The antidote to lifestyle creep


Lifestyle creep is what happens when an increase in your income results in an ever-escalating increase in your spending on expenses rather than saving. Even if you are earning a generous income, lifestyle creep may result in you living from paycheck to paycheck or racking up unfordable debt.

If you have fallen into this trap, don’t worry, there is a solution.

Firstly, you need to prioritise budgeting. Creating a monthly budget puts you in control of your money and prevents you from overspending. This will help you to understand how you spend your money and discover where you need to control your expenses. You need to ensure that you prioritise savings and paying off debts: you can do this by either cutting costs or increasing your income.

Set yourself long-term goals and ensure that you frequently update your progress. You may want to save up an emergency fund, pay off significant debt, save for retirement or for a deposit for a house. Committing to written down financial goals, and actional plans on how to achieve them, will set you up for success. If this process seems overwhelming and you don’t know where to start – ask for professional help from your NMG financial planner.

Manage your debt. Review your debt accounts to understand how much you owe, what the minimum payments are and how much interest you are paying. Expensive, bad debt such as astronomical clothing accounts, overspent credit cards and unaffordable car loans are usually a sign that your lifestyle has run away from you. You’ll will be surprised how much income you will free up by paying off the accounts and removing the interest pressure from your budget.

Make saving your top priority: As famously advised by Warren Buffet: “Do not save what is left after spending; instead spend what is left after saving.”

Make savings and investing easy. You don’t have to rely on will power to achieve your goals; just a little admin in this department will go a long way. Automate your savings debit orders to go off first every month.

Create a plan. Increases in income are usually predictable. Before the money hits your account, have an actionable plan ready on how you plan to use the money. Allocate as much as possible to savings and long-term goals. However, if a windfall of money surprises you, make a promise to yourself not to spend it until you have an actionable plan in place. The rule of thumb is to save 75% of your annual increase amount, with the aim to contribute 20% of your salary to long term retirement savings.

Enjoy it! You need to plan enjoyment into your budget. You’ve worked hard for it, after all. Research indicates that people gain more happiness from experiences than products, which is something to consider when preparing. By planning and controlling this portion of your budget, you can remove potential spending remorse and appreciate the experience more.

Build a side hustle. 100% of this income can be saved towards your goals and reduce the pressure from your main salary. Consider aspiring to join the wealthy who have an average of 7 income sources. You don’t need to create extra pressure on yourself- discover what passive income sources you can create to earn you money while you sleep.


Disclaimer: The information in this communication is for information purposes and is not intended to be detailed advice described in the Financial Advisory and Intermediary Services Act. The fund, administrator and trustees cannot be held liable for damage or loss suffered as a result of any action that you take based on the contents of this communication.

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