Got a raise? Don’t let lifestyle creep eat away at the extra cash

Spending habits can gradually increase as a result of a new salary, leading to lifestyle creep. This slow process is often unnoticed and can affect financial stability. Brandon Wiebe, a financial planner, notes that people tend to spend more when they earn more, making it difficult to control expenses. Even without a raise, spending can creep up due to impulse purchases or stress-related decisions.

Lifestyle creep can be compared to renovating a home, where one upgrade leads to another, making it hard to stop. The "hedonic treadmill" theory explains this psychology, where treating oneself to luxury items can make it feel like the new normal, making it challenging to curb spending.

To prevent lifestyle creep, Wiebe suggests avoiding new expenses initially. He advises making a conscious effort to deprive oneself of grown habits and enjoying them without the expectation of needing more. Common areas for lifestyle creep include convenience purchases, small pleasures, and keeping up with friends' lifestyles.

If spending gets out of control, Yanchuk-Oleksy recommends writing down all expenses to hold oneself accountable. She also emphasizes seeking professional help through free credit counselling sessions and budgeting support. Yanchuk-Oleksy stresses that savings are important, not just for emergencies or long-term goals, but also for large purchases. Instead of relying on credit, saving for big buys is recommended.

Regularly reviewing spending and budgets can help identify problem areas and replace costly options with cheaper alternatives. Wiebe and his wife replaced a luxury car purchase with a cheaper, functional vehicle they found at an auction. Automating savings through a bank account can make the process easier and establish healthy spending boundaries, allowing for a more relaxed financial situation.