As you progress in your career, you’ll probably see your income rise. Across the United States, the median income increases with age, peaking for those between 45 and 64.
When you earn more, it’s tempting to start spending more. If you used to fly economy, you might switch to business class. Instead of doing everyday chores yourself, such as cleaning and grocery shopping, you may decide to hire people to do them for you.
The tendency to spend more as you earn more is called lifestyle creep, or lifestyle inflation. And contrary to popular belief, it’s not necessarily a bad thing. You should use money to improve your quality of life. That’s one of the reasons to work hard and raise your income when possible.
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But lifestyle creep can get out of control if you’re not careful. You could find yourself overspending, to the point where it keeps you from improving your finances. If lifestyle creep is negatively affecting your finances, here are a few easy ways to put a stop to it.
1. Figure out where you truly want to spend more
When you’re making more money, there’s nothing wrong with spending more in areas that are important to you. The mistake people often make is spending more everywhere, including on things that don’t really matter to them.
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Think about what types of spending bring you the most happiness. That could be luxurious vacations, a nice car, or getting meals delivered to save yourself time, to name just a few options. Figure out what you love spending money on, because then you’ll also know which areas aren’t worth spending more.
For example, I love to travel. Even though I use travel credit cards to save where I can, it’s still one of my biggest yearly expenses, and an area where I’ve spent more over the years. On the other hand, I don’t own a car, even though I could afford one. I’ve avoided lifestyle creep in that area, because I know it’s not important to me.
2. Give yourself a waiting period before making purchases
It’s easy to get into the habit of making impulsive purchases, especially when your income has gone up. Something shiny catches your eye, like new shoes or a video game console. You know you can afford it, so you go ahead and buy it. A few weeks later, the luster has worn off, and you’re wondering why you spent that $300 on something you’re barely even using anymore.
Delayed gratification can help with this. Give yourself a waiting period before making purchases you don’t need. I’d recommend one week. If you still think an item is worth buying after the waiting period, then go for it.
I’ve saved myself from a ton of bad purchases this way. When you take some time to think it over, you often realize that it’s not worth the money.
3. Set a monthly savings goal
If you haven’t been able to save as much because of lifestyle creep, a monthly savings goal could help. You could commit to setting aside 20% of your income for savings and retirement, or any amount that works for you.
Once you’ve set a goal, take care of that first every month by transferring money to your savings and retirement accounts. As long as you’re able to pay all your bills and reach your savings goal, you can spend the rest of your money however you want.
Make sure to raise your savings goal as your income increases. A good rule of thumb is to save at least half of every raise.
4. Don’t outsource every small task
Outsourcing tasks can be a smart way to buy back your time. Instead of spending an hour or two on laundry every week, you pay for a wash and fold service. Instead of cleaning your apartment, you pay a housecleaning company.
If you outsource too much, it can put a strain on your finances. Once again, it’s good to prioritize here. Figure out how much you can afford to spend on convenience. Outsource the chores you can afford and that you really don’t like doing.
For example, my wife and I pay a housecleaner, because cleaning takes a lot of time and energy. We could also save time by ordering food deliveries or meal kits, but we normally prepare meals, instead. We both enjoy cooking, and we like having full control over our meals, so outsourcing that isn’t worth it for us.
Lifestyle creep is common, and some increase in your standard of living is normal as you earn more. Consider using the tips above to ensure that lifestyle creep doesn’t hold you back from saving money and building wealth.
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