Don’t Let Lifestyle Creep Haunt Your Finances

Managing your money is a lot like the game of Life. As you move forward in your life and in your career, you’ll experience lifestyle changes that will result in new expenses, goals, and choices about how you want to spend your money.

But what happens when your income increases? Does your spending increase with it? If it does, you may be haunted by a common financial trap – lifestyle creep. That’s when your spending increases with your income and leaves you little money to save or meet your financial goals.

Here are some tips to help you keep that from happening to you:

• Know where your money is going. Review all your expenses and categorize them as “needs” and “wants.” Needs are essential expenses like your rent or mortgage and utilities, while wants are extras like dining out and entertainment. Determine which wants you can reduce. Pay particular attention to subscription services and recurring payments that can be forgotten about but can really add up.
• Create a budget. Once you know where your money is going, create a budget that reflects your income, expenses, and financial goals. Don’t forget to build savings into your budget to ensure you’re not spending everything you earn.
• Set up automatic transfers to savings. To make it easy to save, arrange to have money automatically transferred from your checking to savings each month. Or have a portion of your direct deposit sent to savings if your employer offers that option.
• Put pay increases to work for you. If you get a raise or receive a lump sum of money from a bonus or tax return, plan how you will use it. For example, allocate a portion to build emergency savings, to pay down debt, or to save for a longer-term goal like buying a home.
• Pause before you spend. It’s easier than ever to spend money today thanks to digital ads and payments. But impulse purchases can do a number on your budget. Before you spend money on something, give yourself a 24-hour cooling period. This will give you time to decide if you really need it.

You work hard for your money – and deserve to have something to show for it. Being aware of your expenses and spending money carefully can help you master the financial game of Life.