Featured Blog: A Guide to Preventing Lifestyle Creep (and Using Extra Cash to Build Wealth Instead)

Written by Team WFAN

Women Financial Advancement Network (WFAN) strives for a society where women join the financial system in an equitable manner to lead a more meaningful life.

May 26, 2016

The following blog is by Sophia Bera originally published in her website Gen Y Planning.

You’ve seen this happen to your friends. They get a big raise, or a new job that pays much more than their previous one. Suddenly, they’re a different person. They trade in their 10-year-old Toyota for a brand-new Audi, ditch their roommates for a one-bedroom in a luxury building, and they’re no longer your go-to friend for $2 happy hour beers at a dive bar.

Or maybe it’s happened to you, too. You’re finally making more money, and you don’t want to live like a broke recent college grad anymore. You can afford stuff now! Bring on the designer shoes!

The pressure to raise your standard of living as your income increases is strong. And while a raise of, say, $10,000 a year is awesome, it doesn’t actually go far when you dramatically increase your spending. In fact, trade in your clunker for a new car and *poof!* — that $10,000 raise is spoken for.

So how can you use that extra money to build wealth, while still getting to enjoy the perks of earning more?

Make Sure You’re Saving Enough

It’s not good to be cash-poor and stuff-rich. In general, money can help you earn more money (thank you,compound interest), and luxury goods like cars and jewelry depreciate once you buy them.

Trust me — those Real Housewives may look rich, but real wealth means you know you can afford all of the things you need, and some of the things you want, without worrying about money. That includes getting out of debt, saving for retirement, and being able to afford emergency situations like unexpected home repairs or medical bills.

Make saving money easy by automating as much as you can. Here are some things you can do at work: If you already use direct deposit, you might be able to deposit your paycheck into multiple accounts, allowing you to funnel money into your savings with zero effort. You can also use a pay raise as an excuse to increase your 401(k) contribution (more retirement savings and lower taxes!). Just ask the payroll or benefits person at your office and they’ll walk you through the process.

Outside of work, set up automatic transfers from your checking account to your savings or brokerage accounts. Taking just 30 minutes to automate a few money transfers will make a huge difference in how much, and how easily, you can save. Any time you get a raise is a good time to reevaluate how much of your paycheck you’re allocating to savings or retirement.

Increase Your Standard of Living — Slowly

You officially have this financial planner’s permission: It’s totally fine to use your higher salary to bump up your standard of living! You just need to do it in a sustainable way. That means that once your monthly bills are paid and you’ve set aside money for savings and retirement, you can pick one or two ways to level up your life.

That could mean moving out of a group house into a place with just one roommate, or your own apartment. It could mean trading in your unreliable old car for a newer model of a used car that will have lower maintenance costs. It could mean splurging on one or two fancy dinners out per month, or finally taking that overseas vacation you’ve been dreaming of. It could mean allowing yourself a few expensive, higher quality items of clothing to replace the fast fashion pieces that only last a few washes.

But it doesn’t mean doing all of these things at once. In fact, it can be a fun challenge to treat each lifestyle upgrade as an annual goal. Think of it as a bonus for working hard and getting a raise or new job!

Ignore Outside Influences

Your family and friends mean well, but they might not give you the best advice when it comes to how you should spend your money. Don’t give in to pressure to live beyond your means — whether that’s your friend giving you grief for saying no to her destination bachelorette party, or your parents wondering why you haven’t bought a house yet.

Stop trying to keep up with the Joneses. It’s a losing battle. It’s okay to be the only person you know who still rents their home instead of buying, or who bikes to work instead of driving. No one got ahead financially by giving in to pressure — you get ahead by making a plan for your money, sticking to it, and only spending money on things that match your values.


Bera - Small HeadshotAbout Sophia Bera: Sophia Bera, CFP® is the Founder of Gen Y Planning and is a financial planner for Millennials. She’s passionate about helping people in their 20s and 30s across the with their money. She is a contributor for AOL’s Daily Finance website and has been quoted on various websites and publications including Forbes, Business Insider, Yahoo, Money Magazine, InvestmentNews, Financial Advisor magazine, and The Huffington Post. She was named one of the “Top Financial Advisors for Millennials” by the website: www.MoneyUnder30.com. Sophia is a sought after speaker and presenter and is an active member of the Financial Planning Association. In her free time, she enjoys performing as an actor/singer and traveling the world with her husband, Jake. Follow her on Twitter @sophiabera or sign up for the Gen Y Planning Newsletter to stay up to date on financial articles geared towards Millennials.

Team WFAN

Women Financial Advancement Network (WFAN) strives for a society where women join the financial system in an equitable manner to lead a more meaningful life.

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