In finance terms, we hear about inflation all the time. But what about lifestyle inflation? This is essentially a kind of habit, and both its presence and the problem it causes can be sneaky.
Simply put, lifestyle inflation happens when your pay increases or you undergo a promotion and your costs of living rise as a result. This alludes to those expenses that aren’t necessary. If you think “oh, that won’t happen to me”, be careful. It’s not called “lifestyle creep” for no reason because it creeps up on you!
Don’t fall into the trap of spending more money as your lifestyle changes. Here are some realistic tips to keep you on the lookout.
#1: Know your weaknesses
We’ve all got that one thing that we tend to splurge on. Perhaps it’s a shopping spree at weekends. Or it could be a weekly high-end restaurant date with boo. If you’re honest about the splurges you’re most likely to make, it will help you stay strong against them.
#2: Be careful with credit cards
To keep your financial health in check, be careful not to overspend on credit cards. Be mindful that you’re going to have to pay it all back (with interest) one day, so think twice before that big swipe.
For folks contemplating getting a credit card, read this article to consider some situations before applying for one.
#3: Be ready for it by having a plan
The biggest mistake that many make is to underestimate its ability to be crafty. It’s just a few dollars here, and a few dollars there, so it shouldn’t be that big a deal? Well, that’s precisely what it means to get off on a wrong foot.
Make sure that you plan for lifestyle inflation to happen. Expect the unexpected because the only way you will notice it is when it starts to impact your financials. And trust us, it will.
#4: Stick to your budget
One helpful advice to keep your spending in line is to stick with the same budget you’ve been using before your salary increases.
None of your other spending categories has a reason to increase, after all, so make sure your accounts match what they should be at the end of the month.
We like to use an excel sheet to watch our budget and spending habits. Having a document to pen down your expenses is a sure way to help you eye your monthly paychecks. With the extra savings, you can decide for yourself if you’re ready to venture into investments.
#5: Let yourself off the hook once in a while
Okay, so this goes against the tips above, but it’s essential!
If you set aside a small amount of money every week or month to feed your spending urges, you will be able to last through the entire marathon. That’s because you aren’t sacrificing anything and it’s only fair that you reward yourself after a tough week at work.
Think of it as a strictly monitored allowance.
Lifestyle inflation might be something that you notice after it has already snuck into your life. If that’s the case, that’s no reason for panic.
All you need to do is use the bits of advice shared in this article to deflate it back to where it should be again. Hold fast to it, and you will be on your way to significant savings that you can tuck away for a financially sound future.