4 ways to fight back against lifestyle creep.
Who doesn’t love some extra spending money? It might be a good problem to have, but the truth is that managing more money comes with its own set of challenges.
Take lifestyle creep, for instance. Also known as lifestyle inflation, this is when having more disposable income leads to more frivolous spending habits as a higher standard of living becomes the norm.
Say you have Friday night pizza as a treat. If you come into a little extra cash and find yourself ordering food more regularly, you might still wind up coming up short in the long run. Sure, you’re feeling flush with cash today, but what if you don’t have enough stashed away in case your good fortune runs out?
Does that sound like you or someone you know? Check out a few tips for facing off against those creeping expenses.
1. Don’t budge on your budget
When lifestyle creep sneaks in, it’s sure to sabotage your carefully crafted budget. Your goal should always be to keep your budget consistent across different categories like wants, needs and savings, no matter how much money you have. That way you’re actually increasing your overall net worth.
So say you’re making $50 selling lemons when a lemon shortage allows you to squeeze twice as much profit. Now you’re taking home $100 instead.
It might be tempting to spend all that extra money. But to fight lifestyle creep, you shouldn’t contribute more than twice as much, evenly across all categories.
Yes, you’re making twice as much, but instead of spending your newfound wealth on just the fun stuff, you’re spreading it equally across your expenses and savings as well. Seems fair enough!
2. Stop before you shop
Practicing mindful spending is one of the best cures for lifestyle creep. So rather than getting swept up in the moment, take a beat to consider if it fits your budget.
Tip: Capital One cardholders can set up spending limits to let them know they’re approaching a certain amount. Try dedicating your card use to one of your budget categories and set an alert to let you know when you’re approaching your limit.
3. Make upgrades where they count
Forget those cabs and overpriced espresso drinks. Your money will go further when you splash out on long-lasting upgrades. For example, if you own your home, try investing in capital expenses – improvements like renos that not only make your life better every day, but also increase your property value.
4. Focus on the long haul
Sometimes people fall victim to lifestyle creep because they don’t really know what they want to do with their money. Maybe they don’t have a financial plan because they don’t believe they’ll ever be able to reach long-term financial goals like saving enough for an education, a home or retirement. But we believe if you know what you want, then you can make it happen.
So instead of spending money on blink-and-you’ll-miss-it moments, try to commit at least 20% of your income to your future self. After all, they deserve something nice too!
While a little extra spending money is always appreciated, remember that you can make your personal finances go even further when you follow a budget. If you stick with it, you just might go from a little extra spending money to a lot!
* If Quick Check pre-approves a card, you can be 100% sure we’ll approve your application as long as:
a. There’s been no change in your credit file information, personal information or financial status from the time you receive your Quick Check results to the time you apply for one of our credit cards;
b. You’re at least the age of majority in the province or territory you live in;
c. Your application isn’t flagged for fraud prevention;
d. You don’t have an existing Capital One account; and
e. You haven’t applied for a Capital One account in the last 30 days or had an account with us that was not in good standing in the last year. In good standing means not past due, over limit, fraudulent, restricted, or part of a consumer credit counselling program or bankruptcy.
In some cases, we may not be able to open an account for you even though your application was approved. This can happen if we’re unable to verify your identity, or you don’t provide the required security funds if you’re approved for a Secured Mastercard®.