A Creep to Avoid this Halloween
It's Halloween! Here's a creep to avoid, both on Halloween, and the rest of the year too: Lifestyle Creep.
Lifestyle creep means that as your income rises, your spending rises at an equal or even higher rate. You earn more, you spend even more, and you feel like you are falling behind.
Did you go to Europe after college? Perhaps with a backpack, staying at youth hostels? Probably some of the best memories of your life. But as you age, you progress to a Hampton, then a Hyatt and then, well of course it must be the Four Seasons! What once was luxury is now the new normal.
Is your lifestyle creeping up because you truly need the most expensive alternative? Or are you trying to impress someone? Perhaps yourself?
I am more impressed by what you save. Here are three ways to avoid lifestyle creep.
Start a Budget
If you’re increasing your spending but still putting enough away towards saving or paying off debt, then you aren’t outspending your earnings.
To get on this path, create a budget and stick with it. Tracking your spending vs a budget is an eye-opening way to see what expenses are creeping up, year after year.
Plan for Your Next Promotion
Seeing your paycheck increase significantly after a promotion is exciting! But without a plan, it just may mean higher car payments, a larger mortgage and more monthly bills.
Before temptation strikes, decide what part of the increase you’ll save and what you'll spend. Here’s a thought — keep your lifestyle the same, and save the entire increase. Or use the added money to pay down debt faster.
Once you determine your savings goal, move forward with your plan as soon as the increase goes into effect, making transfers into savings automatic.
Use Your Values
I understand that expenses go up over time. A family’s budget looks quite different than a single person in their 20s. Who doesn’t want what’s best for their kids? What’s best gets pricey… travel sports teams and tutors and camp. I get it. But as your income increases over the years, look to your values to determine your spending priorities.
Lifestyle creep can occur so effortlessly that you don’t even know it’s happening. Be intentional with your savings and spending. Remember, you can have anything you want, not everything.
Shari Greco Reiches
Shari Greco Reiches is Co-Founder, Principal and Chief Growth Officer of Rappaport Reiches Capital Management. She is the architect of the firm's Maximize Your Return on Life Solution, which aligns clients' financial planning with their Core Values. She is a frequent speaker on financial planning and values, author of Maximize Your Return on Life - Invest Your Time and Money in What You Value Most and enjoys mentoring women in the wealth management profession. Please connect with Shari below. She loves to talk about investing, financial planning, and Barry Manilow.