Share  |  Print
Money Minute
Quick Tips
How to Avoid Spending More When You Make More
Money Minute
Don’t let your savings lag when you begin to earn more.
 

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.




The information on this page is provided for educational purposes only and is not tax, legal, financial planning or investment advice. Neither the information nor any opinion expressed in this section constitutes an offer to buy or sell any securities or advisory products. The information provided is general and is not information reasonably sufficient upon which to base an investment decision and should not be considered a recommendation to purchase or sell any particular security. You should not regard this information as a substitute for the exercise of your own judgment. Investing involves risk.

 
Get to Know Ariel
No-load mutual funds for investment accounts, IRAs, 401(K) plans/rollovers, or college savings programs for individual investors
Learn more about Ariel Investments from the people who know it best
Request a kit to learn everything you need to know to invest with Ariel
Start investing with Ariel today
 
 
Past performance does not guarantee future results. © Ariel Investments, LLC. This website and all of its content is for informational and educational purposes only and should not be considered to be investment advice or a recommendation to buy or sell any particular security. The mutual funds offered by Ariel Investment Trust are distributed by Ariel Distributors, LLC, a wholly-owned subsidiary of Ariel Investments, LLC. Use of this website is subject to our Terms & Conditions. The Ariel mutual funds referred to in this site may be offered only to persons in the United States. This web site should not be considered a solicitation or offering of any investment products, funds or services to ineligible investors, investors for whom such products, funds or services are not suitable, or investors outside the United States.

Check the background of this firm on FINRA's BrokerCheck
Ariel Distributors, LLC is a member of the Securities Investor Protection Corporation