With a new job or career comes a new pay packet. The increase in salary will usually mean you also have more money to play with on your days off and less caution when it comes to saving. Believe it or not, but lifestyle inflation is a real thing and you can expect it to impact you when you start to see more money go into your bank account. Identifying between your “wants” and “needs” could mean deciding whether you need those new shoes or paying off your car loan. Be wary of dancing with the devil and stick to these tips, so you can keep on top of any sneaky spending sprees.
Most people unfortunately don’t even think that lifestyle inflation is even a worry to have. “Why stress if you’re earning more than ever before? It obviously means you’re bound to have more money in the bank at all times!” This kind of mentality, my friend, is where we go wrong. Thinking you have an abundance of cash to splash is detrimental to those budgeting habits you picked up all those years ago. Thinking seriously about how you want to spend (or better yet save) that extra money could be the difference between an extra takeaway meal a week or a new car.
Prioritise your debt
Now that you’ve got more money coming in, it’s a handy thought to start allocating your surplus to paying off your debts. This could also help with your credit history. No more overdue phone and electricity bills and say goodbye to scrambling the day before your loan repayments are Direct Debited out of your account. By staying on top of them, or better yet in front, you will be in for a world of bliss the day you no longer have to worry about it (and it could be sooner than you think).
Stick to your budget
It’s easy to continue living pay cheque to pay cheque even if you are earning more. That is because you think you have more money to burn, so you think it’s possible to stick to living off the same amount of savings. This, however, is not the case. Budget to your pay cycle and try not to go over it. This way you can put your money for a rainy day aside and it could make for meaningful spending rather than another meal out or a new wardrobe of clothes. Budgeting is hard, but if you make it a habit, you’re sure to reap the benefits.
Transfer your surplus
So you’ve set a budget that matches your new pay, but you’ve found that you may have been a bit generous with your allowance and end up with money left over each week. The thing going through most people’s minds would be to spend it, right? Have a little extra money for the next week, so you can have a good time. Why not transfer it out into your savings and start with a new budget each week. This way you don’t begin to have extra cash each week that you think you can spend. It will ultimately build up and in no time you’ll be spending more than you intended and becoming a habit. Stick to your budget and the leftover could go towards that holiday I’m sure you deserve.
Success = materialism?
It’s a tale as old as time. “I have more money, therefore I need to flaunt it to the world.” Don’t get me wrong, it’s nice to have new and expensive things, but success does not always equal happiness with new and shiny things. Stay humble, because if you could live off your old salary quite comfortably, then it sure is possible with your new one. Don’t think that because you earn more means you need to have the best of the best – that comes with time, and you are surely able to wait.
Saving your extra funds for a rainy day or a solid investment is bound to make you just as happy (if not more) as it did before you got a pay rise. You could only be in your early 20s and have a deposit for a house at the ready if you stay smart about your savings and not begin the vicious cycle of lifestyle inflation.
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