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Lifestyle Inflation: How to Keep Living at the Same Level When Your Income Increases

In business, we often hear about scope creep. This is when the work required to complete a project goes beyond the originally defined or anticipated amount agreed upon. The provider of the service usually ends up losing money because they underbid what was needed to accomplish the promised results.

Often, something similar happens when our income increases. Usually, when we get a raise or start bringing in more money, we almost naturally start spending more. 

I mean, really, why not? If there is more money then goody for me! I get to spend more!

Unfortunately, the result is what is called lifestyle inflation. It is like scope creep but is more of a spending creep. Generally, we can make ends meet on whatever we’ve got coming in. So why is it that when more comes in, suddenly we have more needs? Do we really? Are we just letting our spending creep up to match our income without recognizing that we don’t shouldn’t let it?

Just as a project begins with set parameters, our lifestyle has its own parameters based on our income level.

Lifestyle Inflation: How to Keep Living at the Same Level When Your Income Increases
If we don’t pay attention, it is easy to live beyond our means and create lifestyle inflation (spend creep) in our personal finances.

Sometimes, we live so tight that we need to recoup, let off some steam, or replace things that are beyond their realistic lifetime. I understand that, and I believe in a little relief when possible. I know what it’s like to live on an impossibly tight budget. So I don’t begrudge anyone an increase in their income. What I would recommend is a strategic approach to the budget changes.

First, I always recommend living by a budget. Knowing what you have coming in and allocating it to where you want it to go before you spend it. Then, assessing whether you managed to live within your means or if you had trouble balancing the budget.

Being aware of your money is the most critical factor in staying in charge of your finances.

If you’ve been living on a budget and your income increases, you’ll already be aware of where any gaps exist. First and foremost, address your needs: housing, food, transportation, utilities, telephone, childcare, healthcare, etc. If you are struggling to meet these needs, then the first place to allocate additional funds would be to these.

For example, let’s say you’re having to ride the bus an hour each way to work. Then you get a raise, allowing you to save enough for a car that could get you to work quickly. Consider putting the additional money into savings and working towards that goal.

When your needs are sufficiently met and you suddenly have additional funds, consider saving toward long-term goals.

If you have children who may want to go to college and you want to help, consider setting up college savings plans. If your retirement seems ages away it can be hard to focus on it now. Instead of spending all your windfall, think about slicing off a portion to max out your retirement plan.

Living on a shoestring does get old. Once you’ve determined that your needs are met and you’ve allocated funds toward long-term goals, then reward yourself. A word of caution here, though. Don’t suddenly develop a Manolo Blahnik shoe addiction.

Lifestyle Inflation: How to Keep Living at the Same Level When Your Income Increases
Lifestyle Inflation: How to Keep Living at the Same Level When Your Income Increases
Set aside a fixed amount of fun money. Then get back on budget as soon as it’s spent.

I keep a list of things I want that don’t fit into my everyday budget. Then I work toward getting them one at a time, saving enough to afford them. Depending on your budget, this could be something as simple as a new pair of jeans. Or it might be a bigger ticket item like the new motorcycle I’m craving. But waiting until you’ve saved enough to buy the extras without going over budget is critical to your money success.

It’s easy to expand your lifestyle without realizing that you are earning a lot more money while still not getting ahead.

Making conscious money choices is the difference between moving your life in the direction you want it to go and randomly ending up scraping by forever.

Fighting lifestyle inflation keeps you happier and financially on track for much longer than surrendering to retail therapy. All of us deserve nice things. But managing the money reserved for them is paramount to successfully meeting your long-term goals and overcoming the urge to fill your life with stuff just because you can.

Taking charge of your money does not mean living a life of deprivation. Smart women can make smart money decisions and have fun things, but also have financial security. Saving for the future ensures you won’t be left out in the rain later in life.

Sherry Lutz Herrington is the owner of Sherrington Financial Fitness, a business consulting and accounting firm specializing in strategic business planning and solid financial accounting for businesses. She is also the author of Strong Women Thriving (, a blog which focuses on empowering women to be financially savvy, particularly after experiencing financial abuse. Sherry is currently writing a new book that both shares her personal story and addresses financial abuse. She can be reached at Join our FB group

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