You thought you were helping yourself by doing certain things, but in the end, it actually made you weaker.. Read more about mediafeed and let us know what you think.
When your quality of living begins to exceed your real income, this is known as lifestyle creep. It’s usually associated with earning more money without saving more money – forsaking key financial objectives like setting up a solid emergency fund or saving for retirement in favor of purchasing a bigger home, better vehicle, or taking a luxurious trip.
While it’s tempting to spend any additional cash as soon as you have it, lifestyle creep puts you and your family at danger financially. After all, there’s no assurance that you’ll remain at the same salary level for the rest of your life.
How to Stay Away From Lifestyle Creep
We contacted Certified Financial Planners, financial advisors, and other personal finance professionals to help you avoid lifestyle creep, also known as lifestyle inflation. Here are 38 strategies to keep from succumbing to lifestyle creep.
1. Prevent lifestyle creep before it becomes a problem.
Maintain a modest level of living for as long as possible, especially if you’re a new graduate, advises Danielle R. Harrison, a Certified Financial Planner at Harrison Financial Planning in Columbia, Missouri.
“Rather of purchasing a brand new vehicle, phone, or condo, use that additional cash to pay down your student debts or save as much as you can for both short- and long-term goals,” Harrison advises. “If you’ve never had money, it’s much simpler to be unaware of what you’re missing.”
2. Make a financial plan
Andrea Woroch, a savings guru, asks, “How can you monitor your spending if you don’t know where it’s going in the first place?” “A budget directs your money and prevents you from squandering it on unimportant items.”
3. Set a monthly savings target.
Every budget should have a line item for “savings.” Before allocating or increasing your discretionary expenditure, pay yourself first.
4. Use the 50/30/20 rule as a guideline.
There are differing viewpoints on how much of your overall income should be set aside each month for savings and retirement objectives. Furthermore, depending on your whole financial background, the answer is likely to differ.
However, if you’re searching for some general recommendations, try using the 50/30/20 rule, which assigns 50% of your income to necessities like rent and utilities, 30% to discretionary spending, and 20% to savings.
5. Maintain a low amount in your bank account.
“Keeping a low balance in your checking account will make you feel less inclined to spend,” says Shang Saavedra, a personal finance blogger at SaveMyCents.com.
6. Make saving a habit.
Set up direct deposit to guarantee that you have limited access to extra money.
Nicole Gopoian Wirick, a Certified Financial Planner in Birmingham, Mississippi, says, “For many of us, money are ready to spend the minute they reach our bank account.” “To prevent this, I advise customers to set up a direct savings plan in which money is sent directly from their bank account to a savings and investment account.”
7. Aim to contribute the maximum amount to your retirement account each year.
Americans are permitted to contribute a certain amount of money to designated retirement accounts such as 401(k)s, individual retirement accounts (IRAs), and Health Savings Accounts each year (HSAs). Employees may contribute up to $19,500 to their 401(k) plan in 2021, for example.
You can build a strong retirement nest fund while avoiding lifestyle creep if you strive to meet these limitations each year. You can at the very least….
8. Automatically raise the stakes
“Many companies are now providing automatic 401(k) deferral increments, which will raise your contributions to your employer-sponsored retirement plan by a set percentage annually,” Harrison adds. “Some people even time it to coincide with yearly merit raises or bonuses.”
9. Think about the difference between net and gross revenue…
Before altering your spending patterns after getting a raise or bonus, be sure you know how much extra money you’ll have after taxes.
10….then make good use of increases.
“Use the extra money to pay down debt or put more money aside,” Harrison advises. “Any money left over may then be utilized to improve your quality of living.”
Calculate the yearly expenses.
Commitments made on a monthly basis may be misleading.
According to David J. Haas, a Certified Financial Planner of Cereus Financial Advisors in Franklin Lakes, New Jersey, “buying a vehicle with a $400 monthly payment vs. one with a $250 monthly payment is just $150 more per month, but a substantial $1800 more per year.” “I suggest creating a monthly and yearly budget and examining any new financial obligations through the perspective of both budgets.”
12. Keep track of your expenditures
A budget is only useful if it is followed. To keep track of your monthly expenditures, use a budgeting software or a basic spreadsheet.
13. Set up spending notifications
When a big transaction hits your checking account, many banks, credit card companies, and budgeting apps will send you a text, email, or push notice. These alerts may act as a disincentive to making big purchases, as well as keep you informed about how much money is available in your account at any one moment.
14. Go through your bank and credit card statements.
As we previously said, apparently little monthly expenditures may pile up over time. Examine your bank and credit card accounts for “zombie charges,” which are recurring subscriptions, renewals, or payments for products or services that you no longer use or need.
15. Review your budget on a frequent basis.
Rick McCallister, a Certified Financial Planner in Torrance, California, advises, “Re-evaluate every year whether or not you’re saving enough.” “Make any required adjustments.”
16. Don’t spend money on things you don’t care about.
“Instead of living a life that our friends and the media want us to live, create a life that aligns with your values,” Saavedra advises. “If I don’t want a nice vehicle, I don’t have to have one.” If I don’t want a large home, I don’t have to have one.”
17. Put yourself in the shoes of a pandemic.
“Covid-19 has resulted in reduced costs in some areas for a lot of people,” says Jason L. Williams, a Certified Financial Planner in McLean, Virginia. “I would advise individuals to consider how much pleasure spending gives them before just adding it back without thinking about it once they are able to.”
Set clear financial objectives.
Otherwise, when your money rises, you’ll be more susceptible to common spending traps.
19. Keep track of your efforts toward achieving them.
“Review your objectives and make sure you’re on track to live the life you desire in the future,” says Molly Ford-Coates, founder and CEO of Ford Financial Management. “Having your objectives in front of you reminds you of why you’re doing what you’re doing.”
20. Seek advice from a professional
If you have a complicated account or need further assistance, a financial advisor or certified financial planner may assist you in setting up more sophisticated savings plans.
21. Make use of your friend system
“Having someone hold you responsible for your financial choices may be a great way to prevent lifestyle creep,” says Forrest McCall, founder of personal finance website Don’t Work Another Day.
Check in with this individual on a frequent basis to ensure you aren’t getting too far away from your financial objectives.
22. Try out two different checking accounts.
“I have my clients open two separate checking accounts to set them up for success,” says Stephanie Trexler, a Certified Financial Planner and CEO of Golden Goose Wealth Planning in Grand Rapids, Michigan. “The first is for monthly bills, which are set up on autopay. The other is for anything else, including spending money for fun.”
Establish a genuine emergency savings account (number 23).
Experts suggest having enough money put aside in a dedicated savings account to cover three to six months’ worth of expenditures if you don’t have any other savings objectives. Bonus tip: To get the most out of these funds, search for an account with a high annual percentage return (APY).
24. Make on-time payments on your credit cards each month.
Avani Ramnani, a Certified Financial Planner at Francis Financial, advises against carrying balances. “This ensures that you only spend what you have in your bank account.”
25. When necessary, place the plastic on ice.
If you find yourself overcharging, Ramnani recommends cutting up your credit cards and relying only on cash or a debit card. “This will limit your spending to what you have in your bank account.”
26. Don’t get out of your first house.
If you don’t really need a bigger house, resist the temptation to “move up.”
“If the smaller property continues to meet your requirements, you may save thousands of dollars in moving and closing expenses, as well as much more with the lower expenditures connected with your ‘starter’ home,” says Joyce Streithorst, a Certified Financial Planner in Melville, New York.
27. Don’t become a ‘home poor’ person.
If you’re unsure about how much to spend on a property, the government defines homeowners who spend 30% or more of their income on housing as “cost-burdened” or “house-poor.”
28. Carefully consider all sources of funding.
It’s preferable to live within your means than to live beyond them, so think carefully before taking out a loan or making any purchase that may put you in debt.
29. Make a debt repayment strategy.
Prioritize debt repayment above spending if you’re already in debt. You may use a number of methods, and we’ve compiled a list of 50 of them right here.
30. Keep a decent credit score.
A high credit score allows you to get the greatest offers on credit cards, mortgages, and other loans, allowing you to save and spend responsibly.
Making on-time payments, keeping credit card balances low, and minimizing the number of new credit applications you submit at any one time may help you retain excellent credit. To learn more about credit scores, go here.
31. Keep your screen time to a minimum.
“It’s difficult not to desire for more when we’re bombarded with pictures of other people’s “perfect” lives. Spend time figuring out what matters most to you,” Harrison advises. “Spending more on consumer goods does not make us happy in the long term because of the hedonic treadmill.”
32. Always be on the lookout for a good deal.
“Just because you have more money doesn’t mean you should squander it because you don’t want to search for ways to save,” Woroch adds.
There are many savings programs, browsers, and websites available to assist you in rapidly comparing prices and finding discounts. Check out this list of 50 money-saving ideas.
33. Purchase used expensive items
“I shop thrift stores or online platforms like Poshmark and Ebay for some of my favorite luxury items,” Saavedra says. “I constantly remind myself, ‘after you use anything new once, it’s used.’ So, apart from the cost savings, I don’t see much of a difference between purchasing used and new.”
34. Make a commitment to save at least a portion of your windfalls.
Avoid the temptation to spend all of your tax returns, yearly bonuses, or other windfalls on expensive desires rather than necessities. Nonetheless…
35. Give yourself some wiggle room
According to Scott A. Bishop, a Certified Financial Planner in Houston, avoiding lifestyle creep is comparable to deviating from a balanced diet. “Most people struggle with restricted diets, just as they struggle with restrictive (seems punishing) budgets. Enjoy part of your achievements if you are financially successful, but pay yourself first.”
36. Create a “treat yourself” bank account.
Control splurges by creating a separate account for them. Inspired by Amy Poehler’s comedy “Parks and Recreation,” Joseph R. Stemmle, a Certified Financial Planner in Richmond, Virginia, maintains a “treat yourself” account.
“I know I have money put aside if I want to reward myself or spend on something, and it won’t affect my total budget,” he adds.
37. Look for fresh methods to ‘inspire pleasure.’
“Rather of purchasing, focus on creating experiences and spending time with family and friends,” advises Marguerita M. Cheng, a Certified Financial Planner in Potomac, Maryland.
38. Begin a side business
If you find yourself longing for more, think of new methods to make money to put toward consumption or savings. Here are 49 different side hustles to think about.
MediaFeed.org created and syndicated this story.
NazariyKarkhut is the author of this image.
Skowronski, Jeanine
Jeanine Skowronski is a personal finance writer and content strategist who has worked as the Head of Content at Policygenius, the Executive Editor of Credit.com, and as a columnist for Inc. Magazine. Her work has appeared in publications such as The Wall Street Journal, American Banker Magazine, Newsweek, Business Insider, and CNBC.
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