Lyons suggests paying yourself a weekly allowance to remain intentional about your spending, no matter how much money you make. She recommends her clients — even those earning more than $1 million a year — set up programs to automatically pay essential expenses. And then with what’s left, they decide on an appropriate budget on a weekly cadence, rather than monthly. “And what that does is really get rid of impulse spending,” she says. For example, if you’re out of money on Thursday and your allowance comes on Friday, it’s easy to decide to put off a purchase. But if you have to wait two weeks for a paycheck, it’s much more tempting to charge it and pay it off later. Earning a raise is a great opportunity to ward off lifestyle creep, Gandhi said. He advised putting a certain percentage of the raise — 75% is a good rule of thumb, he said — into a pot that will help you meet your financial goals, whether that’s retirement, stock investing, saving for a down payment or paying off debt. Then, whatever’s left is yours to use however you want. “This approach still allows you to reap instant gratification from every raise,” he said. “You have 25% to allocate to your budget as you see fit while ensuring 75% is put towards your goals.” This, he said, is one of the best ways for anyone to set themselves up for financial success while evading the subtle-yet-destructive march of lifestyle creep.
The article Lifestyle Creep: Eroding Your Savings, One Raise at a Time was originally published on NerdWallet on August 23, 2021.
CHRIS DAVIS is an editor at NerdWallet.
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