The financial boost from your Christmas bonus and impending year-end raise (if any) may have you quivering from the newfound spending potential. Despite the well-intentioned resolution to abstain from splurging, one’s willpower often succumbs to lifestyle creep.
As you begin to realize that your eyes jumped toward higher-priced items when shopping, the habit would have eaten away plenty of potential savings.
With the influx of income following the holiday season, it marks the perfect time to set a smart financial New Year’s resolution (if you haven’t done so already).
Aim to establish a larger emergency fund. Accelerate the savings for a down payment. Strive to come up with an extra mortgage payment.
After finalizing that goal, use the powerful tool of automatic savings transfers to nullify the lifestyle inflation that would have resulted from the boost in discretionary income.
Identifying Lifestyle Creep
Step back into the shoes of your college-aged self and recall the days when you had to choose from the “value menu” at your favorite fast food restaurant.
Now that you have income, walk into that same restaurant and remain cognizant of where your eyes wander while checking out the menu. You may be veering towards the more expensive items.
That’s one of the prime examples of lifestyle creep. It can influence how you shop for everything else.
Simply having more money in your bank account, whether its from having more income or fewer expenses, tends to create the illusion that the extra cash doesn’t belong there. Consequently, you seek to dispose of it.
Never Having Enough
It all comes back to establishing goals, which means that you are always struggling towards something.
With a never-ending list of financial targets, you’ll simply keep moving extra money into the next item on the list. Once you’ve saved up for a particular purpose, reroute the automatic savings transfer so that the excess income doesn’t contribute to lifestyle creep.
As N.W. Senior said in 1836:
“To abstain from the enjoyment which is in our power, or to seek distant rather than immediate results, are among the most painful exertions of the human will.”
Sure, it may temporarily wreck the dream of quitting the rat race but it is necessary to create a better future.
Therefore, once in a long while, it’s important to wind down with a treat – just don’t make it a habit.
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