How lifestyle creep affects your family budget—and how to avoid it

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Getty Images. Jillian Seller.

What is Lifestyle Creep? This is when your spending increases – but also exceeds – your income. This can happen if you receive a pay increase at work, or a large annual bonus. “Lifestyle creep is a subtle and often gradual loosening of your spending limits,” says Erin McCullen, head of consumer deposit products. Bank of America. Of course, having more money to spend isn’t a bad thing—especially when you’re raising a family. But lifestyle constraints can slowly work their way into your family’s life and wreak havoc on your budget by increasing expenses, leaving little room for savings or investments.

“Over time, finding ways to save will be more challenging,” said Annette Harris, founder of Harris Financial Coaching, tells Parents. Here are ways you can recognize and manage lifestyle ups and downs, so you and your family can stay on track with your finances—and still treat yourself along the way.

1. Review and update your household budget.

The effects of lifestyle creep are not always noticeable – so it is a good idea to sit and Review your family budget and monthly expenses. Maybe you used to cook at home, but find that your family is ordering takeout or going to restaurants more often because of more money. “These actions not only increase the family’s monthly budget, but they can also use a portion of the savings to fund increased spending limits,” says Harris.

Set aside time to review your monthly expenses so you can see where your money is going and identify areas you can reduce. “I especially encourage couples to take the time each month to look at their credit card bills and other expenses to identify unintentional increases in spending,” Ethan Miller, cfp, tells Parents.

Miller says he often sees creeping lifestyles affecting families in the form of rising food and housing costs, and more frequent and expensive travel. Watching how your money is being spent can help you make better, more financially sustainable decisions with your money. Family Finance and Budgeting Specialist Andrea Voroch recommends using budget apps As if mint For an easy way to keep track of your savings and spending. “It also categorizes your monthly expenses as to where you need to cut back,” Voroch says.

2. Don’t spend money to live with other families.

While it can be difficult not to compare yourself to others, spending to live with other families can make lifestyles worse and make it harder to save. Social media doesn’t help either. “In many cases, families spend more money because they want what other families are doing in their social circle,” Voroch says.

Scott Jensen, CFP, and Manager country financial Says that making a big purchase to keep up with other families can lead to a lot of unexpected costs—for example, just because your neighbor has to buy a boat. “We justify buying it because we know a pay increase is likely around the corner… Soon, it’s easy to find yourself not only spending all the increments, but dipping into any surplus. which may have existed earlier,” Jensen says. Be mindful of how another family’s expenses may affect your own, and really evaluate a major purchase to see if it’s a good fit for you (both financially and otherwise).

3. Consider your family’s long-term financial goals and money values.

One way to reduce the lifestyle deficit is to refocus on your family’s long-term wealth goals. It could be retirement, saving for college, or pay off debt. Whatever your money goals, discuss them as a family; This can be a great way to get the kids involved in family finances so they know why you’re sticking to a budget and what you’re saving for.

Jessica McCoyLMFT, suggests creating a family vision board of your money goals and making it visible somewhere. “By naming your goals (like dream vacation or paying for college), you’ll create a budget that supports not only daily necessities, but those family financial goals as well,” explains McCoy.

McCoy also suggests that you discuss your family’s values ​​around money, such as financial freedom, security or wealth. “When lifestyle constraints start to impact your budget, you can remind yourself that you’re not only trying to live within your means, but trying to reach important family goals. ” Discussing long-term goals and value for money will help your family stay on the same page (and budget) when lifestyle creep hits.

4. Invest your growth or bonus.

Prevent lifestyle shortages before they start by investing the difference in salary each time you get a pay increase or bonus, advises Voroch. “Set up automatic transfers to a separate savings account, or to a few different goals… That way, you’re not tempted to start spending more,” Voroch says.

Maintaining your current standard of living can help keep lifestyle fluctuations at bay. “If your previous income was enough to cover your monthly expenses, all or part of the increase could have been invested or saved,” Harris says.

That doesn’t mean you and your family can’t enjoy the money you’re working so hard for. Not all lifestyle creep is bad, and if a new job or growth gives your family the financial freedom to do something you couldn’t before, go for it. Just make sure you’re checking your budget, saving where you can, and investing that money for your family’s financial future as well.

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