5 Ways to Avoid Lifestyle Inflation
If you receive a raise, it can be tempting to participate in lifestyle inflation. If you are working harder and making more money, but you still have the same bills, why not spend a little more, right? This can be a true statement in some cases, particularly if you made so little before that you never got to have any discretionary income, or you had so many bills that your income couldn’t cover them. If you’ve never had any fun, then you should definitely include fun in your budget. However, make sure you have a budget and that you stick to it. If your raise fools you into thinking you can spend all your added income on fun, you risk putting yourself back in a dangerous spot — full of debt or saving nothing. It can be exciting to spend more money and purchase nicer things, but in general, it’s better to use your new money in other ways.
1. Keep to a budget
If you had a budget before your raise, set a new one. Having more money means that your budget will change, so it’s important to update your budget immediately. There are many budget sheets available online if you don’t have your own, and using one that is already made can help you get started. Once you determine just how much disposable income you have, you should figure out how much you want to spend on lifestyle inflation. If you need more money for entertainment, then you should set it aside each month, and stay in budget. If you want to save for a vacation, you can do the same. Just make sure that you make a reasonable monthly change, and then stick to it.