A friend of mine has been struggling to start saving for her emergency fund for years. Even though she’s had a successful career with multiple raises, something kept holding her back. After talking things through with her, we arrived at an interesting explanation: Lifestyle Creep.
What is it? The idea is as our income increases, we also tend to increase our spending habits. Consider this: when you’re starting off early in your career, you might be living off of pasta and living in a modest apartment with roommates. As you progress in your career and start to earn more money, most of us will choose to upgrade our lifestyle. We eat foods that cost more than pasta and sauce; we might find an apartment of our own instead of sharing with roommates. As our career goes even further, many of us will consider starting a family, which costs money, and maybe moving to a condo or house – again, all of these show our lifestyle creeping up.
So interestingly, even though you’re making more money over your career, you’re not that much better off financially because you also allow yourself to spend more.
To minimize lifestyle creep, there are a few things you can do:
- If you’re going to spend more when you earn more, you might as well save more too. The next time you get a raise, use that as an opportunity to start your emergency fund. If you already have an emergency fund, now’s your chance to start an investment account. The idea is to increase your savings when you get an increase in your income.
- Don’t compare yourself to your friends and neighbors. If we see others living the high life, we’re tempted to keep up. I’m not saying we rough it, but why would you want to compete with others when it comes to spending money? The smart move is to avoid this pointless game altogether. You do you, and live your own rich life.
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