5 Ways To Avoid Lifestyle Inflation Once Your Salary Increases

Written by C. James on updated
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Lifestyle inflation, also known as lifestyle creep, is a phenomenon where spending rises in tandem with increasing income. While a moderate degree of lifestyle creep can be seen as a natural (and even motivating!) aspect of personal progress, excessive spending once your salary increases can wreak havoc on long-term financial objectives, like retiring and playing golf all day.

Navigating the balance between enjoying the fruits of success and maintaining a disciplined financial approach is crucial. Responsible financial management involves being mindful of lifestyle inflation and making intentional choices that align with broader financial goals. If you’ve recently received a salary increase, here are a few strategies to make sure you don’t fall victim to lifestyle creep.

1. Direct Raises to Savings and Retirement

Hands resting on a glass jar labeled "savings," filled with U.S. dollar bills, including a visible $50 bill. The jar has a metal clasp lid and sits on a dark surface.
Anastasiia Yanishevska/istockphoto
Anastasiia Yanishevska/istockphoto

Whenever a raise occurs, putting the majority or entirety of your raise into savings or retirement accounts can prevent acclimatization to a larger lifestyle. This tactic ensures that the additional income isn’t visible in your checking account, which may tempt you to spend it.

2. Follow a Plan

A hand writes on a notebook labeled "Goals" with numbered lines. Nearby are a cup of coffee, eyeglasses, a laptop, two closed notebooks, and a light blue gift box with a white ribbon, all on a wooden table surface.
eggeeggjiew/istockphoto
eggeeggjiew/istockphoto

Deliberately setting your financial goals over the next 5, 10, and 20 years can help avoid lifestyle inflation. By sticking to a well-thought-out plan and budget, you can resist the allure of immediate luxuries and allocate surplus funds toward achieving long-term goals.

3. Avoid the Comparison Trap

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Ivanko_Brnjakovic/istockphoto
Ivanko_Brnjakovic/istockphoto

Focusing on personal progress rather than comparing your earnings with peers is crucial. Giving in to societal pressures or attempting to mimic others’ lifestyles can jeopardize financial stability. If you want to avoid lifestyle inflation, maintaining a balance between goals and indulgences is key.

4. Evaluate Your Life Before Your Income Increases

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mapodile/istockphoto
mapodile/istockphoto

Before succumbing to lifestyle inflation after an income boost, consider the hedonic treadmill theory. This theory suggests that lasting happiness remains at a baseline level, regardless of major changes in your life. Reflecting on necessary expenses and the value derived from increased spending can help redirect funds toward meaningful goals.

5. Build Your Financial Support System

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shapecharge/istockphoto
shapecharge/istockphoto

Collaborating with friends, family, or financial professionals can provide valuable support in adhering to financial goals. Establishing a network for regular check-ins and progress updates can reinforce commitment and motivation.