More money means more spending power.
When a promotion at work or a lucrative investment puts more money in your pocket, you’re naturally inclined to treat yourself. But are you still finding the right balance between spending and saving for the future?
Keep these guidelines in mind if you want to keep lifestyle inflation under control.
Recognizing the Trend
Lifestyle inflation is also known as lifestyle creep; it can sneak up on you. Some common signs of this trend include:
- Increased focus on immediate, nonessential purchases
- A significant reduction in savings
- An increase in debt
- Putting your long-term financial goals on the back burner
Being able to afford more luxury items is a wonderful feeling, but left unexamined, this habit can affect your overall financial health.
Lifestyle inflation can lead to a situation where you’re living paycheck to paycheck without a plan for a sudden decrease in income. Consider what would happen if you were to suddenly lose your job, experience a medical emergency or need to retire early.
Do your current spending habits leave you a cushion for the unexpected?
Managing Lifestyle Inflation
Once you recognize lifestyle inflation, it’s possible to take steps to manage it. Lifestyle inflation may be reduced by:
- Evaluating spending and saving habits
- Cutting down on large, impulsive purchases
- Saving a percentage of your income
- Increasing the amount you save when your income increases
- Regularly checking in on your long-term financial goals
Do you have questions about finding the right balance between saving and spending? Reach out for assistance today.