Whether you recently took on a lucrative side gig, or got a raise, or have a new job, having a higher income may lead to greater spending. Maybe you want a bigger home, decide to go out to eat more often, or go out shopping more. It’s easy to realize one day that you are spending more than you make. The good news is there are ways to prevent this from happening and to reverse any that may have happened.
Consider Getting a Higher Paying Job
Lifestyle creep means you unnecessary expenses get higher. However, it is normal for expenses to get higher as you get older. You may have kids, and as they get older, you will need to pay for more things for them. You may need more space than when you were single. Getting a higher paying job can help you cover these increased expenses. One option is to get a degree in a related field, as this can make you more desirable to potential employers. Consider searching for scholarships online to cover some or all of the costs. There are scholarships for college students that can make school much more affordable.
Watch Out for Revolving Debt
If your debt gets away from you, your overall finances will suffer, and you will want to keep a closer watch on lifestyle inflation. If your expenses are beyond what you can afford, you are not in a strong position to meet long-term goals, like paying off the mortgage or building wealth. Having too much debt is detrimental to your credit. This makes it a lot harder to afford another mortgage, refinance, or car loan.
One way to take control of your personal finances is to create ease in reaching your goals. Instead of pushing yourself to put a certain amount into savings each month, you might want to set up automatic payments to investment and savings accounts every month. This prevents spending from going out of control. It also helps you be ready for retirement. If your income fluctuates or you lose your job, not having any savings on hand can be problematic. Reducing lifestyle expenses now will put you in a better position, no matter what life throws your way.
Reversing Lifestyle Creep
If you realize your expenses have already started going up, now is a great time to go over finances and begin making decisions about the things to keep and what you should get rid of. Consider auditing your current spending habits. Where do your funds go each week and month? Listing out recurring expenses will help you weed out things you do not need. If you have bought expensive items, you may be able to sell them to get some of the money back. Putting them all in one place can help you visualize how much you have been spending. If you have been driving an expensive car, you may want to sell it to pay off the car loan and then find a more affordable option. The same is true if you have been renting an expensive home.