Are you making more money but still feel like you're always living paycheck to paycheck? You might be experiencing lifestyle inflation. For many people, as their income grows, so does their spending. To avoid getting stuck in a financial lull because of lifestyle creep, we've compiled a list of fifteen ways to avoid lifestyle inflation.
1. Be Intentional About Your Spending
When you begin making more money, think about what your priorities are and allocate your money accordingly. Don't just buy things on a whim or because you feel like you “deserve them.” Instead, think about what will truly bring you long-term happiness and improve your life.
2. Stick to Your Budget
If you don't have a budget yet, create one! A budget will help you track your income and expenses and prevent overspending. Make a list of your monthly payments and track your spending to ensure you're sticking to your budget.
3. Invest Your Raises
When you get a raise or earn some extra income, consider investing the additional money instead of immediately spending it. This will help you save for the future and contribute to building wealth over time.
4. Spend Time with Frugal People
Surrounding yourself with frugal people can also help you prevent lifestyle inflation. Being around others who prioritize saving and smart spending can help you stay motivated and accountable.
5. Monitor How Much You Spend
There's a saying that the more you make, the more you spend. If you ignore your expenditure, you could be spending much more than you need to. By keeping track of your daily expenses, you'll see where you can cut back. Small changes like bringing your lunch to work or cutting back on subscription services can prevent lifestyle inflation.
6. Avoid Impulse Buys
Impulse buys will definitely contribute to lifestyle inflation. To avoid this, make a list of what you need before going shopping and stick to it. If you see something you want but don't plan on buying, take a step back and think about whether or not it's really necessary.
7. Save For Large Purchases
If you plan on making a large purchase, save up for it instead of buying it on credit. When people start making more money, it's common to make large purchases, contributing to lifestyle inflation. By saving for large purchases, it allows you to reconsider whether or not it's a necessary purchase.
8. Make Gradual Changes
Don't try to upgrade your entire life overnight. Instead, take small steps toward improving your lifestyle. Many people start making more money and want to immediately improve every aspect of their life. But, by making gradual changes, you ensure you aren't taking on anything that isn't sustainable.
9. Don't Compare Yourself with Others
Comparing yourself with the spending habits of friends and acquaintances. Everyone's financial situation is different, yet when you begin making more money, you might be tempted to try to fit in with the spending habits of others. But what works for someone else might not work for you.
10. Treat Yourself with Reason
While avoiding lifestyle inflation is important, it's also important to treat yourself every once, but do it within reason. Instead of splurging on something expensive that you might not even enjoy, make intentional decisions about what you like and what would interest you.
11. Avoid Taking Out New Debts
One of the biggest mistakes people make when they come into more money is taking out new debts. You should never take on any large credit purchases before making informed decisions about what you intend to spend your money on.
12. Set Aside Money for Splurging
While it may seem counterintuitive, setting aside a small percentage of your income for fun can actually help you stay on track with your financial goals. Just make sure you're not dipping into any important savings to do so.
13. Set Up Automatic Savings
Another smart way to avoid lifestyle inflation is by setting up automated savings. Choose the amount from the additional money you're receiving and decide from there how much you can save each month.
14. Use Your Additional Income to Pay Off Debts
Often, when people receive additional income, they begin thinking of different ways it could be spent or saved. Another way to allocate your additional money is by using the extra money you're receiving to pay off any debts you may have.
15. Delay Gratification
It can be tempting to upgrade your lifestyle the second you start earning more money, but try to resist the urge. Give yourself time to adjust to your new income first. If there's something you want or think you deserve for making a certain amount of money, hold off on making that purchase until you've better learned how to budget and manage your new income.
She started her blog, The Money Dreamer, when she realized the 9-5 job was not the lifestyle she wanted anymore. After designing for a while, she wanted a more meaningful life, which was freedom, so she decided to venture out. She took action so that she can live her dream life and decided to help people to live theirs by helping them how to save, budget, and invest.