How to Avoid Lifestyle Creep

New Orleans, US

Lifestyle creep is a more palatable way of saying as your income increases, so do your expenses. To build long-term wealth and save for shorter term, but just as important, goals you want to do the opposite: Increase your income regularly, and keep your expenses as low as possible. How I do this is by keeping my spending the same as before the raise or picking up a side hustle(with some exceptions*).

Here’s how I avoid lifestyle creep

1. Putting the extra money out of sight: a separate, an online only bank account is my personal favorite. Since it takes a few days to transfer funds from my Varo account to my main account, I just leave my card at home and don’t have the details saved anywhere, so if I want to spend the “extra” money, it’s a hassle, which works as a pretty good deterrent.

2. Having a specific dollar goal for the income increase: Are you saving for a house(I am… slowly)? An international trip? Do your want to pay down a big chunk of some debt? Earmark the money so it’s not rolled into your day to day budget.

3. Reviewing my budget: The beginning of a new quarter is the perfect time to analyze spending habits for the last 60-90 using your bank and credit card’s spending reports. Seeing if and where expenses can be reduced and/or money can be shifted to new priorities helps so much in ensuring that my income increase remains earmarked for the goals I set for it.

As I get further into my late twenties, and get closer to moving into my dream career field, I know that a large income increase is forthcoming. I want to make sure when that happens my money habits are so ingrained that if I'm making $75,000 or $225,000, my expenses remain more or less the same, so I can focus on building lasting wealth for myself and my family. Avoiding lifestyle creep is one of the most effective ways to do that, in my opinion.

*Why with exceptions: I don’t think life is very fun if you’re only earning and saving. In line with my personal money philosophy, I think it's important to spend on planned experiences that make bring joy and fulfillment… as long a you budget for it. So take that international trip, skydive, ride the hot air balloon, get the new tattoo… maybe just don’t do all these things in a six month span.

Budgets are Meant to be Adjusted

It happens to all of us, you sit down with your budget and plan for the quarter, month or week… and you get an email from your favorite brand that there’s a 35% off sale, so your $150 shopping budget ballooned to $300 because, you can definitely afford it, so why not? Then the end of your budget period comes you’re over budget every where except savings. I get it, it happens to me(more than it should considering a run a personal finance blog, but that’s life.) The important thing to do is to have that financial check in, hopefully sooner rather than later, but at some point before you sit to edit the next iteration of your budget is fine.

If this is a one off, then its an easy fix, and you can easily adjust your flexible categories(like cafe money, shopping money, and take out money) to even out the fixed ones like your savings that may have fell a little short on your last go round. However if you find that this is the second, third or fourth time you’ve blown through the same category and borrowed from others, perhaps it’s time to rethink your budget.

In an ideal world our budgets would stay at the percentages we wanted and we would hit those goals every quarter/month/week, but as our priorities grow alongside us, we have to edit our budgets to reflect that growth. For me, I know I’ve been spending more on physical books now that I don’t want to use the library as much, and that’s ok, since I’m spending a lot less on clothes and cafes since I’m leaving the house a lot less. Reading has become an even bigger part of my life during this pandemic so I’ve had to adjust my budget to reflect that it has made me happier(and made me much more likely to stick to my budget.)

As March comes to a close, I am definitely re-examining the financial goals I set forth at the beginning of the year and seeing how that compares to my spending. I pretty optimistically thought a new administration would mean a (relatively) swift transition into our new normal and with it increased earning potential(I work in the service industry, specifically restaurants, as I am pursuing my degree and it has been tough, to say the least), unfortunately, that doesn’t seem to be the case for my city. Taking that into consideration I’ve heavily revised my financial goals for the year, generally, but specifically for the second quarter.

Give yourself some grace if your spending is not matching your budget, assess why that is and adjust accordingly. We have 75% of the year to go, we can still meet and exceed the revised (and perhaps more realistic) financial goals we’ve set for ourselves.

Jump Starting Your Finances for the Second Half of The Year

June is such a great time of the year. Cookouts, day parties, amusement pars, beach and pool days. Summer is here with a bang.

June is also the perfect time to give yourself a new start. We all set those resolutions so long ago in January, and if you’re anything like me(and most Americans) you have some vague idea of how you intended to be better this year but the execution has somehow slipped from your grasp.

While this isn’t ideal, its pretty normal and June is the perfect time to reset and actually make progress on those goals. It takes anywhere from 21 to 90 days to cultivate a habit, and we have about 190 days left this year. Why not seize them?

This month I’ve reached for the intentions I set in January and revised them a bit to suit my current need and goals. Although I’m not exactly where I envisioned self in January, I know that I will end the year exactly where I want to be.

The (second) biggest goal I had was to get my finances together, credit, savings and spending. With two international trips, a lot of shopping and a few graduations, my spending has gotten the better of me, especially in the past quarter. To reset, I’ve decided on a track and trim method to jump-start my finances for the second half of the year. I am spending as I usually would all of June, but tracking very single expense electronically through the Mint and Pocketgaurd apps as well as on paper in my budget notebook. The goal here is to see where my money goes, not judge how I’m handling it. In the month of July, I plan to use all the tracking I’m doing in June to cut my discretionary spending in at least half and to increase my savings by at least 50%.

Although were just bout midway through June, I highly recommend joining my track and trim efforts. I know you’ll be as surprised as I was just how much money you spend on small things, and how it all adds up. July will be more intentional, and we’ll be all the happier for it.

How I Plan On Saving $10,000 In Ten Months

I believe savings are an integral part of financial independence, and regardless of our income, we should all be saving something. Even twenty dollars saved this month could be what gets you groceries when all of your bills are auto drafted and you don’t get paid for 5 days. I’ve been there, in college I worked part time jobs that helped stop the gaps of my financial aid, and there were many times a twenty dollar bill made a major difference in my diet plans.

Realistically we should all be aiming to save 3-6 months of our income within 18 months of being gainfully employed, especially if that job pays you eight that you’re (somewhat) comfortably in the middle class, with no dependents. (Here is a link to the Pew income calculator).

Savings can take many forms; you can auto draft your savings(if you do that you should absolutely be using an online bank with an interest rate of at least 2.0apy( and aim for one that distributes interest monthly(such as Varo, where you can earn up to 2.12%APY monthly)), you can withdraw the cash and put it into a piggy bank( for our generation his works really well because we tangible money(cash) feels more real, so were less likely to dip into our physical piggybanks but a lot more likely to swipe our cards) , or investing(but let’s save that for more in depth post, shall we?).

You’re probably asking me how to save money when the past few pay days came a few days too late in your opinion, so I going to list five tips that I use(or try to, because transparency) that allow me to auto draft my savings biweekly without breaking a sweat. I will also be using these tips to save $10,000 over the next ten months.

1. Increase your income. Most millennial are being underpaid, or at leas we are in relation to relative living expenses, especially if you reside in a major city. How can you increase your income? Ask for a raise, find a part time serving or bartering job, dog walk , nanny/ babysit, retail or barista jobs have flexible hour and pay a relatively high hourly wage for “unskilled labor.” At this point in Our lies we more than likely only have our selves to think about, clothe d feed. If you spend 20 hours a week of your free time working instead of spending money or relaxing, that’s about an extra $1000-$1500/ month(or $12000-18000/year). Saving all of that income is extremely realistic and will put you so far ahead in your financial goals. We cant get time back, so we should absolutely be maximizing it. Our twenties and thirties are the perfect time to do that.

2. Decrease your spending. Seriously. With the extra income from your second source of income, you may be tempted to treat yourself. Please, don’t. Lifestyle creep(spending more as you earn more) is how people stay as broke even as they earn really good money. Financially smart people will decrease their variable expenses as they earn more. For me, this means I don’t buy new clothes more than five or so times a year, I still opt for public transportation even though Uber’s are so accesible and relatively inexpensive, I use my sisters Hulu and Amazon accounts, I rent books from the library and study/write in he library in lieu of Starbucks or other coffee shops, and finally, I try to make sure 90% of what I eat I prepared myself. Eating out is definitely where my budget has gone to die, and more than once.

3. Have a grocery budget, and use cash. Since I essentially halved my grocery and eating out budget at the beginning of 2019, there was a steep learning curve. Carrying a card to the grocery store doesn’t work for me. I always end up leaving with about double what I needed or even wanted. I start by figuring out what I want to eat for dinner and breakfast for the week, then shopping my kitchen for ingredients. I then make a list and approximate the costs, I withdraw the cash and go shopping on Sunday evenings, make food Monday or Tuesday since my work week usually starts on Wednesday. I have had to put things back many a time, but since I still want to eat out and I count restaurants/bars in my grocery budget, I prioritize. I like going out with my family and friends so I have to be super fugal in grocery stores. This works for me, I can get away with spending about $120/ month at the grocery store, which is $30 a week. My (specifically for groceries) budget is $150/ month, and I rarely use all of that. ( I am a single person who eats mostly plant-based at home, so that helps, significantly).

4. Pay yourself first, with direct deposit. Make your savings a priority. Treat your savings goal as a bill, and pay it before you do any discretionary spending (bars, amazon, shopping, etc). I recommend breaking your savings goals into two lump sums and scheduling the auto-draft on the first and the fifteenth of the month, or whenever you get paid. I use Varo and c only sing its praises. If you too would like to experience ridiculous interest on your liquid savings, feel free to use my link to sign up for an account Varomoney

5. Have a buffer. A good rule of thumb is to have the amount of your largest auto-draft in your checking account. I like living life on the edge, so my buffer is only a fifth of my largest auto-draft, but I compulsively check my account so it has been some time since I have been charged an overdraft fee. Banks made billions last year in overdraft fees, stop giving them your money. Create a realistic buffer.

6. Put your spending money in a separate account. If you have a Venmo, cash account or are a responsible credit card user( as in you don’t carry a balance from month to month) this is fairly simple to do. Either order a cash or Venmo debit card and put your spending money on the card on the first of the month and only use that money. Once it runs out, it runs out. You can also use a credit card for this, but be careful to follow the same guidelines; if you budget $300 for fun money for the month, don’t charge $350 because it means you are taking money from somewhere else, or you’re creating extra consumer debt , which is what we do not need to do, especially in our twenties.

7. Be patient with yourself. Habits that we’ve had for five or more years don’t change in a month. It takes about 45 days to build a habit and 90 days to build a lifestyle.And we are absolutely building a lifestyle. And at the end of the day, saving $7,000 or $8,000 is a lot better than $0.