The increasing cost of living might silently catch up with you, similar to unnoticed mold in your refrigerator. Questions may arise about your recent choices, such as joining multiple subscription services, frequent online shopping, or ordering food delivery more often. Without much realization, these expenses accumulate, forming larger bills monthly. This is termed ‘lifestyle creep’ or ‘lifestyle inflation’. It often occurs when you start earning more money, perhaps due to career advancement, reduced pandemic-related expenses, or shared expenses with a partner. Instead of saving or investing, you end up spending more.
Financial Planning Tips from Paco de Leon
Paco de Leon, a writer, artist, and financial planner, offers advice on managing finances and emotions to achieve personal wealth and avoid lifestyle inflation.
Strategies to Save Money Effectively
When your income increases, your savings rate should increase too. Adapt your savings to your earnings. If possible, arrange for direct deposits into your savings account, ensuring money is automatically set aside. Even during inflation, pay attention to how your savings match your earnings growth.
Prevent Impulse Buying with a ‘Buy List’
Create a ‘buy list’ to deter impulse purchases. List desired items and wait a set time (a week or a month). If you still want the item, proceed with buying. This method allows anticipation and reduces careless purchases. De Leon mentions this simulates shopping without impulsivity.
Occasional Treating Yourself is Healthy
Spending money on yourself is acceptable. Strict spending can lead to unsatisfactory outbursts, according to de Leon. Treat yourself, but cautiously. Consider how the purchase will make you feel and whether it is a desire to escape unwanted emotions. This aids in avoiding the endless ‘hedonic treadmill’, where short-lived happiness from purchases leads to new desires.
Question ‘What is Enough?’
Lifestyle creep manifests in minor and major lifestyle choices. From coffee habits to seeking a single-family home, consider if your contentment is consumer-based. De Leon warns against assuming one item brings happiness. Often, you might desire a specific item but feel the need for complementary purchases. The solution is pondering ‘What is enough?’ and disconnecting life goals from material desires. Consider daily happiness, necessary earnings, savings for emergencies, and investment needs. Use these considerations to value current possessions instead of seeking more.
Enhance Your Mental and Emotional Well-being
De Leon states, ‘Our relationship with money mirrors our feelings about ourselves.’ Emotions like insecurity or jealousy may prompt needless spending. Develop self-care practices to make sound financial decisions and resist external pressures. Adequate sleep, deep breathing, mood-lifting music, and supportive companionship enhance emotional well-being, positively affecting financial behavior. ‘Improving yourself enhances all life aspects,’ de Leon asserts.
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