We celebrate the increase in our income with a party or a shopping splurge with our loved ones. It is okay to celebrate the milestones as they can act as motivation to put extra effort into your work. However, the increased income and celebrations also possess the risk of lifestyle creep.
It is a condition where needless expenses soon become essentials for a comfortable lifestyle. As a student, it was hard to afford the visits to the clubs every other day. But the increased affordability changes the visits to clubs into a habit and soon into an essential expense.
Dangers of Lifestyle Creep
Lifestyle creep is very dangerous for your finances in the long run. You build a habit of certain unnecessary expenses based on your current affordability. And it is hard to argue against them since people earn more to live a comfortable and luxurious lifestyle.
But the real problem strike when you face a financial crisis because of an unavoidable situation. A sudden layoff will leave you with no income for an uncertain time. You are forced to use the savings to manage the expenses during the job search.
Now, it makes no sense to increase the stress on your savings because of the luxuries and amenities. You should avoid an expensive lifestyle to prevent a debt situation. However, it gets complicated to leave the unnecessary spending that is part of your lifestyle for years.
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Tips to Avoid Lifestyle Creep
You may try to avoid lifestyle creep after considering its side effects on your financial condition. Though, you should worry less about survival during financial emergencies because of fast loans with no guarantor required. Nevertheless, it is recommended to adopt the following financial habit to control your spending.
Set Financial Goals
You need to start your career with a set of financial goals. Long-term goals will motivate you to save and focus on positive financial habits. Ultimately, you need them to secure the financial future to survive the troubling times comfortably.
The long-term financial goals can include saving for a house, car, retirement fund, and college education for children. All of these goals serve a fundamental purpose in your life. Nevertheless, you need to prioritise them to achieve the critical goals first.
Also, you should not wait for the right age to start saving for a financial goal. Many people avoid the retirement fund in the early stages of their careers. However, you should begin as early as possible to cover the damage from financial trouble.
Control the Luxuries
For many people, the purpose of working hard for the promotion is the increased comfort in life. You cannot live the same broke lifestyle as a student throughout your life. Therefore, the expenses, luxuries, and amenities will increase along with the income.
Though, you should control the luxuries to avoid lifestyle creep. You cannot cut the luxuries in an instant to increase the savings. It will result in a guaranteed failure within the next few weeks.
If you are willing to start saving more, use the savour method instead of elimination. The current luxuries in your lifestyle should be limited to a splurge now and then. Also, you need to prioritise the luxuries such as clothing over coffee and long-drive with your loved ones over the weekend booze parties.
Transfer the Raise
The increase in spending is because of the increment from the promotion or new job. You can avoid the urge to spend more if the increased income is not available for spending. The raise should get transferred to the savings account to avoid its use.
The method is difficult to follow as people often tap into a savings account after encountering the urge to spend more. The determination will help to avoid the use of increased income for unnecessary spending. Also, do not carry the debit cards linked to your savings account to shop.
Get Rid of Peer Pressure
Many unnecessary expenses are the result of the urge to keep up with the social circle. You don’t have to buy an overpriced smartphone just because your friends are using it. Also, learn how to say no to the parties in the expensive neighbourhood every other day.
You have a different financial condition and set of financial goals from them. Also, you are more focused on secure finances in the future instead of small comforts in the present. Thus, do not try to catch up with them in terms of luxuries and amenities.
Some people find happiness in the luxuries, while others enjoy inexpensive methods such as reading or watching Netflix. You can explore the world to find the true source of happiness for yourself. You will find gardening more satisfying than the expensive resorts in a distant location.
Therefore, you should spend time exploring the world with some satisfying, adventurous, or relaxing activities. You will learn new skills to help in your personal and professional life from these activities.
Avoid Credit Cards
Credit cards provide financial aid within an instant to support the impulse decisions of the buyer. You buy products and services beyond your budget. After a while, it becomes a habit to spend more and increase the stress on the budget with a heavy bill.
You are forced to pay instalments with heavy interest rates if the bill is not paid on time. Thus, you should use cash, debit cards, or prepaid cards on your next visit to the stores. Even small expenses have severe consequences in the long run on your financial habits and budget.
People At Risk of Lifestyle Creep
Not everyone is at the risk of lifestyle creep as much as a certain population. You need to focus on symptoms of lifestyle creep if you are among these groups. Following are the people with the increased risk of lifestyle creep –
- Young Professionals
Young professionals experience growth in their careers with no experience to manage expenses. For entrepreneurs and freelancers, success may result in increased costs after months of struggle. However, retirees are forced to reduce their spending after the end of their professional careers.
Thus, you should keep an eye on your spending habit after a promotion or professional success. Make sure the expenses are not increasing with unnecessary spending.
To sum up, you can avoid lifestyle creep with the right strategy to manage growth and success. The focus on the bigger picture is significant to prevent the short-term comfort of taking control over long-term investment. Therefore, it is time to slowly introduce positive financial habits to your lifestyle and get rid of needless spending habits.