Have you felt like your savings aren’t growing, despite your career reaching new heights? If that’s the case, you’re not alone. 54% of Americans are dipping into their savings to pay for everyday expenses. As a result, most people find their savings dwindling and not growing—which is not good for their futures. The best way to grow your bank account is to avoid lifestyle inflation. Here’s how to do it.

What is lifestyle inflation?

Lifestyle inflation is when you spend more on regular purchases to improve your general quality of life. This usually happens after receiving a raise, promotion, or acquiring a new source of income.

Why do I need to avoid lifestyle inflation?

Wanting nice things is hardly a bad thing. It’s why you might be working so hard in the first place. However, when your expenses add up and your savings accounts aren’t growing, it becomes a problem.

Here are some reasons why you should try to avoid lifestyle inflation:

It can be addicting

Treating yourself is fine, but it can get addicting. It can be hard to stop when you start introducing yourself to the finer things in life. You deserve nice things, and there’s no reason you can’t have them. Pace yourself and try to stagger the occasions when you go for expensive meals, travel and pampering.

You may start saving and investing less

Sometimes lifestyle inflation happens when you stop saving and investing and start spending more for leisure. While not inherently a bad thing, it can prevent you from reaching certain money milestones if you get carried away.

It can confuse your priorities

One of the most important reasons to avoid lifestyle inflation is that it can make you rethink your goals. You might think a new bag or outfit is more important than having an emergency fund. Having the latest fashion is more fun, granted, but that designer bag won’t do anything to help your future.

Lifestyle inflation will make you dissatisfied

You might feel content with life right now. But once you start experiencing the finer things in life, it can be hard to go back. You may start to confuse things that are nice to have yet ultimately unnecessary with the bare necessities. 

…and it may lead to debt

This is where lifestyle inflation can get dangerous. If you spend too much and your income can’t keep up, you might need debt to finance it. 

There are a ton of reasons why you’d want to be debt-free. What are the benefits of being debt-free? 

How do I avoid lifestyle inflation?

While lifestyle inflation can be dangerous, it’s not impossible to beat. Here are ten ways you can avoid lifestyle inflation.

Identify your motivations

Lifestyle inflation happens when you get distracted. Once you know your motivations, like sending your kid to college, you can focus on why you’re working so hard.

Stay motivated

When you start spending money on things you don’t really need, you just need a reminder of your motivations. A financial vision board can help you stay motivated and free from distractions.

Stick to your budget

When you’re building wealth, your budget is your best friend. It ensures that every cent that you earn is working for you, like paying bills or being invested. Going over budget, and consistently at that, will only lead to your savings stagnating instead of growing.

When you have a budget that works, you don’t need to change it when you start earning more. Using a raise as an excuse to start spending more than necessary is the very definition of lifestyle inflation. After all, if you’re perfectly content with your budget, why try to fix it? You don’t need to spend more money when you start making more.

Save/invest extra income

If there’s one thing you might want to change about your budget after receiving a raise, it’s your savings and investments. By saving/investing your extra money instead of spending it, you’ll use it to earn even more.

Treat every expensive purchase as a long-term investment

Before making a big purchase, consider how it fits into your life. When you buy those expensive Nikes, will you start running, or is it just an impulse? Think about your big purchases before pulling out the debit card.

Don’t forget your discounts

You might not need discounts when you earn more money, but using them is always good. A few dollars saved when using discount codes and coupons is money you can spend elsewhere.

Keep your head on your shoulders

Think you’ve hit it big after earning a fancy title at work? There might still be room to grow. If you’ve got a raise or a promotion, it doesn’t mean you need to spend all the extra money you earn. By keeping a level head and staying disciplined, you’ll stay on the right track to hitting your wealth milestones. There’ll be plenty of time to celebrate after you’ve made your financial dreams come true.

Avoid peer pressure and financial insecurity

One reason why you might want nice things is to impress nice people. You might feel pressured to “keep up” with the people around you. While this feeling is normal, it can be a sign of financial insecurity. 

If you want to spend your money, you want it to be for yourself and to make yourself happy. Not to impress other people on the ‘gram. 

Treat yourself every once in a while

While this might sound counterintuitive, there is a reason to treat yourself after a raise or promotion. If you don’t give yourself a reward now and then, you’ll get burnt out when trying to build wealth.

What you want to do is to give yourself a small treat, like a nice meal, when you want to celebrate something exciting. There are good times to do it, like on your birthday or after receiving a raise. But you have to have the self-control to make sure you’re not spending too much on yourself without good reason. Otherwise, you’ll become the textbook example of what lifestyle inflation is!

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