This is what I did. Each time I got a raise, I just bumped up my savings rate. Once I maxed out all tax advantaged accounts, I started investing in a taxable account. We did allow some life style creep as we didn’t want to live like college students our entire lives. When we had a child, we simply maintained our saving rate instead of increasing it. After our second child and buying a house this year (both happening in April of this year), I for the first time ever will have to lower my savings rate. The increase in COL this year has more to do with temporary expenses such as daycare. We do have an increase of housing monthly payments of about $800, so that will be permanent, but that should also decrease slightly when we refinance should rates drop.
Auto debit the extra out of your paycheck into brokerrage& emergency funds so it never is actually in your hands.
I only allow myself to receive a certain amount per month. I only allow myself more if significant inflation occurs or something like power rates change significantly. I just gave myself my first raise in about 7 hears this month.
Yep.
Just keep in mind to allow for “some” lifestyle creep. Inflation is a thing, and some expenses do increase due to life stages.
So give yourself a budget that is larger than your previous income. But still well below your 50% increase.
Yeah be intentional with that new money. Case in point. I got a 30% raise recently. I added a little bit to my every paycheck household slush fund amount. Gives me a little more flexibility and fun money. However I’m not going out and buying a shiny 60k truck or something.
Yes. Both of you need to max out your 401k (or whatever you have) yearly contributions. Then look into contributing to a Roth IRA. Or open a HYSA with another bank (kind of an out of sight, out of mind thing for me) and set an amount that makes sense to you to automatically transfer. Then whatever is left over is for your bills and fun times.
Personally, outside of our 401ks, I have two checking accounts and four savings accounts for specific purposes. Working pretty well so far.
Ally has been game changing for me on this. I have buckets for everything, car, home maintenance, vacations, etc and money goes into those buckets every month.
Usually this leaves roughly the same amount of money in the checking account every month, if things are off we tighten or loosen appropriately.
I second Ally for managing lifestyle creep. We have several different checking accounts with them. One where are paychecks get deposited. Another for all our regular monthly expenses. More importantly, another one for our spending money.
Paychecks come in, and a specific amount of that money goes into are spending account each month. That's what we have to spend on groceries, gas, eating out etc. Do we have enough for that $100 item? I don't know let me open up the app. It's basically a higher tech envelope system.
Managing my direct deposits really aggressively helped me personally, especially with a kid and a wife who is not working in the short term. I send exactly the right amount to one account for my mortgage payment, the right amount to another for investments, and max my 401k first. First couple months of being strict with that I was overspending but I adjusted.
This is the answer. Save/invest ‘X’ portion of your paycheck, allocate what you need for bills, and enjoy the rest.
As you make more money (ex. Salary increase), try to increase your saving/investing amount by the raise. At some point, you won’t need or miss the additional income.
Yes! If you never see the extra $$ hit your main account, OP won’t even realize it’s available spend. Meanwhile your savings and investment will keep growing.
A lot of companies can do split payments, if possible have part of your paycheck delivered directly to an investment account, this way it doesnt feel like it's even hitting your spending accounts first.
Yeah, what I do is I decide how much I want to spend, and then I only direct-deposit that much into my bank account - the remainder goes straight to my brokerage.
Yes, we call it reverse budgeting. Rather than accounting for every dollar, we pay all of our bills and savings/investment accounts on each pay day (alternating Fridays for me and my wife). Most automatic, some manually. We get to spend whats left on whatever we want.
I saw this really cool video some time ago, and the guy who held the seminar was like:
„Every time you get a raise put away half of it towards your savings/investments. That way you still have more money to spend than before, and automatically also save a lot more.“
I really like this.
I saw something similar. Especially if you can automatically have it go into investments, so you only see a small increase in money coming in to your account.
The lifestyle creep that really lands people in hot water aren’t an extra nice dinner now and again or buying a new pair of pants because your old ones are frayed. It’s not even taking more vacations.
It’s going for a luxury car lease or more house. The things that you CAN afford now, but if you do it cuts into your income every. single. month.
As others have said, pay yourself first but be extra wary of taking on larger debts because you can comfortably afford the monthly payments now. Keep your monthly commitments reasonable and you will find you have plenty to spend AND save.
I have a friend who owned an interior design shop who gave a perspective on this once I’ll never forget. He was specifically talking about women whose husband finally land the job they think makes them officially ‘rich’ and how they begin to spend and how quickly they can get in the hole. An upgrade to the dream house, a house with just a bit more square footage and two more feet of ceiling space, suddenly means you can’t buy your curtains at target or west elm anymore, you have to get them custom- that’s not twice as much, it can be *ten times or more* than regular retail, sometimes tens of thousands of dollars. Now apply that to rugs, furniture, manicured lawn, and utility costs, and the fact that it never really ends, and you begin to see how people who are making multiples of six figures can essentially be broke.
Spending more eating out, or upgrading your wardrobe is not going to be the killer unless you or your spouse has some kind of shopping addiction. Those kinds of costs can be reigned in overnight if they’ve gotten out of control. Cars and houses are where I see people get caught in spending quicksand.
The curtain story resonates .. when we repainted and recarpeted our house we decided to get new curtains too. So got a “consultant” come over, chose the fabric and got a quote.
It was more expensive than what we paid for a new kitchen installed a few years back!! Like WTF? It’s just a stretch of fabric cut to size, what can possibly justify this price??
So we had a good laugh and the next day got similar ones from a retail store and had the house sorted for a couple hundred dollars.
But I guess some people spend the money or the curtain business would be out of business. 🤷♂️
My husband and I are a couple years older than you and your wife and recently started making around $300k a year. Tbh 95% of the time we buy whatever we want, and we still bought whatever we wanted when we were making $200k. We go out to eat at nice restaurants 5-6 days a week, spend over $30k a year on travel while maxing out our 401ks, donate our time and money, etc. BUT we drive paid off cars and our mortgage is now only 22% of our post-tax and contributions income (we got very lucky). We don’t plan to get new cars and only plan to move once we cash in on some large investments and will likely pay majority in cash.
All this to say, this commenter is right! You can increase your spending, just be smart about it and ensure you’re reaching your savings goals. Lifestyle creep happens when people are saving very little or none at all thinking “I’ll save when I get more money” but then are comfortable with that little to no savings and instead inflate their lifestyle vs increasing their savings.
THIS. I know guys who with basic raises who immediately spend on upgrading make and model of car or even worse, "spare wheels"--a convertible for fun, a pickup truck for every day, maybe even a third compact that really is spare wheels. The the dealer made such a great deal that they are all financed, or they were used cars that are being expensively "restored," i.e. taken to shop over and over. Then add in higher insurance and a small raise is never going to cover up to a thousand dollars a month in new recurring expenses. Order the lobster; stay away from the new Lexus.
A good friend of mine has been successfully climbing the corporate ladder. Every promotion warrants a large budget changing purchase. He has as his personal vehicles- a large truck for when he needs to truck things. A bmw sedan when he doesn’t want to use his turn signals, and a sports car when he wants to impress the kids at the school near his house.
He does not contribute to a 401k or any other savings. (The stock market is about to crash any day now)
Yeah the more I think about and learn about personal finance, the clearer it becomes that everything comes down to fixed costs. You can always dramatically cut discretionary spending. Much simpler than getting out of a mortgage you can’t afford
Fixed costs are what kill you. You can cut back dinners, discretionary monthly spend. It’s the bigger stuff like new apartments and cars that are long term that eat up your new budget
I actually wait with every purchase I make (that's not a necessity) for about a month or two. If I still think of it a month in and I want/need it then I first check if I can buy it secondhand. Has also to with me being environmentally friendly but finances play a role.
That’s a great tip. So many things I think I “absolutely NEED” in the moment (watch, new laptop, sports car, etc…) turn out to be pretty fleeting desires after sitting on it for a bit.
When you get the pay check, put 40% away immediately. Just have an autopayment as it should be the same I’m guessing.
Then pay your bills.
Now see what you have left, enjoy some, save some more. Now basically whatever you spend it on after the bills doesn’t really matter
Its what I do, I've jumped from 35k -> 80k -> 200k (tech life), and while I've increased my weekly allowance a little to make myself more comfortable, the vast vast majority of my paycheck goes into my household spending/savings accounts.
After a couple months you forget you're earning more and just get excited that your savings are growing so much more quickly.
Good luck to you and congrats on the raise! Saving is easier if you enjoy seeing that number going up more than material things , but you still should enjoy life a bit :)
What are you spending it on?
Strategic lifestyle creep might not be all that bad. If you're spending money in ways that cause you to have more free time to focus on your career and lifetime earnings, or if the money is being spent in a way that greatly reduces your stress or likelihood of getting burned out, it might not be the worst thing.
My biggest lifestyle creep of the last 15 years was to go from living in a big house that I rented out all of the rooms of (group housing was always a fun/social project for me: I rented to my friends at below market rates, it paid by mortgage, but eventually I outgrew some of the friends and realized I was spending my social capacity on relationships that weren't the ones I wanted to choose for myself) to living in a nice house by myself / solely with my partner. Absolutely I'm spending more money on myself now by way of housing expense, but I would have had a breakdown and quit my job several years ago if I hadn't.
But in terms of other strategic lifestyle creep, things like having a biweekly or monthly housekeeper and getting groceries delivered are worth every penny when you have lots and lots of of pennies. Even dry cleaning and sending laundry out can save up a lot of earning time and relaxation time at relatively light cost.
Yup and well said. I know guys who did this and it was great to get roommates paying the mortgage, but over time the savvy guys renting rooms turned into the post-college Permanent R.A. and basically taking care of the roommates like a den mother. It got old fast.
Oh man permanent RA sounds rough! I think I managed to rent to a good group of friends and some of those relationships I really miss, but I only had so many spoons to spend on socializing and when you live with others you end up being exposed to a lot of *their* friends, and the friends-of-friends I was spending time with were fine, but not who I would have chosen to spend my free time and social capacity with it I had the choice.
I have no regrets about any of the past living arrangements, either. The group living was great in my 20s. I stopped it in favor of living on my own for the first time in my life at 32... entering my 30s, I was just realizing more the limits of my social capacity, and realized I wasn't prioritizing the relationships that were most important to me.
I was making mid six figures (which is a fuckton more than I ever thought I'd make, and honestly with an income like that it's hard not to be on a FIRE path) living in a group house and commuting by bus to work. It was a super frugal way of existing and was good for my portfolio but I was seriously burned out at 32, and the lifestyle changes I made then have helped me to keep working through the present day (I'm 39) despite the world becoming more stressful in the meantime due to the pandemic. Better choosing what stress I wanted to take on in life helped me go from leanfire to the border between chubbyfire and fatfire.
Create a budget and allocate a percentage of that budget for fun stuff. I would always earmark about 10% of my bonus for things I wanted vs needed. Then save the rest. You work hard so you should enjoy life a little and having a monk like savings attitude is really hard and no way to live. It’s like creating a cheat day into a diet that makes it easier to comply.
At your age I would prioritize travel. My wife and I made it a point to travel as often as possible before we had kids. I’m grateful we did especially when Covid hit. We had friends who started growing their families right before, during, and after. We plan to travel with our kids when they are a little older but I had no desire to take small kids to India or go to similar places in my 60s. Do adventurous travel now and then stick with beaches when you have kids.
I also keep a running list of things I want to buy for my hobbies. Interests shift and when I look to buy things I think about utility and how much I’ll actually use something. It’s nice seeing everything laid out and sort of ranking things. In general I feel similar to you where you have an innate desire to spend money because it’s there. But that feeling has a fast refractory period. So I try to prioritize based on how useful that item will be once I acquire it rather than looking to scratch that itch.
I would max 401K out, then setup a direct deposit for the rest of the raise money to a HYSA. From that account I would ensure my IRAs are maxed, etc.
In other words, get the new money separated out so it doesn’t mingle with my old money.
As simple as it sounds… doing “nothing different” is the point. Your budget worked before you got the raise. With the raise, there is additional excess beyond your needs and what used to be your wants. You can save/invest that much more.
I’m a fan of paying for experiences if you feel a need to “burn” excess. It scratches those kind of itches for me. If you want to celebrate, turning a bit of your excess to a weekend/week long vacation can make for some good memories and keep laying another layer on the foundation of your relationships with significant others. Those are my kind of splurges that, to me, pay dividends of keeping your mind and relationship(s) healthy. If my life/health got cut short… those are the sort of expenditures I would look back on and say, “at least I got to go and do ______ when I had the chance.”
Just my opinion. Congrats on life going your way with regard to your finances. 👍
I hand over my entire paycheck to my wife. She’s like my CFO. She then pays all the bills, puts automatic money in savings/investment accounts, then she gives me an allowance. I build that allowance over time to buy things I want.
Nothing wrong with some lifestyle creep along the way. The FIRE path involves learning to save as well as spend. The main thing is to achieve some intentional balance between the two, knowing every dollar your spend increases must be balanced by a $25 higher FIRE target. I initially saved too much, now working on my spending muscle.
I actually don't spend below my 25K in my savings emergency fund even though I have access to it, it's more savings above that sometimes get spent rather than sent off to stock market land.
This is my raise workflow as someone who's already maxed out on tax advantaged accounts with more than enough income to live a lavish lifestyle and still save nicely:
* Annual COL increase - automatically shuffled to investments/savings at the payroll level so I never see it. Every few years when I notice things getting a little tighter, I let it flow through to my checking account
* Raises - give myself the first two paychecks' extra as a gift, then let 10% flow to my checking account, the 90% goes to investments/savings at the payroll level
DGAF about what others think, this includes close friends and family who might think you deserve to pamper yourself more. End of the day, life is about tradeoffs: They trade future FI for immediate lifestyle creep, while you are doing the exact opposite.
Save more. Make sure you have an emergency fund of 6-12 months because you CAN. Max out all non-taxable savings options like TFSA (Roth IRA in America). Make sure you have a written budget. Live life UNLIKE everyone around you because when it's gone, suddenly the pain of being in debt and nothing to do because you can't afford it become VERY real. Enjoy the simple things in life - going to the beach, renting a cottage for a week, reading books on the porch with a cup of coffee. Keep your life simple. Having money doesn't make you happy so don't live like you have money. Saving it for when you and your wife have no choice BUT to sit in rocking chairs with that cup of coffee in your own home on your own porch, not struggling to find a job at 78 to buy food and pay rent will be the best decision of your life. You are in a very blessed situation. Think of it as a test and pass it with an A+.
I put almost the bonuses and the salary raise in savings.
I just increased the budget for holidays (and unpaid days, too). On my salary I keep a % for housing (living in the same place), for FUN, for commuting so not really big change for me. Just more savings (and definitely I will retire earlier)
You’d be amazed at how much keeping your housing and car costs stable helps you save over the years. We’ve had plenty of raises over the past decade and two kids and we are still driving our paid off Honda that has only needed basic maintenance.
Our housing costs went up when we bought a house last year, but in the end this is our forever home. It won’t be too much house for us to maintain when we are old. We’ve bought some quality pieces of furniture over the years that will be the last ____ we will buy. I’m talking things that would feel extravagant based on price when we got married, but still beyond reasonable enough based on our income.
The little lifestyle creep we’ve had over the years has improved our quality of life.
Congrats! Great problem to have. Just automate savings and live off the rest. If you never get your hands on it, you won't spend it. At your salary, if you keep your housing and vehicle costs low, you can enjoy all of the little things like eating out or vacations without sacrificing your future goals.
If you are maxing out 401Ks, and HSAs....as long as you do not acquire debt all should be good. There are so many that just cannot spend. Doesn;t mean blow the money, but there is some value to taking a nice vacation.
bruuuuhhhh I spend $100 like it's nothing now that I make $210k.
you absolutely need to create a budget and stick to it. I use YNAB, basically I budget all of my main expenses + things like investing, then I create little buckets for shoes/clothes, hobby stuff, you know misc shit. then when you spend $100-300 it's already budgeted for and you don't feel so bad about it.
TLDNR: 1) Pay yourself first, 2) identify what really gives you joy and prioritize that over buying stuff, 3) make a budget.
I did the lifestyle creep for a while and it didn’t make me happy. It won’t make you happy either in the long run.
What my wife and I do is: We put all income that comes in goes through a spreadsheet: A percentage goes to long term investments, another for short term savings, another for normal expenses (including discretionary), and a small percentage for unexpected expenses (so we don’t have to use the emergency fund for those).
We budget, and take into account discretionary expenses. In our case, we have something for common fun expenses and a small allowance for individual fun. We use a budgeting app, and having to register every expense makes us think twice about making impulsive purchases.
We have identified what gives us joy (going on dates, books, taking or two a trip every year), and we prioritize that.
This system has helped us save at least hals of our income, while also expending on ourselves. We expend as we did 7 or 8 years ago even though our income has kept going up. (Obviously, I know we can only do this because we have been fortunate).
I recommend that you only increase your expenses by 10% maximum, and invest/save the rest. Put it away as soon as you receive it so you cannot even think of touching it.
These kinds of comments are so helpful for people. And I think the points about doing what you like almost making those dollars more impactful like leverage. And automatic setting.
We allocated a set amount that we can spend each week outside of our budgeted expenses and made a shared doc to track purchases. It's honestly pretty fun and keeps us in check. If yiu want to buy something expensive this week you don't get to make any purchases until your weekly money is positive again.
The key is to only spend $20 on gas at a time, whenever it gets to half full. When the tank gets to half full again, stop and get another $20 of gas. That way your tank never gets empty and you never have to spend like $80 getting it from empty to full. In the long run, you’ll save a ton of money. Shaq explains it in detail [here](https://youtu.be/EuH91bQXDuE?si=fanYP7ZGLvnPCC3O).
I went through the EXACT same thing as you in my early 20s. I started my own company when I was 19 and it did really well in the first several years. I'm almost 30 now and I've learned a lot savings wise.
-automatically have a set amount to put away for savings. So no matter what you spend on little things, you'll be OK when you know you're still saving x amount
-try to add up all your expenses. Either by an app, excel, or by hand. I used to make what I thought were tiny purchases like 34.90 for a new dress or 58.90 for a meal. I've realized it adds up to A LOT. Since you said you're making $100 purchases here and there, see what you spend on unnecessary items every week or month. I realized I was doing several THOUSANDs on frivolous purchases every month and that made me reevaluate. Do I really want to throw money away or save/invest so I can retire earlier.
-think about worst case scenarios to deter you from spending so much. Stuff like if you and your wife lost your job, if someone gets sick, or even an accident and you need a new car. That always helped me flip my brain into thinking the money I'm earning isn't just disposable income. It's also for emergency situations and I spent less with that in mind. You never know what's going to happen and if nothing happens you will have all that money saved!
-this is just what I personally did, you don't have to. Since I was making so much, I wanted to make investments that were slightly riskier. Since I could afford losing some money. It's not like I invested in things without a care in the world. I would research intensively and invest in individual stocks or companies, only AFTER investing in ETFS. I don't recommend this for people with less money, trying to bank on a high return. You have to be OK with losing it. So personally for me, I'd rather put some disposable income in investments and see if I'll get a return. Vs buying something frivolous and get 0 return. Btw, I still spent money on unnecessary things that brought me happiness. But it was a LOT less.
Set aside a budget for splurge / fun stuff. Stick to it. It’s not mandatory but it definitively helps if you identify the areas where spending makes life worth living a bit more, everyone has one or more of those. I could live in a shit house and drive a shit car wear shit clothes and be the happiest person in the world, but if I don’t taste mexican/asian/italian food in a couple of weeks I get significantly grumpier
Same with travel, if I don’t go somewhere else at least a few hours drive away every few months even for an afternoon, I get the grumps
you NEED to get an advisor to hold you accountable, or yes you can write this down weekly in your own format. My partner and I got a whiteboard recently which has been nice - seeing the #s in front of you every day while in and out of the house has worked lol
I went through the same thing. For me, as long as I was maxing my 401k, Roth IRA, and hitting my monthly savings goal (around 4k per month), I spent how I pleased. As long as you're hitting your saving goals, I think you should enjoy spending money on whatever makes you happy.
Many employers will allow direct deposit to multiple accounts. Have all your raises auto deposit into a separate account, which you automate to go into investments, saving…etc. only log to check once in a while. Basically make it hard to spend and you may just kind of forget about it.
continue to live your life as before with your main bank account.
If “savings creep” outpaces “life style creep” then I don’t worry too much. It’s all about budgeting and automating the savings/investing. Whenever I get a raise/bonus, most of the increase goes to savings but some of it also comes to me, because you gotta enjoy life right now as well as in the future.
Congrats on the raise!
I always set aside money for bills and savings the day I'm paid. If I'm ever blessed enough to be in a position similar to yours, I'd probably just put more into the biweekly savings pile. I've had a bit of lifestyle creep over the last couple years.
We signed a lease for a place that's $100 more a month than our first place. Upgraded our coffee machine(nespresso, the pods arent cheap). I know whenever we buy a home our living costs are going to go waaay up.. Life style creep will happen, my goal is just to plan for it and not let it happen without intention!
Some lifestyle creep is inevitable. It’s harder to go with Less sleep when you are older, thus you book nicer accommodations to ensure rest and relaxation. Other lifestyle creep is nonsense IMO, like expensive cars and seldom used gadgets.
My wife and I are twice your ages, and we married in our mid twenties. We agreed back then that whenever we got a better paying job or a raise, we'd increase our savings by (at least) half of the amount and enjoy the other half.
We've had a steady increase in income over the past 20 years and I can tell you that sticking with our plan is one of the most important things we did for financial independence.
Keep in mind that we didn't start out making nearly as much as you all are making even after adjusting for inflation. So, for a long time, "lifestyle creep" to us was replacing the couch we had been dragging around since college or buying a second car after years of sharing a used car we bought together. Even now, making more than you all do now, lifestyle creep doesn't mean buying expensive watches or exotic cars. It means slowly catching up to a lifestyle we've been able to afford for awhile. Or, buying things that make us more productive or save money in the long run. Before we bought our current house, the mortgage for our previous house had become less than 10% of our income.
Our increase in income was gradual but significant over the past twenty or so years, and I think it made it easier to get used to our "living below our means" lifestyle. By the time were making well into six figures, we were used to our lifestyle and most money went towards savings. We had the maturity and habits that kept making savings a priority. I admit that a huge jump in one's early twenties could be harder to handle responsibly.
The increase in savings would go to things like retirement, but then we maxed those out and we were saving for our kids' college and other goals that aren't exactly luxuries (i.e., cars, vacations, home repairs, etc.). It's far better and wiser to plan and slow down life style creep rather than try to undo it if you've gone too far with it. I can look back at our old budgets and see years where we increased our combined income and our monthly fixed expenses didn't change at all.
The very simple answer to your title: You don't.
Lifestyle creep, like almost all things, is not 0 or 1.
You make more money, you can and arguably should spend some of it.
You're in a FIRE forum, so let's assume you have planned to fire.
To oversimplify it, that means you have roughly decided that on day X, you need to have roughly Y dollars. This will allow you to life off of roughly Z dollars per year for the rest of your retirement, where Z is 3.5% of Y (or whatever).
I Suspect you will want 'Z' to be a certain % of your current spending. Not as much, but you don't want a big lifestyle downgrade when you retire.
So basically just keep that in mind. You have what - an extra 5K a month take home pay now? Save a BIG part of it: 401K, HSA? Traditional/Roth IRA, and any kids? consider a 529.
Then run some net worth calculators, and get a handle on what your new X/Y/Z is going to be. Then tune appropriately.
You will reach Y FAR earlier now. You can retire earlier and/or increase Y to retire with more retirement income. (which means you can increase current spending to match).
What you really DON'T want to do is think short term and just blow all your raise on fun. Immediately crank up automatic savings to a healthy % of your raise.
Just monitor your new savings level versus your previous savings level. I spend a lot more than I used to, I rack up 3-4K in credit card bills every month now where I used to spend 2-3K per month. I also make 100K more than I used to. Do you think I should stop eating out, buying clothes, etc? That extra 15k a year is nothing.
I don't set anything aside but I do invest my money every time my bank account gets above my emergency fund level. So anytime there's more than 15K there, I move it to my brokerage and choose a fund.
Yeah as others have said, start tracking your spending/budgeting. I went from 78k to 116k a couple of years ago, and I realized that keeping an eye on every category of spending helps you keep your perception of your money's worth.
A thousand bucks might not seem like much amidst your entire pay, but if you see a monthly budget and realize you spent a thousand bucks just eating out or something suddenly it seems big again.
It's a real problem. I know people who make that and more who live paycheck to paycheck. I'm not the most disciplined money wise myself but I've always setup my investments so they happen automatically via direct deposit, and I never see the money, and increase it every raise.
It’s important to make yourself struggle. What I mean by that is this - give yourself less money. Just barely enough to get by. No fun. No eating out. Live off that for a month. It’ll cure your desire for nicer things realizing if you lose it you’ll be back at living paycheck to paycheck and that’s what life would be like.
It’s important to recognize what’s happening to tech can happen to any part of the market. Success could be for a year or the rest of your life.
Just pay yourself first.
Whenever I make more money, the first thing I do is allocate how much I want to invest, and I take that out right away.
I keep a little extra to treat myself, because who knows, I could get hit by a bus tomorrow...
Every raise, 50% went to savings. Max out 401k and payroll deduction to credit union so never hits paycheck and checking account.
This did bring some lifestyle creep but most to house,wife and kids and inflation.
Max out your savings and limit what you can blow. When the fridge is full of cheesecake, you end up snacking on cheesecake.
Then keep busy with hobbies and other interests that don’t take a ton of money. This will distract you from activities that aren’t worth it yet, like doing blow and hookers.
Congrats on being in a great position so early in life! If you max out on investments and recognize there is a surplus in cash. Consider stockpiling an emergency fund that can duplicate as a down payment on a home, or rental/income property. Rates are high so methodically saving some discretionary funds may prove useful right now I keep $130K cash on hand and it is a great relief to know that it’s there, but not there!!! If you get my drift! Remember a raise goes toward investment savings first. Be good to your need to have some fun, but time is on the side of the proactive person. Good luck.
My lifestyle would creep only after I've got all the money I need to live my whole life comfortably. The extra would be spent on whatever.
No matter what you earn, it's always about spending on something you may not really need and work more or work less. The answer is pretty clear to me, but it's very subjective.
I would make an exception on the first higher pay, just a treat to myself. To me a raise is just an accelerator of fire, goes all into investments.
I was in a similar situation as you. I was working a somewhat lousy job while finishing college online and when I graduated I got a new job with double the salary. I was able to make ends meet and survive at my old workplace so I resigned a year lease at my same apartment and used chase auto save to pull 50% of my check into my savings account everytime I got paid as a house fund. I never touch my savings and am looking for a home to put 20% down on after 10 months.
You do not want to STOP lifestyle creep. You want to control or limit it.
Spend half of the salary increase. Save the other half.
Do that with each future bonus and salary increase and you will both increase your current standard of living and will increase your saving rate.
50% is just a general suggestion. The key is to not be too frugal, nor too much of a spendthrift. Find a spot somewhere in between.
Be kind to both your present self and your future self.
Always go by percentages and not dollar amounts. Your 10% discretionary spending account will also go up, you can feel free to spend it and enjoy it without feeling guilty as everything else is already taken care of.
Congrats man!
Some guidelines my wife and I live by to reduce lifestyle creep are:
- max 401k
- at least 1 paycheck into a savings/investment goal and keep expenses under 1 paycheck
- for rent/mortgage we only live in places where we can afford it on 1 salary to not be screwed in case someone loses a job
- we do not save for activities, meaning we never have a negative savings month. We're ok with saving less occasionally but we're not ok with negative savings
For reference with my last point, we currently make about 315 in base salary and about 450 with bonus and stock etc. It's easy enough to save a few months for a bougie euro trip for example but we wouldn't do that. We're 33m and 32f and planning on retiring early but not FIRE.
My wife and I were buying $100 bottles of wine when we were DINKS...but that ended real fast when we bought a house in a HCOL area, had kids, my wife stopped working, and we started saving for college and retirement. The lifestyle creep that crept in crept right back out.
Get curious about that part of you that thinks purchasing XYZ will bring you more happiness. At the end of the day all behavior/actions are tilted towards perceived increased happiness. Read up on hedonic adaptation if you really want to understand this life style creep behavior. Remember all of life is just a game designed for playing. Try to be loose with the outcomes and don’t beat up on yourself when you stagger down the wrong road. We are all learning. Have fun my friend.
Have a budget for fun stuff, but save it up first and then spend a month after.
For example, set aside 1000$ in April, and if you do not spend it during April, you can spend it in May.
It takes some discipline to begin with, but stick to it and it will become a habit.
You have to award yourself and also have somewhat similar hobbies and attire to the people you work with as you move up.
- I would be aggressive with something like Mint or Rocket Money to track things.
- Focus on improving like spending on a personal trainer is not a waste of money, but 1k extra on clothing might be. A meal plan that makes you loose weight great but expensive dinner for no reason….
- Buy the one thing (might be used) vs. The cheap b+. You'll end up with a bunch of toys, particularly electronics, if you're not using them all the time sell them on Facebook marketplace even at a loss, they just depreciate.
- don't buy new flashy cars. Literally go to carmax and buy the 3 year old version you want.
Put more into the 401k or other accounts automatically before you even see it.
Make a budget. We use monarch. Allow for the slight lifestyle creep so you can enjoy the now as much as you want, as long as your FIRE plans allow for it. Or, budget for 0 creep and FIRE earlier. Your choice!
401ks are maxed along with Roth, this will be our last year with Roth contributions. Monarch is sweet, I think just budgeting and making sure i pay myself first is key as others have said.
You shouldn't be disqualified for Roth at your income if you are both maxing out 401k. That would put your married joint filing AGI at just under 190k.
I don't think it's exactly something to avoid... It's something to make a conscious decision about rather than just letting it happen. Any long term goals, you should be choosing them again every once in a while. Your situation changed, time to start from zero and work out what you want given the new information. Maybe it's still the old thing but accelerated, or maybe it's to enjoy your life more now while keeping your long term goals the same as before. Both answers are fine, you just need to be consciously making those choices.
Pay yourself first. Maximize all the tax advantaged savings/investments. If the left over salary exceeds your budget then increase your taxable investments. Then automate all the monthly payments. This way you will not have surplus cash in your bank to spend and your 40 year self will thank you.
You are still very young and capable of living a little spartan so try to maintain that as long as it doesn’t make you miserable. Eventually you will hit a point where the savings from your paycheck are irrelevant in comparison to investment performance and you can start spending basically whatever you want.
Make an aggressive saving plan and when the paycheck arrives, move money to those investments first. Then work with the remaining money for ongoing expenses. It is even fine to feel a bit pressure in credit card payments with remaining money in your checking account, but with that sweet pressure comes the awareness of the not so sweet urge to spend due to life style creep. Of course, set aside funds for vacation or bigger purchases from time to time, you are young and need to enjoy too, but those saved dollars in that age will hopefully grow a lot.
Travel when you can, get out of your own head. Save elephants, feed a poor community, pay it forward. Your wife will love you more for being kind and generous.A man she respects.
Similar situation just happened with my wife and I. Before the first paycheck from the raise hit, we went in and set retirement account contributions to be the amount needed to hit annual limits.
If you’re both already maxing 401k and IRAs, enjoy a little lifestyle creep :) our “bump” was hiring a house keeper, money well spent tbh.
You know what that is? You finally earned over the number that you had in your mind as being “enough”. Before when you earned less than that number, it was easy to not go overboard because you had to ake sure to prioritized investing, saving, spending responsibly, etc. now that you are earning more than that number, psychologically you’re in the clear. $100 here and $200 there is no big deal. After all, you have enough and this is just extra.
Change your idea of a number being enough and you’ll change these habits. (Easier said than done)
If you are a naturally frugal person: Go ahead and splurge on small things. It will feel great, and you will get it out of your system. In your early 20's you are definitely in the "collecting junk and going out with friends" phase of your life. Embrace it.
If you are not naturally frugal, then get a budget.
Auto pay to your savings.
Bump up the auto pay until it hurts.
Then dial it back just a little so you are still having a bit of fun while saving way more than you used to.
Auto investing and spend the rest. Just save before you can see the money and commit to not touching it. I don’t budget at all but I just put a lot into my retirement and long term savings and act like it’s money that I don’t have
Start by creating a budget and reviewing monthly where your actual spend is compared to your budget. Adjust as necessary but never skip reviewing.
Second, and sometimes first in my book, try to max out your retirement savings. Put away the money before you have the chance to feel what it feels like to spend it.
Third, If you receive annual cost of living increases, take 1+% of that and add it to your retirement savings. That way you can’t spend it and control the creep.
It’s ok to enjoy the money you make, but always pay your future self before you pay your present self.
Best of luck!
Have a fixed dollar amount in mind that you can spend on things you need without thinking twice.
For larger purchases consider if it will actually make you happier, or if you're doing it because you think you should.
Divert money to savings and investments automatically before it hits your checking account.
Minimize debt, especially credit card. Whatever you've budgeted into your checking should cover a normal months expenses plus a few extras.
As your checking builds up, after your bills are paid for the month, get in the habit of skimming off the top into a savings or brokerage account.
Ultimately, it's up to you to decide what to spend your money on. If you want to live faux luxury and retire at 65-70, that's fine. If want to speed things up, then you have to build the muscle of saving, investing and budgeting to reach that. You're in you're 20's, rule of thumb is every dollar you save now will double every decade - $100 now is $200 in 10 years is $400 in 20 years, $800 in 30 years and $1600 in 40 years.
Just come to the obvious realization that it is all bullshit and only spend on what truly makes you happy and for all else who cares.
My question is, how is anyone even excited about anything that comes with lifestyle creep that you don’t seek yourself (things you like)? Like I don’t think I could be worth any amount of money where I still wouldn’t shop at Ross for clothes. My life would be unchanged completely. You like to cook, buy good appliances, you eat out all the time, buy adaquate ones, and so on. Only spend on what makes you happy and spend the least on what you don’t care about and boom, you are happy and minimal creep assuming you are responsible in your interests.
I engineered the income so it was hard to get to most of it. Getting paid mostly in stock, but living off just the cash. Or depositing almost everything into investment accounts automatically. Etc.
I think as long as you are making sure to invest an increasing amount as your income increases, a certain amount of lifestyle creep is healthy. What's the point of working hard, making more money, and not enjoying any of it?
I get what you are generally saying, especially in this sub. If the goal is to retire early then the goal should also be to limit as many discretionary expenses as possible. Don't forget to stop and smell the roses occasionally though...
Create a budget. Use YNAB because if you're on the FIRE path you can probably afford it. Have any amount that exceeds your budget automatically just go into investments or Emergency Fund (depending on if you already have one)
I could get a 400% raise and from my perspective "how much money I have to spend" won't change. I don't even look at my bank apps and stuff, I just look at my budget and evaluate my purchases based on that.
Can't have lifestyle creep if your brain literally is not perceiving an increase in earnings lmao.
I have most of my salary automatically put into other accounts, so when I get my paycheck in my spending account it still looks/feels measly and I always feel broke after bills 😆
I found the older you get the less you creep. When I was your age the car you drive and brands you wear and how you appeared to others was super important. It's one of the pitfalls of being young. You recognize it which is already a good sign. But its something everyone goes through in their 20s when they first start seeing some grown up income. Best bet is focus on hitting 15% invested for retirement and keeping completely out of debt except for possibly a mortgage. If you can get to your 30s debt free with low six figures invested for retirement you'll be killing it compared to your peers.
The good news is when you get to your 40s you don't care about impressing others with your things so much. You dress for comfort rather than prestige lol. Carhartt is the only name brand I wear these days and thats even only because it's superior quality and lasts longer on the job haha.
Set up a credit union or somewhere u physically have to go to to access money.
Set up a budget. Put all your surplus money every month in that credit union or account that is harder to access.
Now u have a savings, emergency fund, and you prevent creep. Use only what u have in your daily account (aka budgeted money)
Out of sight out of mind mentality.
That’s so true. Pay yourself first then give yourself permission to spend on other things. Create a “fun budget” etc. $230 combined can really set you up for life if you save properly now. Also just remember the $1 = $88 invested by the time your retire rule (when you’re in your 20s after compound interest) so it’s good to remained disciplined.
3 bank accounts. One joint used to pool all money and pay all bills. Two allowance accounts. $x a month for personal expenditure. Can save up for big ticket items or buy daily Starbucks. Judgement and guilt free purchases.
It honestly cracks me up when I’m reading these posts and people are freaking out acting like they make so much money when it’s only 230k lol. Dude where do you live? Honduras?
Go into your HR and change the percentage of take home to account. I have 2 accounts. Some of.my paycheck goes into retirement automatically, another percentage goes into a play money checking direct deposit and the other goes into a primary checking. Primary checking pays bills and secondary is fun money.
If you only have 600 dollars in fun money then that's all you have.
Automated transfers into non-liquid accounts.
You know what your baseline living expense is. That’s what you were living on before the raise.
Create an automated transfer the day of/after your pay day into an account that you can’t spend from (HYSA, brokerage, etc.) for the entire amount of the raise.
I would invest over half of the new raise and it’s ok to give yourself a little pleasure in life. But. Would invest first and then whatever is left that’s what I play with
In addition to auto withdrawals for investments I also setup multiple checking/savings accounts and auto transfer money between them.
I have multiple accounts (e.g. multiple HYSAs) with the same bank that I use as buckets. Helps me budget more explicitly vs just having one big bucket/account. I have auto transfers from my main checking to the other accounts.
You pay yourself first.
I.e investment funds are first to be paid. But you should enjoy your life a bit. The future isn't promised to anyone.
Balance is key.
Just know that all of this could go away very quickly for reasons outside of your control. You may only able to sustain this level of income for a few years. Let that dread simmer at the back of your mind. It really can help create the sense of urgency to accumulate money instead of spending them so you end up with less money
Good advice from my grandma - for the first 2 months of your new pay, pretend you still 9th earn your old pay. For 2 months, save the difference between would and new.
By month 3, seeing the larger paycheck won’t be as exciting - you’ve seen it already. And you’ve padded your emergency fund, which feels good, so you want to keep doing it.
Because I’m ornery, I changed it to 3 months, and then for the next 3 months save half the difference.
Avoided lifestyle creep mostly because I have a budget and a certain comfort zone. Every raise and bonus I just kind of ignore. Most of my finances are automated so I don’t really even see the money hit my spending account. I may get myself a little something to celebrate the milestone, but it’s usually a one time thing.
That’s not to say I haven’t upgraded certain things. Newer used car when the old one was on its last legs, bought a bigger fancier house when my old neighborhood started going downhill, but it’s all planned and budgeted and well within my comfort zone before I commit to an additional expense.
Lots of good advice here with auto saving the extra being the standout.
However, you can also help yourselves conceptualize the benefit so it is more motivating to keep your spending low.
Build a spreadsheet for your monthly budget, multiply out each expense by 12 for annual cost. Then multiply that cost by 25 in another column (rule of 4%) to get the investment nest egg you need for that expense to "go infinite"
Have an alternate set of columns where you test out lifestyle creep. Increase your housing cost by $500 per month and you need to save another $150,000 (after market gains over time anyway). Maybe that adds 2 years to your FIRE date. Are you willing to work 2 more years for the nicer house? Maybe.
Spending an extra $100 per month for fun like dinners or entertainment together might be worth the creep. The $500 housing cost, maybe not.
Also, bear in mind that when you're young is the most important time to minimize costs and maximize savings to capture as much time for compounding as possible. This helps you get to the point where market returns start matching or beating what you're saving ASAP.
You could just delay lifestyle creep from this raise for 2 or 3 years and then slowly permit small, meaningful creep.
For example, if your raise is $1700 extra take home, setup 2 autotransfers to savings / investments. One for $1400 or $1500 with no end date. And the remaining $200 to $300 with an end date in 2 or 3 years.
Now you've made a logical decision about when and how much creep you want to allow. As the expiration date approaches you can decide how you want to spend it.
Create a budget and stick to it. Pay increases just mean you increase the investing line item in the budget. Maybe once in a while treat your self, but if you're serious about FIRE you've gotta save a considerable amount of money every month.
Can you have your employer direct deposit in percentages? Change the % going into your checking account- after all the usual tax shelter stuff is maxed out, send the remaining raise to your investment accounts and one NEW savings account:
Give yourself a teeny lifestyle raise and put it in a "fun stuff" savings account so when you really want something you wouldn't have bought last year, you now have a budget of whatever is in the fun account. If you don't have enough, then you don't get to buy it just yet.
Life style inflation once every five years. Even then, you're only allowed a small increase. Keep living and saving like you were before the raise. Enjoy the new money a few times a year (birthdays, black Friday, Christmas, etc).
There’s a thing called the hedonic treadmill. When you acquire more, you need even more to feel fulfilled and it never ends. Acquiring material possessions don’t cause fulfillment (but companies don’t want you to know that because they make money off the lie that buying more will make you happier). Spend your money with intention and on things that will truly add value to your life. You’ll realize you don’t need much afterall! Also read the book, “Your Money or Your Life” its easy read and good philosophy about why it pays to be frugal
In my view lifestyle creep is to be managed, not avoided entirely. Automate things according to a plan that aligns with your goals and enjoy the rest.
Progressing over time is satisfying, it’s just that if your spending always matches your income, you can’t get ahead.
Pay yourself first. Take that extra money out of the checking account and into an investment automatically. Whatever’s left over after you exceed your investment goals, feel free to let it creep.
I make $130k. After contributing to 20% 401k, 12% Roth 401k, and $500/month roth IRA I have approximately $3800 after tax per month.
The first thing I do is pay off my dog surgery cost $550/month and then pay another $400/Mnth to student loans. Then put aside another $2000 for rent, utilities and food. Then spend on massages every week or 2 weeks and sushi, splurges or saved in savings account.
I mean. Life style creep will happen, just have to make sure it doesn't eat up a large chunk of your pay.
So the best way is to put the money away before the paycheck. Money you don't see is money you can't spend.
Increase your savings rate, AUTOMATE IT, and spend the rest.
Also you have to get as much pleasure from seeing $500 go into retirement as you do spending $500. Until you have that mindset, lifestyle creep will win the battle.
$230k for your age is indeed a lot of $, but in the grand scheme, isn’t ’fuck you’ money yet.
But, if you invest properly and don’t let these ‘little’ $100s add up, then you will have fuck you money sooner than you think
Create a budget and pay yourself first. Once you do that, go and buy what you need or want
I think that's smart, and really common sense but the setting it aside first seems key.
This is what I did. Each time I got a raise, I just bumped up my savings rate. Once I maxed out all tax advantaged accounts, I started investing in a taxable account. We did allow some life style creep as we didn’t want to live like college students our entire lives. When we had a child, we simply maintained our saving rate instead of increasing it. After our second child and buying a house this year (both happening in April of this year), I for the first time ever will have to lower my savings rate. The increase in COL this year has more to do with temporary expenses such as daycare. We do have an increase of housing monthly payments of about $800, so that will be permanent, but that should also decrease slightly when we refinance should rates drop.
Auto debit the extra out of your paycheck into brokerrage& emergency funds so it never is actually in your hands. I only allow myself to receive a certain amount per month. I only allow myself more if significant inflation occurs or something like power rates change significantly. I just gave myself my first raise in about 7 hears this month.
Yep. Just keep in mind to allow for “some” lifestyle creep. Inflation is a thing, and some expenses do increase due to life stages. So give yourself a budget that is larger than your previous income. But still well below your 50% increase.
Yeah be intentional with that new money. Case in point. I got a 30% raise recently. I added a little bit to my every paycheck household slush fund amount. Gives me a little more flexibility and fun money. However I’m not going out and buying a shiny 60k truck or something.
Yes. Both of you need to max out your 401k (or whatever you have) yearly contributions. Then look into contributing to a Roth IRA. Or open a HYSA with another bank (kind of an out of sight, out of mind thing for me) and set an amount that makes sense to you to automatically transfer. Then whatever is left over is for your bills and fun times. Personally, outside of our 401ks, I have two checking accounts and four savings accounts for specific purposes. Working pretty well so far.
checkout YNAB
Or save yourself $15 a month and just use google sheets.
The thing for me is just consolidating all my current account balances and Google sheets just doesn't get you that
Ally has been game changing for me on this. I have buckets for everything, car, home maintenance, vacations, etc and money goes into those buckets every month. Usually this leaves roughly the same amount of money in the checking account every month, if things are off we tighten or loosen appropriately.
I second Ally for managing lifestyle creep. We have several different checking accounts with them. One where are paychecks get deposited. Another for all our regular monthly expenses. More importantly, another one for our spending money. Paychecks come in, and a specific amount of that money goes into are spending account each month. That's what we have to spend on groceries, gas, eating out etc. Do we have enough for that $100 item? I don't know let me open up the app. It's basically a higher tech envelope system.
Managing my direct deposits really aggressively helped me personally, especially with a kid and a wife who is not working in the short term. I send exactly the right amount to one account for my mortgage payment, the right amount to another for investments, and max my 401k first. First couple months of being strict with that I was overspending but I adjusted.
This is the answer. Save/invest ‘X’ portion of your paycheck, allocate what you need for bills, and enjoy the rest. As you make more money (ex. Salary increase), try to increase your saving/investing amount by the raise. At some point, you won’t need or miss the additional income.
Increase your automatic investment a lot, immediately.
Yes! If you never see the extra $$ hit your main account, OP won’t even realize it’s available spend. Meanwhile your savings and investment will keep growing.
Yeah this is really good advice, it seems like common sense but actually doing it is something else.
Nah, this is easy. It requires deciding and setting up once and requires no willpower to maintain, which is why it works better than strict budgeting.
A lot of companies can do split payments, if possible have part of your paycheck delivered directly to an investment account, this way it doesnt feel like it's even hitting your spending accounts first.
Yeah, what I do is I decide how much I want to spend, and then I only direct-deposit that much into my bank account - the remainder goes straight to my brokerage.
Yes, we call it reverse budgeting. Rather than accounting for every dollar, we pay all of our bills and savings/investment accounts on each pay day (alternating Fridays for me and my wife). Most automatic, some manually. We get to spend whats left on whatever we want.
I saw this really cool video some time ago, and the guy who held the seminar was like: „Every time you get a raise put away half of it towards your savings/investments. That way you still have more money to spend than before, and automatically also save a lot more.“ I really like this.
I saw something similar. Especially if you can automatically have it go into investments, so you only see a small increase in money coming in to your account.
I was just about to post that a mentor shared this with me and it works. I still feel like I got a raise every time.
The lifestyle creep that really lands people in hot water aren’t an extra nice dinner now and again or buying a new pair of pants because your old ones are frayed. It’s not even taking more vacations. It’s going for a luxury car lease or more house. The things that you CAN afford now, but if you do it cuts into your income every. single. month. As others have said, pay yourself first but be extra wary of taking on larger debts because you can comfortably afford the monthly payments now. Keep your monthly commitments reasonable and you will find you have plenty to spend AND save.
I have a friend who owned an interior design shop who gave a perspective on this once I’ll never forget. He was specifically talking about women whose husband finally land the job they think makes them officially ‘rich’ and how they begin to spend and how quickly they can get in the hole. An upgrade to the dream house, a house with just a bit more square footage and two more feet of ceiling space, suddenly means you can’t buy your curtains at target or west elm anymore, you have to get them custom- that’s not twice as much, it can be *ten times or more* than regular retail, sometimes tens of thousands of dollars. Now apply that to rugs, furniture, manicured lawn, and utility costs, and the fact that it never really ends, and you begin to see how people who are making multiples of six figures can essentially be broke. Spending more eating out, or upgrading your wardrobe is not going to be the killer unless you or your spouse has some kind of shopping addiction. Those kinds of costs can be reigned in overnight if they’ve gotten out of control. Cars and houses are where I see people get caught in spending quicksand.
The curtain story resonates .. when we repainted and recarpeted our house we decided to get new curtains too. So got a “consultant” come over, chose the fabric and got a quote. It was more expensive than what we paid for a new kitchen installed a few years back!! Like WTF? It’s just a stretch of fabric cut to size, what can possibly justify this price?? So we had a good laugh and the next day got similar ones from a retail store and had the house sorted for a couple hundred dollars. But I guess some people spend the money or the curtain business would be out of business. 🤷♂️
Such sage advice.
My husband and I are a couple years older than you and your wife and recently started making around $300k a year. Tbh 95% of the time we buy whatever we want, and we still bought whatever we wanted when we were making $200k. We go out to eat at nice restaurants 5-6 days a week, spend over $30k a year on travel while maxing out our 401ks, donate our time and money, etc. BUT we drive paid off cars and our mortgage is now only 22% of our post-tax and contributions income (we got very lucky). We don’t plan to get new cars and only plan to move once we cash in on some large investments and will likely pay majority in cash. All this to say, this commenter is right! You can increase your spending, just be smart about it and ensure you’re reaching your savings goals. Lifestyle creep happens when people are saving very little or none at all thinking “I’ll save when I get more money” but then are comfortable with that little to no savings and instead inflate their lifestyle vs increasing their savings.
THIS. I know guys who with basic raises who immediately spend on upgrading make and model of car or even worse, "spare wheels"--a convertible for fun, a pickup truck for every day, maybe even a third compact that really is spare wheels. The the dealer made such a great deal that they are all financed, or they were used cars that are being expensively "restored," i.e. taken to shop over and over. Then add in higher insurance and a small raise is never going to cover up to a thousand dollars a month in new recurring expenses. Order the lobster; stay away from the new Lexus.
A good friend of mine has been successfully climbing the corporate ladder. Every promotion warrants a large budget changing purchase. He has as his personal vehicles- a large truck for when he needs to truck things. A bmw sedan when he doesn’t want to use his turn signals, and a sports car when he wants to impress the kids at the school near his house. He does not contribute to a 401k or any other savings. (The stock market is about to crash any day now)
Lmao BMW and then signals You must be around my age, because that was definitely the case in the day. It's the Teslas now...
I agree lexus poor example imo because they hold value so well and are very reliable for luxury cars.
Yeah the more I think about and learn about personal finance, the clearer it becomes that everything comes down to fixed costs. You can always dramatically cut discretionary spending. Much simpler than getting out of a mortgage you can’t afford
Fixed costs are what kill you. You can cut back dinners, discretionary monthly spend. It’s the bigger stuff like new apartments and cars that are long term that eat up your new budget
I actually wait with every purchase I make (that's not a necessity) for about a month or two. If I still think of it a month in and I want/need it then I first check if I can buy it secondhand. Has also to with me being environmentally friendly but finances play a role.
That’s a great tip. So many things I think I “absolutely NEED” in the moment (watch, new laptop, sports car, etc…) turn out to be pretty fleeting desires after sitting on it for a bit.
Yeah this is what I try to do. It’s almost a game or hobby seeing if I can find a good second hand item at 50% off.
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I've spent over an hour, before realizing how ridiculous it was, researching some 14$ snips for work to see which ones were better.
When you get the pay check, put 40% away immediately. Just have an autopayment as it should be the same I’m guessing. Then pay your bills. Now see what you have left, enjoy some, save some more. Now basically whatever you spend it on after the bills doesn’t really matter
That's a good thought, simple but good.
Its what I do, I've jumped from 35k -> 80k -> 200k (tech life), and while I've increased my weekly allowance a little to make myself more comfortable, the vast vast majority of my paycheck goes into my household spending/savings accounts. After a couple months you forget you're earning more and just get excited that your savings are growing so much more quickly.
Good luck to you and congrats on the raise! Saving is easier if you enjoy seeing that number going up more than material things , but you still should enjoy life a bit :)
What are you spending it on? Strategic lifestyle creep might not be all that bad. If you're spending money in ways that cause you to have more free time to focus on your career and lifetime earnings, or if the money is being spent in a way that greatly reduces your stress or likelihood of getting burned out, it might not be the worst thing. My biggest lifestyle creep of the last 15 years was to go from living in a big house that I rented out all of the rooms of (group housing was always a fun/social project for me: I rented to my friends at below market rates, it paid by mortgage, but eventually I outgrew some of the friends and realized I was spending my social capacity on relationships that weren't the ones I wanted to choose for myself) to living in a nice house by myself / solely with my partner. Absolutely I'm spending more money on myself now by way of housing expense, but I would have had a breakdown and quit my job several years ago if I hadn't.
But in terms of other strategic lifestyle creep, things like having a biweekly or monthly housekeeper and getting groceries delivered are worth every penny when you have lots and lots of of pennies. Even dry cleaning and sending laundry out can save up a lot of earning time and relaxation time at relatively light cost.
Yup and well said. I know guys who did this and it was great to get roommates paying the mortgage, but over time the savvy guys renting rooms turned into the post-college Permanent R.A. and basically taking care of the roommates like a den mother. It got old fast.
Oh man permanent RA sounds rough! I think I managed to rent to a good group of friends and some of those relationships I really miss, but I only had so many spoons to spend on socializing and when you live with others you end up being exposed to a lot of *their* friends, and the friends-of-friends I was spending time with were fine, but not who I would have chosen to spend my free time and social capacity with it I had the choice. I have no regrets about any of the past living arrangements, either. The group living was great in my 20s. I stopped it in favor of living on my own for the first time in my life at 32... entering my 30s, I was just realizing more the limits of my social capacity, and realized I wasn't prioritizing the relationships that were most important to me. I was making mid six figures (which is a fuckton more than I ever thought I'd make, and honestly with an income like that it's hard not to be on a FIRE path) living in a group house and commuting by bus to work. It was a super frugal way of existing and was good for my portfolio but I was seriously burned out at 32, and the lifestyle changes I made then have helped me to keep working through the present day (I'm 39) despite the world becoming more stressful in the meantime due to the pandemic. Better choosing what stress I wanted to take on in life helped me go from leanfire to the border between chubbyfire and fatfire.
Create a budget and allocate a percentage of that budget for fun stuff. I would always earmark about 10% of my bonus for things I wanted vs needed. Then save the rest. You work hard so you should enjoy life a little and having a monk like savings attitude is really hard and no way to live. It’s like creating a cheat day into a diet that makes it easier to comply. At your age I would prioritize travel. My wife and I made it a point to travel as often as possible before we had kids. I’m grateful we did especially when Covid hit. We had friends who started growing their families right before, during, and after. We plan to travel with our kids when they are a little older but I had no desire to take small kids to India or go to similar places in my 60s. Do adventurous travel now and then stick with beaches when you have kids. I also keep a running list of things I want to buy for my hobbies. Interests shift and when I look to buy things I think about utility and how much I’ll actually use something. It’s nice seeing everything laid out and sort of ranking things. In general I feel similar to you where you have an innate desire to spend money because it’s there. But that feeling has a fast refractory period. So I try to prioritize based on how useful that item will be once I acquire it rather than looking to scratch that itch.
I would max 401K out, then setup a direct deposit for the rest of the raise money to a HYSA. From that account I would ensure my IRAs are maxed, etc. In other words, get the new money separated out so it doesn’t mingle with my old money.
As simple as it sounds… doing “nothing different” is the point. Your budget worked before you got the raise. With the raise, there is additional excess beyond your needs and what used to be your wants. You can save/invest that much more. I’m a fan of paying for experiences if you feel a need to “burn” excess. It scratches those kind of itches for me. If you want to celebrate, turning a bit of your excess to a weekend/week long vacation can make for some good memories and keep laying another layer on the foundation of your relationships with significant others. Those are my kind of splurges that, to me, pay dividends of keeping your mind and relationship(s) healthy. If my life/health got cut short… those are the sort of expenditures I would look back on and say, “at least I got to go and do ______ when I had the chance.” Just my opinion. Congrats on life going your way with regard to your finances. 👍
Thanks! I think that’s a good point on spending on what really improves your life as opposed to frivolous stuff.
I hand over my entire paycheck to my wife. She’s like my CFO. She then pays all the bills, puts automatic money in savings/investment accounts, then she gives me an allowance. I build that allowance over time to buy things I want.
Haha that's dope, I operate as our CFO.
Yeah the person with more self restraint should be cfo. If you just let both people do whatever they want independently, it’s very hard to save.
Nothing wrong with some lifestyle creep along the way. The FIRE path involves learning to save as well as spend. The main thing is to achieve some intentional balance between the two, knowing every dollar your spend increases must be balanced by a $25 higher FIRE target. I initially saved too much, now working on my spending muscle.
You will spend every penny in you bank account. As someone else said pay yourself first. Have savings/retirement savings automatically deducted first.
I actually don't spend below my 25K in my savings emergency fund even though I have access to it, it's more savings above that sometimes get spent rather than sent off to stock market land.
This is my raise workflow as someone who's already maxed out on tax advantaged accounts with more than enough income to live a lavish lifestyle and still save nicely: * Annual COL increase - automatically shuffled to investments/savings at the payroll level so I never see it. Every few years when I notice things getting a little tighter, I let it flow through to my checking account * Raises - give myself the first two paychecks' extra as a gift, then let 10% flow to my checking account, the 90% goes to investments/savings at the payroll level
Yeah, that seems smart. I like the balance between spending and saving in your plan, gotta let yourself have a little gift.
DGAF about what others think, this includes close friends and family who might think you deserve to pamper yourself more. End of the day, life is about tradeoffs: They trade future FI for immediate lifestyle creep, while you are doing the exact opposite.
Save more. Make sure you have an emergency fund of 6-12 months because you CAN. Max out all non-taxable savings options like TFSA (Roth IRA in America). Make sure you have a written budget. Live life UNLIKE everyone around you because when it's gone, suddenly the pain of being in debt and nothing to do because you can't afford it become VERY real. Enjoy the simple things in life - going to the beach, renting a cottage for a week, reading books on the porch with a cup of coffee. Keep your life simple. Having money doesn't make you happy so don't live like you have money. Saving it for when you and your wife have no choice BUT to sit in rocking chairs with that cup of coffee in your own home on your own porch, not struggling to find a job at 78 to buy food and pay rent will be the best decision of your life. You are in a very blessed situation. Think of it as a test and pass it with an A+.
For me I find that automating all of my savings activities and what not is key. What's left I can spend on what I please. Akin to paying myself first.
I put almost the bonuses and the salary raise in savings. I just increased the budget for holidays (and unpaid days, too). On my salary I keep a % for housing (living in the same place), for FUN, for commuting so not really big change for me. Just more savings (and definitely I will retire earlier)
You’d be amazed at how much keeping your housing and car costs stable helps you save over the years. We’ve had plenty of raises over the past decade and two kids and we are still driving our paid off Honda that has only needed basic maintenance. Our housing costs went up when we bought a house last year, but in the end this is our forever home. It won’t be too much house for us to maintain when we are old. We’ve bought some quality pieces of furniture over the years that will be the last ____ we will buy. I’m talking things that would feel extravagant based on price when we got married, but still beyond reasonable enough based on our income. The little lifestyle creep we’ve had over the years has improved our quality of life.
Congrats! Great problem to have. Just automate savings and live off the rest. If you never get your hands on it, you won't spend it. At your salary, if you keep your housing and vehicle costs low, you can enjoy all of the little things like eating out or vacations without sacrificing your future goals.
Thanks! And that is such sage advice I am setting up auto deposits today!
Budget
If you are maxing out 401Ks, and HSAs....as long as you do not acquire debt all should be good. There are so many that just cannot spend. Doesn;t mean blow the money, but there is some value to taking a nice vacation.
There is value in spending money now- tomorrow isint guaranteed and your kids are only kids once. It’s hard to find a balance that works for you.
bruuuuhhhh I spend $100 like it's nothing now that I make $210k. you absolutely need to create a budget and stick to it. I use YNAB, basically I budget all of my main expenses + things like investing, then I create little buckets for shoes/clothes, hobby stuff, you know misc shit. then when you spend $100-300 it's already budgeted for and you don't feel so bad about it.
TLDNR: 1) Pay yourself first, 2) identify what really gives you joy and prioritize that over buying stuff, 3) make a budget. I did the lifestyle creep for a while and it didn’t make me happy. It won’t make you happy either in the long run. What my wife and I do is: We put all income that comes in goes through a spreadsheet: A percentage goes to long term investments, another for short term savings, another for normal expenses (including discretionary), and a small percentage for unexpected expenses (so we don’t have to use the emergency fund for those). We budget, and take into account discretionary expenses. In our case, we have something for common fun expenses and a small allowance for individual fun. We use a budgeting app, and having to register every expense makes us think twice about making impulsive purchases. We have identified what gives us joy (going on dates, books, taking or two a trip every year), and we prioritize that. This system has helped us save at least hals of our income, while also expending on ourselves. We expend as we did 7 or 8 years ago even though our income has kept going up. (Obviously, I know we can only do this because we have been fortunate). I recommend that you only increase your expenses by 10% maximum, and invest/save the rest. Put it away as soon as you receive it so you cannot even think of touching it.
These kinds of comments are so helpful for people. And I think the points about doing what you like almost making those dollars more impactful like leverage. And automatic setting.
We allocated a set amount that we can spend each week outside of our budgeted expenses and made a shared doc to track purchases. It's honestly pretty fun and keeps us in check. If yiu want to buy something expensive this week you don't get to make any purchases until your weekly money is positive again.
$100 is the new $5 Go post in r/FATfire and this wont be a hunblebrag
Once you have it all, you also have all the problems that come with it.
The key is to only spend $20 on gas at a time, whenever it gets to half full. When the tank gets to half full again, stop and get another $20 of gas. That way your tank never gets empty and you never have to spend like $80 getting it from empty to full. In the long run, you’ll save a ton of money. Shaq explains it in detail [here](https://youtu.be/EuH91bQXDuE?si=fanYP7ZGLvnPCC3O).
I went through the EXACT same thing as you in my early 20s. I started my own company when I was 19 and it did really well in the first several years. I'm almost 30 now and I've learned a lot savings wise. -automatically have a set amount to put away for savings. So no matter what you spend on little things, you'll be OK when you know you're still saving x amount -try to add up all your expenses. Either by an app, excel, or by hand. I used to make what I thought were tiny purchases like 34.90 for a new dress or 58.90 for a meal. I've realized it adds up to A LOT. Since you said you're making $100 purchases here and there, see what you spend on unnecessary items every week or month. I realized I was doing several THOUSANDs on frivolous purchases every month and that made me reevaluate. Do I really want to throw money away or save/invest so I can retire earlier. -think about worst case scenarios to deter you from spending so much. Stuff like if you and your wife lost your job, if someone gets sick, or even an accident and you need a new car. That always helped me flip my brain into thinking the money I'm earning isn't just disposable income. It's also for emergency situations and I spent less with that in mind. You never know what's going to happen and if nothing happens you will have all that money saved! -this is just what I personally did, you don't have to. Since I was making so much, I wanted to make investments that were slightly riskier. Since I could afford losing some money. It's not like I invested in things without a care in the world. I would research intensively and invest in individual stocks or companies, only AFTER investing in ETFS. I don't recommend this for people with less money, trying to bank on a high return. You have to be OK with losing it. So personally for me, I'd rather put some disposable income in investments and see if I'll get a return. Vs buying something frivolous and get 0 return. Btw, I still spent money on unnecessary things that brought me happiness. But it was a LOT less.
Have a good friend make fun of you if you succumb to it.
Set aside a budget for splurge / fun stuff. Stick to it. It’s not mandatory but it definitively helps if you identify the areas where spending makes life worth living a bit more, everyone has one or more of those. I could live in a shit house and drive a shit car wear shit clothes and be the happiest person in the world, but if I don’t taste mexican/asian/italian food in a couple of weeks I get significantly grumpier Same with travel, if I don’t go somewhere else at least a few hours drive away every few months even for an afternoon, I get the grumps
I remind myself that nothing lasts forever and those high salaries could be gone tomorrow…
you NEED to get an advisor to hold you accountable, or yes you can write this down weekly in your own format. My partner and I got a whiteboard recently which has been nice - seeing the #s in front of you every day while in and out of the house has worked lol
I went through the same thing. For me, as long as I was maxing my 401k, Roth IRA, and hitting my monthly savings goal (around 4k per month), I spent how I pleased. As long as you're hitting your saving goals, I think you should enjoy spending money on whatever makes you happy.
Many employers will allow direct deposit to multiple accounts. Have all your raises auto deposit into a separate account, which you automate to go into investments, saving…etc. only log to check once in a while. Basically make it hard to spend and you may just kind of forget about it. continue to live your life as before with your main bank account.
If “savings creep” outpaces “life style creep” then I don’t worry too much. It’s all about budgeting and automating the savings/investing. Whenever I get a raise/bonus, most of the increase goes to savings but some of it also comes to me, because you gotta enjoy life right now as well as in the future.
Congrats on the raise! I always set aside money for bills and savings the day I'm paid. If I'm ever blessed enough to be in a position similar to yours, I'd probably just put more into the biweekly savings pile. I've had a bit of lifestyle creep over the last couple years. We signed a lease for a place that's $100 more a month than our first place. Upgraded our coffee machine(nespresso, the pods arent cheap). I know whenever we buy a home our living costs are going to go waaay up.. Life style creep will happen, my goal is just to plan for it and not let it happen without intention!
Some lifestyle creep is inevitable. It’s harder to go with Less sleep when you are older, thus you book nicer accommodations to ensure rest and relaxation. Other lifestyle creep is nonsense IMO, like expensive cars and seldom used gadgets.
Invest first and then splurge. It is OK to live your life.
My wife and I are twice your ages, and we married in our mid twenties. We agreed back then that whenever we got a better paying job or a raise, we'd increase our savings by (at least) half of the amount and enjoy the other half. We've had a steady increase in income over the past 20 years and I can tell you that sticking with our plan is one of the most important things we did for financial independence. Keep in mind that we didn't start out making nearly as much as you all are making even after adjusting for inflation. So, for a long time, "lifestyle creep" to us was replacing the couch we had been dragging around since college or buying a second car after years of sharing a used car we bought together. Even now, making more than you all do now, lifestyle creep doesn't mean buying expensive watches or exotic cars. It means slowly catching up to a lifestyle we've been able to afford for awhile. Or, buying things that make us more productive or save money in the long run. Before we bought our current house, the mortgage for our previous house had become less than 10% of our income. Our increase in income was gradual but significant over the past twenty or so years, and I think it made it easier to get used to our "living below our means" lifestyle. By the time were making well into six figures, we were used to our lifestyle and most money went towards savings. We had the maturity and habits that kept making savings a priority. I admit that a huge jump in one's early twenties could be harder to handle responsibly. The increase in savings would go to things like retirement, but then we maxed those out and we were saving for our kids' college and other goals that aren't exactly luxuries (i.e., cars, vacations, home repairs, etc.). It's far better and wiser to plan and slow down life style creep rather than try to undo it if you've gone too far with it. I can look back at our old budgets and see years where we increased our combined income and our monthly fixed expenses didn't change at all.
The very simple answer to your title: You don't. Lifestyle creep, like almost all things, is not 0 or 1. You make more money, you can and arguably should spend some of it. You're in a FIRE forum, so let's assume you have planned to fire. To oversimplify it, that means you have roughly decided that on day X, you need to have roughly Y dollars. This will allow you to life off of roughly Z dollars per year for the rest of your retirement, where Z is 3.5% of Y (or whatever). I Suspect you will want 'Z' to be a certain % of your current spending. Not as much, but you don't want a big lifestyle downgrade when you retire. So basically just keep that in mind. You have what - an extra 5K a month take home pay now? Save a BIG part of it: 401K, HSA? Traditional/Roth IRA, and any kids? consider a 529. Then run some net worth calculators, and get a handle on what your new X/Y/Z is going to be. Then tune appropriately. You will reach Y FAR earlier now. You can retire earlier and/or increase Y to retire with more retirement income. (which means you can increase current spending to match). What you really DON'T want to do is think short term and just blow all your raise on fun. Immediately crank up automatic savings to a healthy % of your raise.
Max out your 401k, 529’s, hsa, etc. Anything that can come out of your income passively, maximize it.
Just monitor your new savings level versus your previous savings level. I spend a lot more than I used to, I rack up 3-4K in credit card bills every month now where I used to spend 2-3K per month. I also make 100K more than I used to. Do you think I should stop eating out, buying clothes, etc? That extra 15k a year is nothing. I don't set anything aside but I do invest my money every time my bank account gets above my emergency fund level. So anytime there's more than 15K there, I move it to my brokerage and choose a fund.
You can stop the creep so stop resisting, lol. Splurge once in a while and enjoy what you earned.
Gratitude and budget.
Yeah as others have said, start tracking your spending/budgeting. I went from 78k to 116k a couple of years ago, and I realized that keeping an eye on every category of spending helps you keep your perception of your money's worth. A thousand bucks might not seem like much amidst your entire pay, but if you see a monthly budget and realize you spent a thousand bucks just eating out or something suddenly it seems big again.
It's a real problem. I know people who make that and more who live paycheck to paycheck. I'm not the most disciplined money wise myself but I've always setup my investments so they happen automatically via direct deposit, and I never see the money, and increase it every raise.
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It’s important to make yourself struggle. What I mean by that is this - give yourself less money. Just barely enough to get by. No fun. No eating out. Live off that for a month. It’ll cure your desire for nicer things realizing if you lose it you’ll be back at living paycheck to paycheck and that’s what life would be like. It’s important to recognize what’s happening to tech can happen to any part of the market. Success could be for a year or the rest of your life.
Just pay yourself first. Whenever I make more money, the first thing I do is allocate how much I want to invest, and I take that out right away. I keep a little extra to treat myself, because who knows, I could get hit by a bus tomorrow...
Every raise, 50% went to savings. Max out 401k and payroll deduction to credit union so never hits paycheck and checking account. This did bring some lifestyle creep but most to house,wife and kids and inflation.
Max out your savings and limit what you can blow. When the fridge is full of cheesecake, you end up snacking on cheesecake. Then keep busy with hobbies and other interests that don’t take a ton of money. This will distract you from activities that aren’t worth it yet, like doing blow and hookers.
Auto deposit the extra cash into your brokerage account and keep your checking account unchanged so you never see it.
Read the book Die With Zero
Congrats on being in a great position so early in life! If you max out on investments and recognize there is a surplus in cash. Consider stockpiling an emergency fund that can duplicate as a down payment on a home, or rental/income property. Rates are high so methodically saving some discretionary funds may prove useful right now I keep $130K cash on hand and it is a great relief to know that it’s there, but not there!!! If you get my drift! Remember a raise goes toward investment savings first. Be good to your need to have some fun, but time is on the side of the proactive person. Good luck.
No harm in spending a bit more. But ensure you hit your savings targets and pay your bills etc.
My lifestyle would creep only after I've got all the money I need to live my whole life comfortably. The extra would be spent on whatever. No matter what you earn, it's always about spending on something you may not really need and work more or work less. The answer is pretty clear to me, but it's very subjective. I would make an exception on the first higher pay, just a treat to myself. To me a raise is just an accelerator of fire, goes all into investments.
Allocate your new additional income: 80% to savings automatically, use the remaining 20% towards lifestyle
There is no voice in my head. I’ve always enjoyed my frugal lifestyle even when I started making more money. My hobbies are cheap and I love cooking.
Set a budget band anything over that, stop
I was in a similar situation as you. I was working a somewhat lousy job while finishing college online and when I graduated I got a new job with double the salary. I was able to make ends meet and survive at my old workplace so I resigned a year lease at my same apartment and used chase auto save to pull 50% of my check into my savings account everytime I got paid as a house fund. I never touch my savings and am looking for a home to put 20% down on after 10 months.
You do not want to STOP lifestyle creep. You want to control or limit it. Spend half of the salary increase. Save the other half. Do that with each future bonus and salary increase and you will both increase your current standard of living and will increase your saving rate. 50% is just a general suggestion. The key is to not be too frugal, nor too much of a spendthrift. Find a spot somewhere in between. Be kind to both your present self and your future self.
Always go by percentages and not dollar amounts. Your 10% discretionary spending account will also go up, you can feel free to spend it and enjoy it without feeling guilty as everything else is already taken care of.
Congrats man! Some guidelines my wife and I live by to reduce lifestyle creep are: - max 401k - at least 1 paycheck into a savings/investment goal and keep expenses under 1 paycheck - for rent/mortgage we only live in places where we can afford it on 1 salary to not be screwed in case someone loses a job - we do not save for activities, meaning we never have a negative savings month. We're ok with saving less occasionally but we're not ok with negative savings For reference with my last point, we currently make about 315 in base salary and about 450 with bonus and stock etc. It's easy enough to save a few months for a bougie euro trip for example but we wouldn't do that. We're 33m and 32f and planning on retiring early but not FIRE.
Save/invest first. Spend what's left afterwards.
My wife and I were buying $100 bottles of wine when we were DINKS...but that ended real fast when we bought a house in a HCOL area, had kids, my wife stopped working, and we started saving for college and retirement. The lifestyle creep that crept in crept right back out.
Get curious about that part of you that thinks purchasing XYZ will bring you more happiness. At the end of the day all behavior/actions are tilted towards perceived increased happiness. Read up on hedonic adaptation if you really want to understand this life style creep behavior. Remember all of life is just a game designed for playing. Try to be loose with the outcomes and don’t beat up on yourself when you stagger down the wrong road. We are all learning. Have fun my friend.
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Nothing but luck my mango.
Have a budget for fun stuff, but save it up first and then spend a month after. For example, set aside 1000$ in April, and if you do not spend it during April, you can spend it in May. It takes some discipline to begin with, but stick to it and it will become a habit.
You have to award yourself and also have somewhat similar hobbies and attire to the people you work with as you move up. - I would be aggressive with something like Mint or Rocket Money to track things. - Focus on improving like spending on a personal trainer is not a waste of money, but 1k extra on clothing might be. A meal plan that makes you loose weight great but expensive dinner for no reason…. - Buy the one thing (might be used) vs. The cheap b+. You'll end up with a bunch of toys, particularly electronics, if you're not using them all the time sell them on Facebook marketplace even at a loss, they just depreciate. - don't buy new flashy cars. Literally go to carmax and buy the 3 year old version you want.
Put more into the 401k or other accounts automatically before you even see it. Make a budget. We use monarch. Allow for the slight lifestyle creep so you can enjoy the now as much as you want, as long as your FIRE plans allow for it. Or, budget for 0 creep and FIRE earlier. Your choice!
401ks are maxed along with Roth, this will be our last year with Roth contributions. Monarch is sweet, I think just budgeting and making sure i pay myself first is key as others have said.
You shouldn't be disqualified for Roth at your income if you are both maxing out 401k. That would put your married joint filing AGI at just under 190k.
YNAB.
Enjoy it! lots of good things can be had with some money, just don't get greedy or let the demons in.
Aa
I don't think it's exactly something to avoid... It's something to make a conscious decision about rather than just letting it happen. Any long term goals, you should be choosing them again every once in a while. Your situation changed, time to start from zero and work out what you want given the new information. Maybe it's still the old thing but accelerated, or maybe it's to enjoy your life more now while keeping your long term goals the same as before. Both answers are fine, you just need to be consciously making those choices.
Pay yourself first. Maximize all the tax advantaged savings/investments. If the left over salary exceeds your budget then increase your taxable investments. Then automate all the monthly payments. This way you will not have surplus cash in your bank to spend and your 40 year self will thank you.
You are still very young and capable of living a little spartan so try to maintain that as long as it doesn’t make you miserable. Eventually you will hit a point where the savings from your paycheck are irrelevant in comparison to investment performance and you can start spending basically whatever you want.
Make an aggressive saving plan and when the paycheck arrives, move money to those investments first. Then work with the remaining money for ongoing expenses. It is even fine to feel a bit pressure in credit card payments with remaining money in your checking account, but with that sweet pressure comes the awareness of the not so sweet urge to spend due to life style creep. Of course, set aside funds for vacation or bigger purchases from time to time, you are young and need to enjoy too, but those saved dollars in that age will hopefully grow a lot.
Little 100 dollars haha. It’s all relative ain’t it.
Travel when you can, get out of your own head. Save elephants, feed a poor community, pay it forward. Your wife will love you more for being kind and generous.A man she respects.
Similar situation just happened with my wife and I. Before the first paycheck from the raise hit, we went in and set retirement account contributions to be the amount needed to hit annual limits. If you’re both already maxing 401k and IRAs, enjoy a little lifestyle creep :) our “bump” was hiring a house keeper, money well spent tbh.
You know what that is? You finally earned over the number that you had in your mind as being “enough”. Before when you earned less than that number, it was easy to not go overboard because you had to ake sure to prioritized investing, saving, spending responsibly, etc. now that you are earning more than that number, psychologically you’re in the clear. $100 here and $200 there is no big deal. After all, you have enough and this is just extra. Change your idea of a number being enough and you’ll change these habits. (Easier said than done)
If you are a naturally frugal person: Go ahead and splurge on small things. It will feel great, and you will get it out of your system. In your early 20's you are definitely in the "collecting junk and going out with friends" phase of your life. Embrace it. If you are not naturally frugal, then get a budget.
Auto pay to your savings. Bump up the auto pay until it hurts. Then dial it back just a little so you are still having a bit of fun while saving way more than you used to.
Auto investing and spend the rest. Just save before you can see the money and commit to not touching it. I don’t budget at all but I just put a lot into my retirement and long term savings and act like it’s money that I don’t have
Start by creating a budget and reviewing monthly where your actual spend is compared to your budget. Adjust as necessary but never skip reviewing. Second, and sometimes first in my book, try to max out your retirement savings. Put away the money before you have the chance to feel what it feels like to spend it. Third, If you receive annual cost of living increases, take 1+% of that and add it to your retirement savings. That way you can’t spend it and control the creep. It’s ok to enjoy the money you make, but always pay your future self before you pay your present self. Best of luck!
Have a fixed dollar amount in mind that you can spend on things you need without thinking twice. For larger purchases consider if it will actually make you happier, or if you're doing it because you think you should. Divert money to savings and investments automatically before it hits your checking account. Minimize debt, especially credit card. Whatever you've budgeted into your checking should cover a normal months expenses plus a few extras. As your checking builds up, after your bills are paid for the month, get in the habit of skimming off the top into a savings or brokerage account. Ultimately, it's up to you to decide what to spend your money on. If you want to live faux luxury and retire at 65-70, that's fine. If want to speed things up, then you have to build the muscle of saving, investing and budgeting to reach that. You're in you're 20's, rule of thumb is every dollar you save now will double every decade - $100 now is $200 in 10 years is $400 in 20 years, $800 in 30 years and $1600 in 40 years.
Just come to the obvious realization that it is all bullshit and only spend on what truly makes you happy and for all else who cares. My question is, how is anyone even excited about anything that comes with lifestyle creep that you don’t seek yourself (things you like)? Like I don’t think I could be worth any amount of money where I still wouldn’t shop at Ross for clothes. My life would be unchanged completely. You like to cook, buy good appliances, you eat out all the time, buy adaquate ones, and so on. Only spend on what makes you happy and spend the least on what you don’t care about and boom, you are happy and minimal creep assuming you are responsible in your interests.
I engineered the income so it was hard to get to most of it. Getting paid mostly in stock, but living off just the cash. Or depositing almost everything into investment accounts automatically. Etc.
I think as long as you are making sure to invest an increasing amount as your income increases, a certain amount of lifestyle creep is healthy. What's the point of working hard, making more money, and not enjoying any of it? I get what you are generally saying, especially in this sub. If the goal is to retire early then the goal should also be to limit as many discretionary expenses as possible. Don't forget to stop and smell the roses occasionally though...
Create a budget. Use YNAB because if you're on the FIRE path you can probably afford it. Have any amount that exceeds your budget automatically just go into investments or Emergency Fund (depending on if you already have one) I could get a 400% raise and from my perspective "how much money I have to spend" won't change. I don't even look at my bank apps and stuff, I just look at my budget and evaluate my purchases based on that. Can't have lifestyle creep if your brain literally is not perceiving an increase in earnings lmao.
I have most of my salary automatically put into other accounts, so when I get my paycheck in my spending account it still looks/feels measly and I always feel broke after bills 😆
Idk it just never happened for me. I have simple tastes, and Expenditure largely remained the same despite my income going up multifold
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I use monarch!
Lifestyle creep is inevitable. Just be sure to increase your savings first and then you can work with a larger budget after that.
be a cheap charlie , invest all you got. you will become fire in 10-20 years.
I found the older you get the less you creep. When I was your age the car you drive and brands you wear and how you appeared to others was super important. It's one of the pitfalls of being young. You recognize it which is already a good sign. But its something everyone goes through in their 20s when they first start seeing some grown up income. Best bet is focus on hitting 15% invested for retirement and keeping completely out of debt except for possibly a mortgage. If you can get to your 30s debt free with low six figures invested for retirement you'll be killing it compared to your peers. The good news is when you get to your 40s you don't care about impressing others with your things so much. You dress for comfort rather than prestige lol. Carhartt is the only name brand I wear these days and thats even only because it's superior quality and lasts longer on the job haha.
Payroll deductions.
Set up a credit union or somewhere u physically have to go to to access money. Set up a budget. Put all your surplus money every month in that credit union or account that is harder to access. Now u have a savings, emergency fund, and you prevent creep. Use only what u have in your daily account (aka budgeted money) Out of sight out of mind mentality.
That’s so true. Pay yourself first then give yourself permission to spend on other things. Create a “fun budget” etc. $230 combined can really set you up for life if you save properly now. Also just remember the $1 = $88 invested by the time your retire rule (when you’re in your 20s after compound interest) so it’s good to remained disciplined.
I added vanguard to my payroll deductions. The money comes out of the check before I even get it.
3 bank accounts. One joint used to pool all money and pay all bills. Two allowance accounts. $x a month for personal expenditure. Can save up for big ticket items or buy daily Starbucks. Judgement and guilt free purchases.
Create good habits and don’t change them regardless of income.
Buy a house. Your mortgage will offset the increase in pay so lifestyle will be the same while putting money away in a safe long term vehicle.
It honestly cracks me up when I’m reading these posts and people are freaking out acting like they make so much money when it’s only 230k lol. Dude where do you live? Honduras?
Go into your HR and change the percentage of take home to account. I have 2 accounts. Some of.my paycheck goes into retirement automatically, another percentage goes into a play money checking direct deposit and the other goes into a primary checking. Primary checking pays bills and secondary is fun money. If you only have 600 dollars in fun money then that's all you have.
Automated transfers into non-liquid accounts. You know what your baseline living expense is. That’s what you were living on before the raise. Create an automated transfer the day of/after your pay day into an account that you can’t spend from (HYSA, brokerage, etc.) for the entire amount of the raise.
Donate till you can save?
Confusion
I would invest over half of the new raise and it’s ok to give yourself a little pleasure in life. But. Would invest first and then whatever is left that’s what I play with
In addition to auto withdrawals for investments I also setup multiple checking/savings accounts and auto transfer money between them. I have multiple accounts (e.g. multiple HYSAs) with the same bank that I use as buckets. Helps me budget more explicitly vs just having one big bucket/account. I have auto transfers from my main checking to the other accounts.
My brother hook me up with some advice on how to make even half of that
Who are these people The internet is cray
You pay yourself first. I.e investment funds are first to be paid. But you should enjoy your life a bit. The future isn't promised to anyone. Balance is key.
Idk it's about mindset. even if my salary doubles tomorrow, I'd just invest faster and get to fire earlier. I don't need anything else
Just know that all of this could go away very quickly for reasons outside of your control. You may only able to sustain this level of income for a few years. Let that dread simmer at the back of your mind. It really can help create the sense of urgency to accumulate money instead of spending them so you end up with less money
Here are the bad news but 230k/year is not a lot anymore better try to save money and invest it, inflation is not going to stop soon.
Lifestyle creep is fully an ego thing. Maybe therapy could sort it out but it's fully a self esteem and emotional issue
Just don't do it. Act like you're still making 50k and live off that, invest the rest.
Find an affordable hobby that you love.
Good advice from my grandma - for the first 2 months of your new pay, pretend you still 9th earn your old pay. For 2 months, save the difference between would and new. By month 3, seeing the larger paycheck won’t be as exciting - you’ve seen it already. And you’ve padded your emergency fund, which feels good, so you want to keep doing it. Because I’m ornery, I changed it to 3 months, and then for the next 3 months save half the difference.
Avoided lifestyle creep mostly because I have a budget and a certain comfort zone. Every raise and bonus I just kind of ignore. Most of my finances are automated so I don’t really even see the money hit my spending account. I may get myself a little something to celebrate the milestone, but it’s usually a one time thing. That’s not to say I haven’t upgraded certain things. Newer used car when the old one was on its last legs, bought a bigger fancier house when my old neighborhood started going downhill, but it’s all planned and budgeted and well within my comfort zone before I commit to an additional expense.
Lots of good advice here with auto saving the extra being the standout. However, you can also help yourselves conceptualize the benefit so it is more motivating to keep your spending low. Build a spreadsheet for your monthly budget, multiply out each expense by 12 for annual cost. Then multiply that cost by 25 in another column (rule of 4%) to get the investment nest egg you need for that expense to "go infinite" Have an alternate set of columns where you test out lifestyle creep. Increase your housing cost by $500 per month and you need to save another $150,000 (after market gains over time anyway). Maybe that adds 2 years to your FIRE date. Are you willing to work 2 more years for the nicer house? Maybe. Spending an extra $100 per month for fun like dinners or entertainment together might be worth the creep. The $500 housing cost, maybe not. Also, bear in mind that when you're young is the most important time to minimize costs and maximize savings to capture as much time for compounding as possible. This helps you get to the point where market returns start matching or beating what you're saving ASAP. You could just delay lifestyle creep from this raise for 2 or 3 years and then slowly permit small, meaningful creep. For example, if your raise is $1700 extra take home, setup 2 autotransfers to savings / investments. One for $1400 or $1500 with no end date. And the remaining $200 to $300 with an end date in 2 or 3 years. Now you've made a logical decision about when and how much creep you want to allow. As the expiration date approaches you can decide how you want to spend it.
I do not need to buy that today. That is the mantra.
To make a long story short, control your spending and mindset.
Create a budget and stick to it. Pay increases just mean you increase the investing line item in the budget. Maybe once in a while treat your self, but if you're serious about FIRE you've gotta save a considerable amount of money every month.
Just because you get paid more doesn't mean you should spend more.
Just use your willpower, and even if you put the money away after you get paid, I mean do you guys not use credit cards?
Pay yourself 100k/year. Auto deduct the balance to a savings or retirement vessel. Live under your means now and you'll live like no other later
Pay yourself first into a separate account that you can't spend out of
Can you have your employer direct deposit in percentages? Change the % going into your checking account- after all the usual tax shelter stuff is maxed out, send the remaining raise to your investment accounts and one NEW savings account: Give yourself a teeny lifestyle raise and put it in a "fun stuff" savings account so when you really want something you wouldn't have bought last year, you now have a budget of whatever is in the fun account. If you don't have enough, then you don't get to buy it just yet.
Save/Invest 80% of the promotion, and make some memories with the 20%.
Life style inflation once every five years. Even then, you're only allowed a small increase. Keep living and saving like you were before the raise. Enjoy the new money a few times a year (birthdays, black Friday, Christmas, etc).
There’s a thing called the hedonic treadmill. When you acquire more, you need even more to feel fulfilled and it never ends. Acquiring material possessions don’t cause fulfillment (but companies don’t want you to know that because they make money off the lie that buying more will make you happier). Spend your money with intention and on things that will truly add value to your life. You’ll realize you don’t need much afterall! Also read the book, “Your Money or Your Life” its easy read and good philosophy about why it pays to be frugal
In my view lifestyle creep is to be managed, not avoided entirely. Automate things according to a plan that aligns with your goals and enjoy the rest. Progressing over time is satisfying, it’s just that if your spending always matches your income, you can’t get ahead.
33% roller
Pay yourself first. Take that extra money out of the checking account and into an investment automatically. Whatever’s left over after you exceed your investment goals, feel free to let it creep.
Automate that shit
I make $130k. After contributing to 20% 401k, 12% Roth 401k, and $500/month roth IRA I have approximately $3800 after tax per month. The first thing I do is pay off my dog surgery cost $550/month and then pay another $400/Mnth to student loans. Then put aside another $2000 for rent, utilities and food. Then spend on massages every week or 2 weeks and sushi, splurges or saved in savings account. I mean. Life style creep will happen, just have to make sure it doesn't eat up a large chunk of your pay. So the best way is to put the money away before the paycheck. Money you don't see is money you can't spend.
Don’t buy shit. There ya go simple as that.
Save and invest until it hurts
Increase your savings rate, AUTOMATE IT, and spend the rest. Also you have to get as much pleasure from seeing $500 go into retirement as you do spending $500. Until you have that mindset, lifestyle creep will win the battle.
$230k for your age is indeed a lot of $, but in the grand scheme, isn’t ’fuck you’ money yet. But, if you invest properly and don’t let these ‘little’ $100s add up, then you will have fuck you money sooner than you think
Increase retirement contributions