Beware of Lifestyle Creep: How Luxury Keeps Getting More Expensive
Getting a promotion, a raise, or a new position with a higher salary is an exciting event. Making more money is a goal many people aim to achieve. While it’s easy to want to celebrate this new influx of money with a large purchase, lifestyle creep can happen quickly and put you in a difficult situation.
When you are earning more, you may be tempted to spend more. Big-ticket items such as luxury cars, new homes, and extravagant accessories could be your first purchases with your higher salary.
However, these items may not leave you with much money left over and could end up costing you more than their initial sticker price in the long run.
Luxury Items May Cost More Than You Think
After a pay raise, you may think it’s time to purchase that shiny new convertible you’ve had your eye on for years. After all, you can now afford the monthly payments with your new salary. It’s essential to consider those monthly payments won’t be the only increase you may see, however.
On average, convertible car insurance will cost more than coverage for other vehicles due to their higher price tags. You are paying more per month for your car loan and your insurance costs when you add it all up.
The same can be said for a more luxurious or extravagant home. Although you may feel the monthly payments are reasonable, it’s crucial to consider the influx of bills that will come along with a larger, more expensive home.
Heating, air conditioning, water, and other bills may be more costly in a bigger house. You may also move to a location with higher taxes or a monthly homeowners association (HOA) fee, causing your monthly bills to increase drastically.
The Importance of Savings
Having a savings account or an emergency fund is an essential financial asset. Though it’s undoubtedly easier to spend money as you earn it — especially when you have received a large influx of income — setting money aside is crucial.
Life can become unpredictable at any moment, and some disasters or emergencies may be costly. Without money set aside, you may find yourself in a difficult situation and unable to pay your bills.
It can also be a slippery slope once you begin purchasing new items. Once you have a flashy new car, you may think you need a luxurious, modern home to match. While your paycheck may technically cover these costs each month, you are putting yourself in a poor financial situation if you have no money left over after paying your bills.
Rather than allowing lifestyle creep to take over and drain your bank account, try using your newfound income to put money aside in a savings account. It’s certainly not as exciting as luxurious new purchases, but it will potentially save you in the long run.
You also don’t have to deprive yourself of purchasing new things necessarily; simply buy in moderation. If you want to treat yourself to a new, small item to celebrate your new salary, you shouldn’t avoid it. However, take time to adjust to your new income before going all out on a luxury lifestyle, and attempt to save money where you can.
Luxury Lifestyle Creeps up Quickly
A new influx of money may have you hoping to purchase new luxury items left and right. While you might technically be able to afford these items, leaving yourself with no money left over can place you in a tight spot financially.
It’s easy to consider spending excessive amounts on items like new cars or homes. However, it’s wiser to put some of your increased income away for the future. You never know what will happen in life, and having the proper financial preparation can save you massive amounts of stress in the long run.
A few small purchases won’t cause your luxury lifestyle to extend too far, but it’s crucial to be mindful of your spending habits. Catching them before they get out of hand can help you avoid the lifestyle creep.
Alexandra Arcand writes and researches for the car insurance site, CarInsuranceComparison.com. She is aware of how quickly overspending can occur and hopes to share her knowledge with others about the importance of savings and emergency funds.