Lifestyle Creep Is Real, Here’s How To Balance It
Q: Dear Ruchi, I’ve been so lucky to receive 2 significant raises in the last year at work. Funny enough when I was looking at my numbers, I realized I actually am saving less than I was the year before. I know I have certainly celebrated and gone on a few vacations and feel less “worried” about my money, yet there is less in the bank. What am I missing here? Am I just overspending?
A: Ah, I hear you! Been there! It’s really exciting when we start to make financial strides in our lives, whether it’s a raise, a new job, or even a cash infusion you weren’t expecting. It’s great to get excited about our money, it's also important to remember that just because we make more doesn’t necessarily mean we have to spend more. This happens more often than you’d think when people reach new financial peaks in their lives. The good news is, that all it takes to reframe this is a little reorganization and taking a closer look at your numbers. Let’s get into it!
A big part of this has to do with our money habits because the reality is, no matter how much money we have, it's likely that our habits remain consistent across any phase of income. At Watch Her Prosper, our overarching theme is always rooted in living your most prosperous life. We want you to do everything that makes you feel happy. That’s why we work to equip you with the tools you need to create positive money habits and choices that empower future you, free of judgment! Remember that increased income alone doesn’t guarantee financial freedom, it’s what we do with it! That's why it's essential to establish healthy financial habits early, even when you have limited income. These habits will become ingrained in us (just like muscle memory) and make a significant impact when our income grows. It's like training your financial muscles – start now, and you'll see the results later!
As you work with your new income, here are a few steps that can help you take control of what’s coming in and out every month.
First things first, create or update your budget. Whether you work with a bookkeeper or CPA, or you manage your budgets through an app or spreadsheet, it’s time to update things! What is your new monthly income and what are your non-negotiable monthly expenses? It’s important to see what you’re working with.
Pay down any existing debt. Credit cards, car loans, etc. are best to cross off of your list as early as possible so you can put your money toward other things that contribute to prosperous living. This will also alleviate debt payments from your monthly budget, allowing you to redistribute your earnings in a new way.
Check in on your emergency fund. Whether you’ve started one already or have been meaning to do so, this is an important place to replenish frequently, and it’s especially important to revisit this as your expenses are increasing. It’s all about peace of mind knowing you can weather unexpected expenses.
Be a fan of leftovers! Having money left over at the end of the month leaves room for investments that can help you build wealth. It’s a common belief that holding onto our money is the best way to save, though ensuring your money is working for you is equally important. Consider starting small! It can be as simple as contributing more to your retirement plan or opening a high-yield savings account. Remember… future you will thank you!
Here’s to your prosperity!
Ruchi