"I like my money where I can see it, hanging in my closet."
➡ Have you heard of lifestyle inflation?
➡ Are you aware of it creeping up on you?
➡ Do you find yourself 'doing a Carrie' and splurging on things you love as soon as you have some extra income (any ‘Sex And The City’ fans out there?)?
In these wobbly times, it is more important than ever to be aware of this often subconscious behaviour.
What is lifestyle inflation?
Lifestyle inflation, or lifestyle creep, is an increase in spending after receiving a raise instead of saving the additional income. It can also come around after paying off a loan if you decide to spend the extra money rather than directing it to savings. The result being, you always spend what you earn, even as your income increases, rather than saving more when the opportunity to do so arises.
Unsurprisingly, this can cause frustration and upset as we often don’t realise we are doing it. Subconsciously we increase our spend as our income increases and we can find ourselves with no money left at the end of the month, and no uplift on savings, despite the extra income.
Sound familiar? Don’t despair!
This is incredibly common and YOU CAN rein it in and beat your personal lifestyle inflation.
Here are my tops tips to limit lifestyle inflation:
Automate your savings and prioritise savings ahead of spending.
Be intentional when you do spend, rather than mindlessly spending (and turn off Amazon’s buy now option!)
Set & maintain your budget which will help you keep on track with your planning
Set long-term goals which will benefit from contributing to long-term investing in a pension or ISA
Remember to treat yourself! Set aside a percentage of your income for your happy, guilt-free splurges. But keep it within your budget so you maintain control
Next time you get a raise, or a windful, ask yourself …
"How much am I willing to spend on 'fun' and how much would I like to set aside for my long-term financial goals?"
We want to find a balance that works for both our lifestyle, and our wallet.
The key is to find a balance between fun now, and long-term goals that WORKS FOR YOU.
Meanwhile ... are you a Sex In The City fan too? Let me know by commenting below. Or send me an email - I love to hear from you!
If this article has struck a cord with you, perhaps are struggling to rein in that lifestyle creep, or you have recently received a windfall, please contact me for a free mini 121 to chat about ways I might be able to help.
And don't forget to join my mailing list for more tips on money and time management!