One of the finest joys you can have is receiving a wage increase. However, if you’re not saving additional funds while receiving a higher wage, you may have been a victim of “lifestyle creep.” What it is, why it occurs, and what you can do to stop it are described here.
‘Lifestyle creep’ may sometimes be frightful, despite how it seems like something from a horror film. It’s also known as “lifestyle inflation,” and it occurs when your income and spending increase.
But why is that a problem?
Let’s assume you get a raise at work or, even better, a new position that earns more. So you swap in your ten-year-old vehicle for the most recent model on credit, relocate to a larger home in a nicer neighborhood, and give up your neighborhood budget gym in favor of that posh fitness club. All of these are instances of lifestyle inflation.
Now that you have enough money to improve your house or vehicle, it’s completely acceptable to do so (after all, you presumably didn’t want to live in a one-bedroom apartment forever). And it seems sense to want to pamper yourself if you worked hard to acquire that new job.
But if your spending rises at the same rate as your income, you can be in a difficult financial scenario.
Am I a victim of lifestyle creep?
The warning signals of lifestyle creep might be simple to ignore. It may be as easy as switching to M&S from Aldi for your weekly grocery shopping, getting your hair done monthly rather than just sometimes, or replacing your annual staycation with two international trips. Even though they may appear insignificant, they may mount up over time.
If you regularly utilize credit cards, loans, and ‘buy now, pay later’ services to finance your new way of life, it might not be long-term viable.
If your bank balance and savings accounts are not expanding much (or even declining), you should also take a second look at your expenditures.
What is the impact of lifestyle creep?
Lifestyle creep may result in finer possessions and more enjoyable pastimes, but it may also indicate that your financial condition is not as good as it should be. You may still dread payday, which may be unpleasant and detrimental to your mental health.
The past few years have shown us that while it might be tempting to enjoy your money now and live in the now, it’s best to be ready for anything.
Just consider all the folks who obtained low-interest mortgages a few years ago; many of them are already dealing with significant hikes in their monthly expenses as their fixed-rate arrangements have expired and interest rates have risen.
Keeping your expenses in check and ensuring you have money as a backup might make all the difference, even if you shouldn’t live in terror.
How can I prevent lifestyle creep?
Reading this and relating to it a little too much? Don’t panic, though; there are a few things you can do to cut back on your expenditures and increase your savings.
Review your expenditures to see where you’re overspending. Sitting down and reviewing your expenses over the past six months or years may help.
Cut costs where you can: Once you know your expenditure, you may determine where to make reductions. Could you revoke your access to the streaming services you don’t use? Could you buy groceries elsewhere at a lower cost? Do you need to join a club, or could you work out at home or run in your neighborhood park?
Establish a budget: Making sure your budget is reasonable can help you stay on track since you’ll have something to strive for each month.
Think about your purchases: Before making a purchase, give yourself a few days to consider your options. You may realize you didn’t truly want it, and the temptation to purchase it fades.
Set financial targets: Having goals and prizes for how much you want to put away, whether for a home deposit, vacation, or even an emergency savings fund, might help you stay motivated and reduce wasteful spending.
Once you have an emergency fund and additional savings, invest the remaining funds to increase your chances of seeing a return on your investment. Additionally, since investing is something you do over a lengthy period(at least five years), you’ll have to sell your assets to get your money, making it difficult to spend.
