Biggest wealth killer

Have you ever felt that no matter how much you earn you’re still struggling to save? Could lifestyle creep be something to blame?

What is lifestyle creep? 🛍️

Also know as lifestyle inflation. Essentially, it’s increasing your spending as you earn more. It could be spending on lavish holidays, expensive skincare or clothes, home and car upgrades or eating out in nice restaurants. You name it.

A lot of it comes from (sometimes unintentionally) trying to keep up with lifestyles we see on social media and there’s plenty of that in front of our eyes everyday 📱.

Whether that’s seeing influencers constantly on holidays, celebrities advertising the latest thing or seeing friends throwing extravagant international weddings. It’s easy to see the highlights of somebody’s life and think they are doing this all the time.

Lifestyle creep can also happen gradually as we start earning more and may not always be as noticeable. You get a pay rise, so you decide to treat yourself to a better car, which then increases the additional expenses.

You may also decide to treat yourself to additional holidays, which then eats up into any extra money you earn.

I have been guilty of this as well - at one point I was spending a small fortune on hair and other beauty products, just because I saw others around me doing the same.

Was it something that made a difference to my life? Not really.

Since then I have been a lot more intentional with what I choose to spend my money on and it’s made a big difference to my savings and how I feel about finances in general.

How does it affect us? 💰

Spending more isn’t always bad, especially if you can afford to and are already saving and investing a solid amount. However, a lot of people fall into the consumerism trap and end up spending more than they can actually afford.

This can often impact bigger money goals and prevent us from saving and investing enough for retirement. Delayed gratification is hard to appreciate!

Another way how lifestyle creep can impact us is going into bad debt.

Using credit cards to cover any purchases we want is extremely easy, so no wonder why so many people end up racking up big balances and struggling to pay it back.

How to avoid it? 🙅🏼‍♀️

📝 Create a financial plan

Being intentional with your money can help prioritise what is really important to you. This can help direct money into the areas that you want to spend money on - whether that’s saving for a house, a comfortable retirement or long term travel.

It becomes easier to save if you know exactly why you’re doing it and what the reward might be.

💸 Pay yourself first

Before you start spending on discretionary things, what you could do is set aside a certain percentage of your take home pay to go directly into savings each month.

This way you avoid spending it first and saving only what you’re left with at the end of the month. This concept really helps to save and invest more and something I swear by now.

🤖 Automate, automate, automate

Goes without saying that you should automate your finances as much as possible. If you set up automatic transfers at the beginning of the month to go to various savings and investment accounts, you remove the temptation to spend this money. It also saves you time and having to think about it.

🤑 Increase savings as you earn more

Increasing savings percentage as you get pay rises or bonuses can be a great way to boost your wealth. It can be tempting to treat yourself and spend all of the additional money you get, but if you can increase your savings rate, your future you will thank you.

💰 Side hustles

Create a side hustle and save all of it. This could be offering services (dog walking or house sitting), selling digital products online or putting up your spare room on airbnb. There are now lots of ways to make additional money.

My weekly recommendation

Since we’re in the height of the wedding season, this article on the rise of the postnups is pretty timely! Perhaps prenups and postnups are more of an American thing, but it’s worth considering protecting yourself in case things don’t work out.

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Until next time ✌️

Lina at Money Blues