Smart Tips to Fight Lifestyle Inflation
A raise proves that your efforts at work are not in vain. Getting one takes you a step higher in terms of pay grade, and sometimes even on the corporate ladder. The amount added to your salary are not just a reflection of your hard work, but a reminder that you deserve to live a good life-the best life possible even. This leads many to adopt the mantra of work hard, play (spend) hard.
You deserve a good life-whether or not you get a raise. But the belief that an increase in income is your ticket to greater spending power is nothing but a costly myth. Lifestyle inflation is a sneaky bastard that keeps you from achieving long-term personal financial goals.
Receiving a raise and splurging now is not the road to financial independence. Doing so will only leave you unprepared for the costs associated with some of life's big events. Simply put, going on a spending spree just because you have the money now pulls you further away from achieving financial goals.
Don't let lifestyle inflation rob you of the joy of lasting financial rewards. Here are some steps you can take to avoid that trap:
Set a Budget
Any change in your finances-whether it's a spike or a slump-should make you rethink your budget. Most people don't pay attention to their allowance if they get a raise simply because they believe they have more cash to spare.
Understand that money-however big it is-can be swept off your hands in an instant if you don't keep an eye (and a tight hand) on it. Set a budget and stick to it. List all your expenses. Once you've set aside finances to pay necessary bills, determine how much should go to your splurges. Of course, your hard work deserves a reward. Spend money on things you want, but remember to stay true to your budget. Be reasonable when it comes to allocating money for the 'splurge' category.
Settle Your Debts
Make it a commitment to pay debts. This should be an important factor in creating your new budget. Settle debts as soon as possible. Free yourself from high-interest debts, especially those incurred in credit cards.
More than the security and peace of mind, this financial move will help tidy up your credit history. This will make a good impression on employers should you plan to make a career move in the future.
The best combat for lifestyle inflation is saving. Yes, it's tempting to indulge in gadgets and a couple of new pairs of shoes when you see that extra digit in your salary. But again, satisfying your material cravings now won't do you good. Consider changing your perspective. Instead of seeing your raise as a ticket to splurge, think of it as a stronger reason to save.
The key to this is envisioning financial independence. Think of the home you'll buy for your future family. Imagine retiring early. Fix your eyes on these long-term rewards. This will help you stick to saving and keep you from splurging.
Stop the Keeping-up-with-the-Juans Attitude
Lifestyle inflation often happens because some people feel they have to keep up with their others' purchasing lifestyle. For others, though, it's not just about keeping up. It's competition with others that drives them to spend more. When someone buys something, you feel the need to buy one as well-one that's bigger and grander. One that will suck the life out of your pockets.
Don't compare what you have with what others have. It's a guarantee that you will always find someone with something better. Focus on what you really need. When you feel the urge to splurge just to keep up with friends, learn to say no. All it takes is discipline.
With these tips, you can live large, yet spend small. Being money-smart is simply the key. Don't let lifestyle inflation steal away your financial independence. Remember that your savings today will lead to lasting rewards tomorrow.