Are you spending more money than you can afford?
It is common for a millennial to spend more money on superficial things like expensive cars, a second home, branded clothing, etc. Not to generalize, but most people in their 20s and early 30s are not much concerned about saving money for retirement. Also, rapid career advancements can create a false sense of wealth. This post is intended to help those who do not wish to become a victim of Lifestyle Creep or Lifestyle Inflation.
What Is Lifestyle Creep? When Does It Occur?
According to Investopedia, Lifestyle Creep or Lifestyle Inflation refers to an increase in spending when an individual’s income goes up. This phenomenon is prevalent in people with a poor background. Someone who spent his/her entire childhood broke, hungry and without any resources is more likely to become a victim– once they start money as an adult– of Lifestyle Creep.
The exact reason behind this phenomenon is still unknown but it is understood that victims of Lifestyle Creep do not have enough awareness of their current financial situation. One thing is for sure, as their expendable income also rises, they continue to spend money on superficial things. Only debt, bankruptcy, or any other financial crisis can snap them out of their reckless spending habits.
4 Ways to Prevent Yourself From Becoming a Victim of Lifestyle Creep
1) Begin Paying Off your Debt
If you owe money to a financial institution and haven’t repaid them in time, you must stop spending money on leisurely things and start paying off your debt immediately. The more you wait, the more debt will pummel. There is no getting around it. Also, realize that spending money does make people feel good about themselves in the short term.
2) You Don’t Have to Spend It All
These days, it is possible to move up the corporate ladder quickly. Most people begin earning more than they ever dreamed of within 2-3 years of work. There is nothing wrong with quick success. But you must also be prepared to handle the inflow of money. You don’t have to spend it all.
3) Set a Budget
Without budgeting, you will most likely spend 90-95 percent of your monthly income without even realizing it. People who do not budget, usually spend their lives living paycheck to paycheck. Hence, it is essential to maintain a notebook or a spreadsheet dedicated to budgeting. Make two columns: Fixed Expenses and Variable Expenses. Make sure you update the sheet every time you spend.
4) Don’t Go out as Much
Going out with friends and family is one of the most important parts of life. But it does not make sense to go out 3-4 times a week and spend more than you can afford. Try to limit going out to just once a week. And avoid visiting fancy restaurants and cafes. Visiting a free public park or a museum can also be equally amusing.
Most people who work hard and earn enough in return begin to feel like they deserve more from life. A normal life fails to satisfy their needs and cravings. This is the primary reason for spending more money than you can afford. Hence, it is essential to not let money dictate your thinking.