Imagine this: After receiving a pay raise, you immediately decide that your Toyota doesn’t really suit your new income. So you decide to purchase a Lexus. You obviously need a new wardrobe to match your Lexus, and, uh… your kitchen could do with an update as well.
Welcome to the world of lifestyle creep, a phenomenon that financial advisors fear is preventing you from achieving financial independence and a comfortable retirement.
In this article we will help you find out if you’re a victim of lifestyle creep guide you on how to prevent it from jeopardizing your financial future.
You could be thinking that the more money you make, the wealthier you’ll be. However, nothing could be further from the truth…
Director of Research for the Affluent Market Institute Sarah Stanley Fallaw conducted a survey of 600 millionaires, and identified six criteria that were more important to financial success than income. If someone is living over their means, their money is nothing. It’s what you do with that money that counts.
- To avoid lifestyle creep, live within your means and set aside a portion of your salary for savings and investments.
- Make a spending plan and divide your requirements and wants into categories.
- Set aside a certain percentage of your money for spending, saving, and investing.
You need to make an honest assessment of what matters to you most, and use that as a tool. Which is more important to you: financial freedom or instant gratification and consumerism?
To help set you on course later on to make more thoughtful purchasing decisions, write down your financial and life goals. Keep it nearby and revisit when you’re feeling the ‘lifestyle creep’ kick in. Your future you will thank you one day.
Written by Ncumisa Lerato Kunana.
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