Fight Lifestyle Creep with Automation

You’ve likely heard of lifestyle creep. Put simply, the more money you make, the more money you spend. Items that were once luxuries slowly begin to seem like necessities as you start earning more. Before you know it, your new inflated lifestyle, in all its glory, has entirely absorbed your extra income and you find yourself in a comparable financial situation as the one you were in before the raise.

While lifestyle creep can manifest in the purchase of a new expensive car, regular evenings at upscale restaurants, or lavish vacations; it is important to realize that lifestyle creep tends to start much smaller. You may notice yourself buying a $30 bottle of wine rather than your usual $15 bottle. You might be ordering a few extra appetizers at dinner. You may be purchasing seats further up in the airplane in business class. This is how the creep starts.

By no means am I saying that you should not enjoy your financial success that ultimately resulted from your commitment, determination, and hard work. You deserve to treat yourself. The key is to strike a balance between enjoying the things that matter most in life to you, while also setting yourself up for a secure financial future. This article aims to provide you with a couple tips and tricks that will help you combat lifestyle creep.
 

Finding the balance.

Before discussing how financial automation can help, here are a few general pieces of advice:

Trade out your expenses. Let’s say you have a passion for television and film and now that you are making more money, you feel as though your desire to upgrade to a premium cable package is justified. Take a look and see where you can cut back on your other expenses. Maybe you don’t need to dine out as often or maybe you can cut back on your phone plan. Further, you should seek out low cost alternatives with other providers. 

 
Low cost alternatives. It is much more expensive for a company to attract and obtain new customers than it is for the company to focus on keeping them. As a customer, this gives you considerable leverage and bargaining power.

Especially with subscription or monthly services, even a small discount can result in significant savings in the long run. By taking the time to do research about competitor’s pricing and other low cost alternatives, you can approach your service provider and request better prices. Check out these tips about how to effectively negotiate with customer service representatives. If they don’t budge to meet your demands, consider making the switch to save yourself some money.

Even as you become a higher earner, seeking out opportunities to save still remains incredibly important and will help you combat the financial ramifications of lifestyle creep.
 

We’ve discussed some ways you can take to keep yourself in check. While these are all important actions to take, it is undeniable that constantly seeking out discounts, negotiating with service providers, remaining vigilant about lifestyle creep, and keeping your long term financial goals in mind is exhausting. So, how can we make this easier?
 

Automate your finances.

Automating your finances provides you with a blueprint for financial success. Not only does automation make your life easier as it relieves you of the time-consuming duty of paying bills or redirecting your funds, but it also helps you fight the temptation to deviate from your investments and savings plans. The idea is that you can’t really miss money that wasn’t there in the first place. Out of sight, out of mind, right?

Essentially, when money comes into your account, it should be automatically redirected to your various other accounts. A portion of every paycheque should go to your retirement fund, pay back outstanding debts, top up your emergency fund, and increase your investments. You can set up your automated payments to go through different accounts, too, which allows you to organize them to your liking.


Automating your bills. Nowadays, almost all regular bills can be automated. This includes mortgage payments, utilities, tuition payments, memberships, subscription services, and sometimes even rent. Think of how much time and energy you can save by not having to worry about transferring these every month. This also reduces the chance that you miss payments and harm your credit.


Automating your investments. First, review your financial situation and develop an investment strategy that works for you. Determine your time horizon, how much you want to contribute, and what the optimal asset allocation mix is for you. Once you develop this, arrange automatic periodic transfers from your bank account to a brokerage firm or mutual funds. By investing periodically, you are reducing the impact of the stock market’s volatility on your financial assets through dollar cost averaging.

Automated investing helps you avoid the temptation of spending your money unnecessarily or frivolously, and setting yourself up to receive more money in the future through capital gains and compound interest.
 

Don’t forget to reassess annually.

While one of the benefits of automating your finances is that you don’t have to think about your money as often, it is important that you don’t entirely check out of your money management duties. Twice a year, set up a reminder in your calendar to reassess your automation plan. It is likely that over the course of a year, you have taken on some debt, had some unexpected expenses, or received a raise. Whatever it may be, your financial goals have changed, so your automation plan must evolve with them, as well.

If you receive a promotion, raise, or sizable bonus, and are already living comfortably, consider redirecting close to 100% of your extra cash into debt payment, increasing your retirement savings or putting more money into your investments. As you make your money, you should be increasing your contributions to these accounts. Your standard of living will continue to be the same but you will move towards a state of debt freedom and financial security.
 

Ultimately, automating your finances is a highly effective tool that can help you stay on top of your finances and fight lifestyle creep. 

Just as we, as humans, crave immediate gratification and succumb to temptations, we are also creatures of routine. This is why it is important to make use of mechanisms and systems that help you establish healthy financial routines.