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The mathematical way to fix this is to just set a budget. However budget runs up against real life sometimes and choosing to go out with friends is probably more beneficial to your wellbeing than saving $50. So there is a balance to strike. What sorts of things do you spend money on? Is it hobbies? Booze? Buying never ending stream of bs on Amazon?
I attempt to prevent this by updating my direct deposit with each raise so that the majority of each raise goes into investments (mine is split between Roth 401k, Roth IRA, HSA which is invested and not used for current medical expenses, and after tax brokerage account). Basically prevents me from being able to spend it. I admit that reverse already occurring lifestyle creep is difficult psychologically, but it is possible.
This is the strategy we used and the one I recommend as well. Each and every bonus I split a portion to spend and I portion to save. I had the benefit of a deferred compensation program that made it easy to set and forget. I retired 7 years ago at 52 using the strategy. It works.
Besides budgeting as others have mentioned, I would suggest not changing your friend group or how you hang out as you move up the economic ladder. The ones who were there for you on your way up are the ones who keep you grounded. Other than that be cautious about over spending for convenience unless you get a real ROI from it
Simple compound your money on different platforms I do this regularly I have multiple streams going . Do you work for money or does your money work for you?
Imagine you're the CEO of a company whose primary asset is yourself. Figure out what your objectives are and plan out your spending in advance. The goal should be to live on your base salary, invest your bonus, and then budget any additional spending at the start of each year.
Lifestyle creep happens when you spend money without thinking about whether it truly makes your life better. Some luxuries are completely worth it (as investments in your happiness, resilience, mental health), but avoid spending to signal that you're successful and avoid friends/romantic partners that encourage you to spend beyond what you're comfortable with. Not everyone's pay goes up forever so you need to make it last.
Consider checking out Dave Ramsey. He has a pretty good system which may help you.
Wow didn’t expect to see bigotry on this page
I took a different position within the company last summer as well as moving to another city, I am feeling the pinch of the job change from an hourly plus bonus to straight hourly. It was not a shock when doing my taxes and showing me a loss of income of 6500 from one year to the next. Yes, I feel the pinch. Working remote since March 2020. At least it saves me gas, yet, I still do not drive much. Do not go out. Cut my expenses as much as possible. Single income household/one person household. I use Quicken to balance my income/expenses. Have used credit, which I know is not the answer. Yes, I am a financial counselor. And it sucks, both my children earn 20 to 30K more than I per year. Sorry, went off tangent. But yes, I can relate.
It’s looking at what’s a need and what’s a necessity- what is something that is nonnegotiable versus you’re ok to only have this here and there.
I recently lost my job as the secondary bread winner. We panicked initially because of this same reason. We found that with me not working we would be saving $300 per month in dog sitter fees, $400 per month in tithes, $200 per month in gas and lunches. Then we paid off our loan which saved us $200 per month. Etc etc. It’s true that things that used to be luxuries become necessities. For us that’s streaming services, restaurants, my nails and hair, and travel. We’re not giving up those things but we have cut back on them to fit our new budget. I’ll admit we had begun to struggle under the weight of our expensive lifestyle. Just keep in mind what is truly optional and what’s worth giving up your peace of mind and future planning. Good luck!
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My strategy is to max my 401k contributions and max IRA contributions. If you don’t see it in your bank account, you’re less likely to spend it … with the added benefit of retirement account growth.
I agree
I would suggest you track your monthly expenses and categorize them into needs, wants, and savings/debt repayment.
Then, use a budgeting method such as the 50/30/20 rule, which allocates 50% of your income to needs, 30% to wants/debt repayment, and 20% to savings/investments. The key is to fund your savings and investments for future and emergency needs.
I understand where you are coming from. I have had that notably too. As an example, coffee and pastry a few days a week somewhere. I ended up buying an espresso machine on FB marketplace at a great deal and then purchasing pastries in bulk from the supermarket. Another thing that has kept me honest was a budget to look at expenses. I kept track of it more when money was tight. When I started bringing in more money than needed, I lost sight of the budget. Recent job loss has brought a new vigilance of where I am spending my money, and it's renewed my interest in limiting frivolous spend!