Are You Making This Key Financial Mistake?
Market Meditations | March 6, 2021
When you receive a raise, what do you do with the extra cash? Do you celebrate? ? Do you buy that new car? Do you start eating out more often??
If so you could be making one of the easiest but biggest financial mistakes possible: Lifestyle Creep.
Lifestyle creep is a phenomenon that occurs as your income rises. Things you previously considered luxuries, you now consider as necessities. You think you NEED that daily coffee or those designer brands.?
Whilst some lifestyle creep is ok, too much has the potential to completely derail your savings goals. If you consider an item a necessity you will consistently spend money on that item, even if you don’t need it.
To stop lifestyle creep in its tracks, try these tips: ✅
- Have a financial plan and know exactly how any extra income is going to be spent
- Treat yourself strategically. Earmark a specific amount of income for a “fun fund” and know that you can spend that without hampering your long term goals. ?
- Challenge your mindset. Audit your everyday purchases and for each item consider, do I really need this and does this actually contribute to my happiness?
- Be goal oriented. ? Whether your goal is financial freedom or saving for a deposit – be conscious that each time you let lifestyle creep occur, you are pushing yourself away from your final goal.