Riddle me this – who starts spending more the second they increase their income? You? Well, you’re not alone in this. Most people fall into this trap referred to as the lifestyle creep, almost always unconsciously. But guess what? Spending money without a plan leaves you feeling like you’re broke, even when you earn what most people would consider enviable.
And did you know that in any population, a significant portion of the people don’t save? Basing this argument from various studies and a most recent one conducted in Australia, financial advisor David Andrew says that the issue affects even individuals bringing in big bucks every month.
It Strikes Early
In Australia, 40% of families with an annual income of $200,000 live from paycheck to paycheck. They are affected by the lifestyle creep, a habit that most individuals pick up when they are fairly young. By the time they have families, it’s already difficult to shake off the practice, and since they think they are comfortable, why even bother changing?
As Lacey Filipich, founder of Money School says, the lifestyle creep manifests when guys are in college. Truth be told, we spend a huge part of our college lives having fun, no? When we run short of cash, cheap drinks will do. The second you feel you are doing great financially expensive bottles of whatever it is that’s your poison pop, true or very true?
It may seem pretty harmless, but your mind registers the notion of having more money with more spending. Soon, you’re out of college and you get that dream job but you always seem to be broke, why? Blame it on the lifestyle creep.
So, how then do you slay this monster? David Andrew advises that you should carefully evaluate your spending habits now before your next increase in income comes around. In truth, you may find it difficult to give up some things, but if you didn’t spend on them before your current income, they have to go.
Don’t Rush
And when that extra cash finally comes in, don’t rush into spending it. Give yourself some time to think of something constructive you could use the money for, then direct it towards that. You could even save it all, say for example for retirement, and when your golden years catch up with you, financial insecurity will be a foreign phenomenon to you.
If you’re an ardent spender, saving might be quite the uphill task. However, there’s a workable solution. Open an account in a bank different from your regular one, have no card for it, and also have no online access to it. Having done that, ask your primary bank to automatically send your pre-determined amount to the new account monthly. Simple enough, don’t you think?
According to Filipich, saving aggressively is what an ardent spender actually needs. This ensures that they always have their money with them, and if they feel that it’s too much slaying the lifestyle creep, they can cheat by withdrawing some of the cash and getting their “fix.” Spending can be quite the addiction it seems.
