Imagine this: After receiving a pay raise, you immediately decide that your Toyota doesn’t really suit with 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 phenomena 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 are victim of lifestyle creep and learn how to prevent lifestyle creep from jeopardizing your financial future.
You could think that the more money you make, the more wealthy you’ll be, and nothing could be further from the truth than this. 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. What you do with that money is what counts.
To avoid lifestyle creep, live within your means and set aside some 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 so that you have some.
Make an honest assessment of what matters to you more and use that as a tool. Which is more important to you: financial freedom or quick gratification and consumerism? To help you later on when making more thoughtful purchasing decisions, write down your financial and life goals. Future you will thank you one day.
Also see: Quiet Thriving: The new workplace trend we should be channeling
