We don’t know who needs to hear this, but you don’t have to spend more money just because you earn more money. (Or, you know, have more to spare because a global pandemic has you commuting, traveling, and going out a lot less.)
Hear us out. Upgrading your spending habits when there’s more money to go around is called lifestyle inflation. It turns things you once thought were nice to have into can’t-live-withouts. Think: a house or apartment with (a lot) more bedrooms than people who live there, yearly dream vacations, luxury cars, new shoes for every season, etc.
Spending more and more makes it harder to build wealth and reach your big financial goals. Catch, meet 22. Because the more money you spend on needs, the more savings you’ll need in case of a big lifestyle deflating moment, like getting laid off. And the more you’ll need set aside for retirement to maintain your standards.
It can be hard to notice, especially because it typically happens slowly over time. Hence its other name: lifestyle creep.
But there are two easy ways to evaluate whether you’re spending within your means. One, check out your credit card statements. Overspending could look like carrying a balance from month to month or borrowing from savings to cover the bills. That can lead to unnecessary debt and living paycheck-to-paycheck forever. Two, look at how much you’re saving. When you make more, you should save more.
Follow these tips for keeping yourself and your wallet in check:
Related: How to Save Smarter
Lifestyle inflation can sneak up on you. Making conscious spending choices, automating good habits, and keeping your goals top of mind can help you stay on track.
Skimm'd by: Ivana Pino, Elizabeth Smith, and Elyse Steinhaus