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What Does "Keeping Up with the Joneses" Do to Your Balance Sheet?

February 15, 2022
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Getting a raise or a bonus is always an exciting thing—and if you’ve recently gotten one, congratulations! Making more money is a positive, but spending more money isn’t always. For many people, the higher their income levels rise, the higher the pressure is to “keep up with the Joneses” in their expenditures.

This phenomenon is also referred to as lifestyle creep—that is, your lifestyle spending habits begin to creep up with each boost in income, and as a result, you never actually see the impacts of having more money. Below, we will take a look at exactly what lifestyle creep is and how savvy spenders can prevent it.

What is Lifestyle Creep?

Lifestyle creep happens when an increase in income leads to an increase in spending. This is often due to the fact that people want to “keep up with the Joneses” with their lifestyle habits, and with more money, they finally feel that they can. Going for vacations, eating at nicer restaurants, buying new electronics, and more can all contribute to this. The issue is that when this becomes the norm, every raise becomes null—and that means that instead of putting extra money towards your goals, you’re putting extra money towards lifestyle perks that may not be serving you in the long term.

How to Combat Lifestyle Creep

Increase Your Savings Goals First

Any time you get an increase in income, it is a good idea to consider how that can help you reach your goals instead of simply adding to your monthly expenses. Using that extra money on your paycheck for student loan payments, higher IRA contributions, or other long-term savings goals you’ve set up will put it to good use before you even have a chance to miss it.

Automate Your Investments

No matter how good someone is with money, seeing a high bank account balance can subconsciously make it feel more acceptable to make discretionary purchases. That is why we always recommend people automate their investments—if money for investing, saving, and paying bills comes out of your account as soon as your paycheck hits, you will only see the money that is left over that is actually yours to spend.

Remind Yourself of Your Goals

Most people would not make an impulse purchase today if they knew it would directly impact their retirement age, but oftentimes, spending feels a bit more ambiguous than this. It is a good idea to have clear, long-term goals that you remind yourself of often—this way, you can weigh each purchase and lifestyle perk against what you hope to accomplish in the future.

If you’d like to learn more about setting long-term goals and spending smart, we would love to chat! Book a consult with us today to learn more.