(Bloomberg Business) — When you get a raise, especially after a long spell of puny or no hikes in pay, it's a time to celebrate. So it's easy to tell that voice telling you not to waste money on a morning cold brew to shut up for a minute. You've earned that treat.
And you have. But you may be standing on the precipice, or already be in the grips of, a dangerous and pernicious trend: lifestyle creep.
It sounds creepily fungal, and for good reason. It's a sort of self-generated inflation rate, something no one needs when wage growth just had a poor showing in the economic data. Once our incomes go up, we often incorporate new little treats into our routine and hardly notice. There's that cold brew, and then there are more lunches out, and then there's upgrading the smartphone, having your home cleaned more often, leasing a fancier car.
So if you're lucky enough to get a bump in pay, have that cold brew today and maybe tomorrow. Then think about ways to head off little lifestyle upgrades that add up to big lost opportunities to save.
If you're not one of the lucky few getting raises, being smarter about saving is a way basically to give yourself a raise, or at least more financial flexibility. Since studies have shown that we get most of our raises in our 20s and 30s, fending lifestyle creep can pay off big over the long run. Here are a few ways to combat lifestyle creep and be a smarter saver:
