So you've landed a new job or locked in a promotion — congratulations! In the flurry of champagne and one too many treat yo'self purchases, you might be dismayed to realise that your savings haven't actually increased and your bank account still looks a bit poorly.
After the honeymoon period of your newfound salary growth spurt, your increased spending habits might start to feel right at home, and what were once considered luxuries are now necessities.
Welcome to lifestyle creep, also known as lifestyle inflation. This phenomenon sees the gradual increase of your spending along with your pay increases. That $20 bottle of wine you usually reach for might turn into a $40 bottle. You might swap your high street purchases for something a bit more luxurious. Runs at the park might be replaced with a boujee gym membership. It might even mean a new car, or a new apartment. An upgrade to our salary often goes hand in hand with an upgrade in our spending habits too.
Of course, there's nothing wrong with treating yourself and splashing out every now and then. But it can be a slippery slope downwards to something harder to tame, like revenge spending.
Lifestyle creep is dangerous because, as the name suggests, it creeps up on you. Because it's often made up of small, incremental changes that happen gradually over an extended period of time, it goes unnoticed a lot of the time. The outcome is that a lot of people don't even realize that they are knee-deep in lifestyle creep.
What it does is essentially shift your baseline costs, so your expenses increase as your income increases, leaving less for longer-term savings goals. A new salary means it might be time to revisit your budget allocations. Spending more doesn't mean you're 'failing' if it has been accounted for in your plans.
Another way to combat the effects of lifestyle creep is to reevaluate what is a luxury and what is a necessity in your life. It's best to do this when you first get a raise because once you're accustomed to a certain level of comfort, it can be hard to rewire your thinking.
So go and enjoy your fresh injection of cash and the pleasures that it comes with. But be wary of lifestyle creep that may be lurking.