Speaker 1: Hi, I'm Stacey Hyde and I'm back with another
episode of Better Financial Health in 15 minutes or less.
And today I'd like to talk about something I call lifestyle
creep.
You got the big raise, you got the new car, but at the end of
the month there's still almost no money left.
Where did it go, and how does this, and what can you do about
it?
So lifestyle creep is when, slowly, over time, you maybe
start not bringing your lunches often, so you eat out more or
you meet friends for drinks, but instead of going to somebody's
house, you're going out to a bar but now it's not the corner bar
, it's this nicer bar in this fancy restaurant and sometimes
you're hungry, so you stay and have dinner, or you order
takeout or meal delivery services multiple times a week
instead of going to the grocery store, and so all of those
things add up.
Or maybe, instead of taking the budget-friendly all-inclusive
vacation or going camping, you've gone to you know a much
nicer resort and you've upgraded your plane ticket, because who
doesn't want more leg room and to make sure that they can get
their bags in the overhead bins?
Been there, done that.
So that type of spending can really erode your savings and
impact your long-term goals and it can cause you to have a
paycheck to paycheck lifestyle, even making six figures.
I was talking to a friend the other day and she was like man,
I need a financial planner.
And I started asking her.
She goes oh, I know, we spend what'd?
She tell me, a couple of thousand dollars a month on meal
delivery services.
I was like, oh, wow, so that's you know.
And she didn't really even seem willing to cut back on that.
And that's really the first step is being understanding
where it's going.
She understood that, but she wasn't ready to make a change.
And so, in order to have a better life in the future, for
future you, you have to make some changes today, and it's
really not any fun to live paycheck to paycheck.
So what you want to look at when you look to see what's
going on she obviously had done this are your expenses rising
faster than your income, and that can be easy today with
inflation and the tariffs and things like that going on.
And you want to compare.
Pull out or go online, as most of us do, and pull an old credit
card statement from two years ago, pull an old bank statement
from two years ago and compare what your expenses are today
versus what they were then, and a lot of the streaming services
have had, um, quite a bit of increases and if you're not
using them all, you may want to cancel them.
I know some people that they'll have netflix for three months.
They'll watch all the stuff they want, then they'll get
apple for a couple of months, watch what they want there and
then, and they kind of cycle through them so they never have
more than one at a time.
And then you know, I think we're all addicted to our amazon
prime for not just the movies, um, but also the free delivery.
Or, as my husband likes to point out, it's not free, we're
paying for the included delivery services and I think that is a
good distinction to look at.
But what you want to think about is sort of the um 50-30-20 rule
and anytime you get a raise, you really want to limit the
lifestyle piece to 30% of your raise, or if it can be less,
that's all the better.
I was actually telling my daughter and son-in-law that the
real key to building lasting wealth is to not raise your
lifestyle every time you got a raise.
If you were comfortable at one level, just stay there and then
you can take that money and increase your savings, increase
your 401k at work, add more to your Roth IRA, but don't forget
to put that money in your savings and set it aside.
No, it doesn't have the potential to grow as much as
stuff that you put in stock, but it's there if you need a new
car or you have a repair on your home or something else, or you
have an unexpected medical bill bill, because, let's be real,
out-of-pocket payments for medical expenses can really add
up quickly, so you want to make sure you're prepared for that
too.
So the challenge I want to ask kind of ask you to try out today
is, the next time you get a raise, really be deliberate
about where you spend that extra money and make sure that it
really has a nice impact for you .
Or what you could even do is take the raise, don't change
anything for a month and see how it feels to have that extra
money in your bank account.
Don't let it just sit there in your regular checking account,
though, because that's not gonna going to earn you anything.
You want to make sure you're transferring it to a high yield
savings account, a money market account or to fund some of those
other longer term goals.
So, and the key thing to keep in mind is that real wealth does
not come from making more money .
It comes from keeping more money and, at the end of the day
, your future self will thank you for keeping more money today
, and it will grow over time, even if it feels like for a
while that it's not making that much difference.
I promise you the power of compound interest will work for
you over time.
Thanks for tuning in.
This has been another episode of Better Financial Health in 15
Minutes or Less.