Do you feel like the more you earn the less money you seem to have left over in your bank? If so, you could be a victim of the dreaded 'lifestyle creep'.
There’s a common misconception that the more money you earn, the more you have to spend.
But experts are telling us that the complete opposite is actually true...
What is 'lifestyle creep'?
The term refers to having a few more pennies to spend after getting a raise or a higher paid job, resulting in you treating yourself to more of the finer things in life.
Maybe you just got a yearly bonus, or your boss decided you deserve a pay rise, it’s all great news!
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But could you actually be worse off than before, because you have more money to spend instead of saving the extra income.
Here are four signs that you could be experiencing a ‘lifestyle creep’...
Your savings are stagnant
Not considering transferring a larger chunk of money to your savings upon a pay increase can be a huge mistake.
Talking to Business Insider, Robin Aiken, Principal at Homrich Berg Wealth Management, said: “If the amount you are saving has remained static even after a few years of raises and bonuses at work, that is a sign that you are spending all of the extra money you are making each year.”
While it’s nice to treat yourself when a bonus comes your way, remember that your savings should be growing steadily if you have received multiple raises.
Spending has increased
Do you now shop at more expensive supermarkets, eat out at nicer restaurants, or buy your clothes from a more spenny brand?
These are all signs that your pay increases are being frittered away on things that don't make you wealthy in the long-term.
You are not budgeting
Remember those student days when every pound mattered?
Perhaps budgeting isn’t a part of your financial planning anymore, but it certainly should be, no matter your income.
If you don't know how much money goes towards your disposable income each month, you can overspend without even realising how much you’re doing so.
You don’t feel in control of your finances
Do you feel stressed every time you go to check your bank account, anticipating the amount you spent that day?
This could be an indication that the amount you spend on your lifestyle is exceeding your income.
If you feel dread or regret about any of your accounts, it is time to take a hold of the issue.
How can you prevent a lifestyle creep?
Well, preventing a ‘lifestyle creep’ mostly involves the opposite of all of those signs.
Taking control and budgeting are the key factors.
Making sure you have an emergency fund that you can rely on will also make your financial situation a less stressful experience.
Once your savings are prioritised, any long-term consequences of overspending will slowly start to dwindle.
Topics: Money, Advice, Life Hacks
Mia Williams