Picture this, your efforts at work finally paid off, and your employer gave you a raise. Exciting, right? Having a new or added income is always good news, but believe it or not, how you choose to spend it will determine your financial fate. Lifestyle inflation, also known as lifestyle creep, often leads to people’s overspending habits that snowball into debt.
Don’t get us wrong, rewarding yourself after you hit a target or receive a salary increment is a good thing. However, splurging on things that do not align with your budget can tip the scales off your financial stance landing you in massive debt problems.
3 Powerful Tips To Avoid Life Inflation
Research shows that people spend proportionally to their projected income. That means the more you earn, the more you spend, and the less you earn and vice versa. There are, however, ways to break the cycle and introduce mindful spending, especially when trying to break out of a debt cycle or pay it off. Here are some tips you will find helpful if you are trying not to get swept up in life inflation.
1. Set Budget
It can be exciting knowing you have extra income but do not let it distract you from the most important thing; doing the math. Learn how much more income you will be working on your budget. Sometimes rising income does not assure one a significant boost in cash flow. Come up with a feasible budget for your costs and expenses.
2. Wait On Impulse Purchases
There is nothing wrong with treating yourself as long as you reign in on your spending. A fan splurge here and there is a great idea, but getting ripped up in every sale is stretching it too far. Avoid impulse purchases by always planning for splurges. Anytime you think of making an unplanned purchase implement the 48-hour wait.
3. Save/ Pay Off Debt
Do you have any pending debt? Or falling behind on your savings? An increase in income is a great way to compensate for your financial setbacks. Determine what you want to do first with your increased income; save or pay off debt. Set up an automation payment to rid yourself of the regular ‘to pay or not to pay’. Before you know it, you will be checking off your financial goals.
Final Take
Do not allow lifestyle inflation to derail your long-term goals. Rather look at extra income as an opportunity that gets you closer to financial freedom rather than short-lived gratification. This will start by aligning your spending habits with a feasible budget and paying off debts weighing down your financial standing.