Are You a Creeper?
I’m probably not talking about the kind of creeper you’re thinking about, but I still admire you for wanting to know if you are one! A few years ago, blogger to the financial advisors, Michael Kitces came up with the term “lifestyle creep”. If you’ve recently paid off a major debt or negotiated a nice pay raise, you’ve probably found some extra cash in your wallet.
If you’re like most normal people, your first response to having a few extra dollars to work with is to go out and celebrate your newly expanded financial freedom. Maybe splurge on a fancy dinner or take an expensive vacation you couldn’t afford before. That’s a good response and one that is well deserved for what may have been years of your own personal sacrifice.
Now that we’ve established you’re a normal person, what happens after the celebration? Most likely you’ll notice how easily you can afford to go out to dinner twice a week when previously a trip to Panera Bread was a special treat. You’ll probably notice how dated and worn a lot of your clothes are, luckily you can afford to buy new ones more often now. Then, on the way to work, you notice your odometer reads 158,751 miles. How long have you had this old jalopy anyways? Eight years of faithful and reliable service? Forget about it. You can lease a brand new car for $249 a month(with a limit on the number of miles you can drive it….but you probably won’t drive your brand new car THAT much right?). All of a sudden your bank account balance at the end of the month looks eerily familiar. Welcome to Creephood.
What if you don’t want to be a creeper? Consider these tips to prevent your lifestyle from creeping up too quickly:
1) Be aware that you’ll be tempted to spend more freely.
It’s ok to increase your spending, after all why else have you been working so hard? However, be sure to keep a good perspective and be intentional. If you lived without something before your raise, maybe you’ll still be happy without it now.
2) Follow a budget.
When you’re making $22,000 a year with a student loan payment and renting in California, planning a budget seems like a waste of time. You pay your rent, loan, utilities and insurance then use what’s left to buy something that resembles food. Once you have some discretionary income however, budgeting becomes vitally important. Plan ahead what you are willing to spend on shopping, dining out and other non-essential purchases. This will save you from impulsive spending.
3) Boost your savings.
Every time you get a raise, be sure to boost your retirement savings in step and don’t stop until you’re maxing out your contributions. Set aside money for medium and long term goals like buying a home or traveling to Europe. If your emergency savings is not up to snuff, start there. Review your goals to be sure you’re saving for the things that matter to you.
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