The term “lifestyle creep,” also known as lifestyle inflation, describes the phenomenon of people increasing their spending as their salaries rise, usually converting things that used to be luxuries into necessities.
If someone gets a generous bonus or a substantial raise as they rise in their firm, they’re more likely to book an expensive vacation, upgrade to a bigger house, or pick up a brand new car. Their daily spending may then continue to creep up as their salary does, leading them to live paycheck to paycheck even as they make a lot of money. So how can you avoid lifestyle creep as you advance in your legal career?
Build a budget
You can avoid edging into lifestyle inflation by setting a strict budget and sticking to it. Try using apps like Mint, Goodbudget, or Pocketguard, which break down your spending habits and give you grown-up allowances for different categories, like housing costs, restaurants, clothing, or entertainment expenditures. Taking a close look at how and where you spend your money can seem daunting but getting into the habit is a key element of financial health. Sticking to a budget will help you avoid falling into an increasingly lavish lifestyle and confusing luxuries for things you need.
Pay your savings and retirement funds first
It’s easy to make this an automatic step, removing any room for forgetfulness and the temptation to use all your income right away. Simply have a fixed percentage or dollar amount moved from each paycheck to both your savings fund and your 401(k) or whatever vehicle you use to save for retirement. As long as you save enough to cover an emergency and several months of living expenses (and, of course, several months of loan payments) in the event you find yourself unemployed, you can occasionally (emphasis on “occasionally”) use some of your savings for entertainment or vacations. Just be sure not to use too much of it or dip into it too often. It’s all about being reasonable.
Setting goals can help you keep your priorities—and budget—straight, and give you something to work towards as you save and avoid the tendency to overspend. Your goals should involve objectives both big and small, and time frames both short and long term. For instance, we already mentioned that you should save enough for both an emergency and several months of living expenses, but you should also save for vacations and other, smaller splurges, avoiding whipping out your credit card for these purchases. Have a holiday spending savings goal, an extravagant wedding anniversary gift savings goal, a we’re-getting-a-puppy savings goal—you get the idea.
Avoid buying things you don’t need
We’ve all been there — you walk into a clothing store, browse Amazon, or fantasize about a new car, and suddenly you’re forking your credit card over for your latest big purchase. Perhaps the most important part of avoiding lifestyle creep is simply to not buy things that you don’t need. Institute “no-shop” months, where you don’t buy any new clothing, cosmetics, or electronics unless you’re actively replacing something, and once the month is over, you might realize that it wasn’t really that hard. Another tactic is to think about each purchase for a week; if you really think about that designer purse or new speaker system, you might not even want it in a week.
The regular purchases that we may not even think of as a big deal may be the most insidious part of lifestyle creep. Buying expensive coffee every day, eating out at extravagant restaurants several days a week and ordering takeout instead of cooking at home, and paying a housekeeper twice a week don’t necessarily sound out of line, but those things add up. Of course, no one would suggest that you can’t spend your money on any of these things—you can buy coffee, go out to eat, and employ a housekeeper. But you don’t need two cups of five-dollar coffee every day, you don’t need to eat dinner at expensive restaurants four days a week and order takeout all weekend, and a housekeeper once every two weeks is just fine for a busy lawyer.
Try making one or two small changes to your spending. Also, quickly create a realistic budget that includes short-term, long-term, and retirement saving. It can include rough number ranges and best guesses. It doesn’t have to be perfect.