A raise or promotion brings a serious upgrade to your budget. Putting your nose to the grindstone finally paid off, and you have the extra cash to prove it. At least, you thought you did, but a quick look at your bank balance shows you have no more money in your account than before you were catapulted into riches.
How did this happen? What you may be experiencing is lifestyle creep, and it can seriously harm your finances.
Are You Creeping?
Lifestyle creep describes that gradual uptick in discretionary spending that happens as your budget grows bigger. It’s really quite simple. As you make more money, you end up spending more money, too.
It’s a slow process that grows with each raise and promotion, which makes it hard to realize it’s happening. What starts as a little splurge to celebrate your raise becomes a permanent fixture in your budget.
Before you know it, you’re used to a certain standard of living. Instead of saving money for your future, you’re spending it on luxuries. You might even fall into debt chasing after exclusive experiences, events, and toys.
How Do You Stop it?
Mindfulness is the key to stopping lifestyle creep in its tracks. Being aware of goals and recognizing the spending that might achieve them helps you manage your finances with intention.
You may achieve your mindful money management style with the following tips.
Keep Spending, Within Reason
Once you do earn more money, you don’t have to pretend you’re still living on a shoestring budget and bank all that extra cash. Some spending is normal, as long as you do it responsibly.
Trade impulsive shopping for thoughtful spending. Instead of getting anything and everything just because you have the money, sit back and think about what you really want. Chances are that sixth pair of sneakers won’t really make you any happier.
Reconsider How You Use a Personal Loan or Line of Credit
The experts at CreditFresh advise it’s time to shakeup your relationship with credit if you use it as an excuse to splurge. They warn against using any personal loan or line of credit to cover expected expenses or to maintain a certain lifestyle.
Something like a CreditFresh Line of Credit by CBW Bank should be used sparingly when your savings fall short of unexpected emergency expenses, like medical bills or repairs. More still, you should only dip into a personal loan or line of credit if you can pay back what you owe.
Squirrel Away Money into Separate Funds
Any time you receive a raise, promotion, or bonus, you’ll want to revisit your budget. Sit down and figure out where this newfound cash should go.
Boosting what you can put into an emergency fund and your retirement savings is a good first step. An emergency fund — which should cover roughly six months of expenses — helps you take on unexpected bills and repairs, so you don’t have to tap into a personal loan or line of credit. And knowing you’re on track to retiring just makes sense.
You put in all the work to get that raise or promotion. Why let lifestyle creep sneak away with this extra money? Remember these tips any time your paycheck grows. They’ll help you celebrate your new lot in life without wasting all your cash.