Money Rules: Avoid lifestyle creep

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When I talk to friends who make a lot more money than me, I’m always fascinated by what they consider as essentials.

Monthly massages, weekly dinners out and regular sports sessions are all on the list.

But then I think we’ve all been guilty of lifestyle creep, where as your income increases, so does your spending.

It’s only when you have to drastically cut down that you realise how little of your spending is on actual essentials.

On that thread, avoiding lifestyle creep is Taryn Duhig’s money rule.

Duhig, who writes Saving in London City, is no stranger to the phenomenon but has found that keeping it under control has helped her achieve her financial goals faster.

Here, she explains how she actively avoids lifestyle creep, and stays intentional with any salary increases.

When did you start this rule and why?

During my 20s, as my career progressed and I began working my way up the ladder, my salary increased incrementally. 

The first few times I received pay rises, I remember feeling excited, thinking “I can buy posh makeup now”, or “I can finally treat myself to some fancy stationery”. I was working hard, and it was time for an upgrade!

It didn’t cross my mind to start saving the difference; I just focused on all the material items that I felt I could afford to buy.

A few years into building my career, I started thinking more seriously about my future and examining my spending habits.

I began consuming personal finance content, and using savings and investment calculators to see how much I needed to contribute to reach my goals.

Around this time, I had a huge mindset shift in relation to money.

I decided that going forward, every time I received a pay rise, I would either save or invest the difference, rather than splashing the cash on trends or items I fancied on a whim. It’s a rule I’ve stuck to ever since, and I’m so glad I did.

Why is this your number one money rule?

This is my number one money rule because I realised that although I was putting significant time and effort into building my skill set and increasing my income, if I continued upgrading my lifestyle at the same pace, I would be left with nothing to show for it.

It can be so tempting to spend more when you have the cash in the bank, particularly as our consumerist society encourages us to keep up with the latest technology and ever-changing trends. 

By resisting this pressure, I have been able to lay down the foundations for my financial future.

How does the rule work in practice?

I’ve found that the best way to stick to my rule is by automating my savings and investment payments. 

By doing this every month, I’ve built and embedded the habit, and I can increase the amount if I do receive a pay rise.

Automation has been key; rather than deliberating each month, or letting the extra money sit in my bank account without a purpose (before inevitably being spent on sweets), I stick to the long term plan.

I do budget a set amount of fun money per month though, which I mostly spend on socialising, experiences and food. I think it’s important not to deprive yourself.

How has it helped you manage your money?

Since introducing the rule, my savings and investment contributions have increased, and I have been able to reach my goals more quickly.

I no longer have that sinking feeling when I log into my online banking account, or wonder “where has all my money gone?”

Are there any downsides?

Some people could argue that I’m not getting to enjoy the additional income I’ve made by working hard and climbing the career ladder.

However, I think that my savings and investments will be enjoyed by future me. 

The money will be spent on things I really love and value, such as a property or once in a life-time holiday, instead of being squandered on the latest clothes and shoes.

I always allocate money into a fun fund to be spent every month, so I never feel like I am going without. 

I also recommend treating yourself to one small item from your wishlist each time you receive a promotion or bonus. You can celebrate your successes and be responsible with money.

Do you have any other hints or tips?

I’ve found that sitting down and figuring out your money goals is essential. If you don’t have a purpose for your money, it can be easy to fritter away more than you realise each month.

Visual charts or trackers can be motivating too, and tracking my net worth each month has kept me accountable.