The sneakiest trap of all is ALMOST unavoidable. Most people are living inside this trap and don’t even know it.
This series dives into the three main obstacles to growing your net worth and avoiding the trap of debt. If you haven’t read up on them, here are obstacles #1 and #2.
Today, let’s tackle:
OBSTACLE #3: Lifestyle Inflation
It’s sneaky because it happens when your spending slowly increases as your income increases.
You get a raise, and suddenly, you’re spending just as much as you’re making, if not more. Your savings account never gets the memo about your raise.
Have you ever had a bump in your paycheck and thought, “I deserve to treat myself!”
So, you upgrade your lifestyle a bit. Then it happens again, and again, until you’re right back where you started: strapped for cash and working harder than ever. It’s a vicious cycle that keeps you from building wealth. It’s like treading water; you’re working hard but not getting anywhere financially.
Take a moment to pause and think back to a few raises ago. Did you feel excited? Like you were about to have so much money?
Then why, five raises later, are you feeling like you’ve made no progress toward your financial goals? Sigh. Lifestyle inflation. I’ve been there too. So, how do you beat it?
HOW TO AVOID OBSTACLE #3: Lifestyle Inflation
Track your income and expenses over time. Seriously, it’s that simple.
Use a chart like the one I’ve got here. Plot your income on the x-axis and expenses on the y-axis. Keep your expenses consistently below your income, even as your income grows. I make a line graph on paper, with the x-axis labeled time and the y-axis labeled dollar value.
I love to have a gap because it shows me how much extra I have to save or invest!
As my income has risen over the past year and a half, my expenses have been bumpy, but have consistently stayed below my income. You don’t see expenses creeping way up as my income increases.
Tracking income and expenses is an accountability tool for avoiding lifestyle creep.
If you don’t want to do it on paper, make a copy of my spreadsheet and edit it with your values. (It’s free!) Write what your income was for any given month, and then your expenses. You can delete the placeholder values and put in each month as you go.
You got this, Mama. Say it with me:
I am in control of my financial future.
