Imagine this is your routine: each morning you get up, get the kids ready for the day, and stop by your favorite coffee shop to grab a coffee. A few months pass and you’ve landed a new job with a bigger salary, leading to increased day-to-day spending.
Your new routine still includes your usual coffee, but now you’ve added a bagel. At work, you grab lunch with your new coworkers the first few weeks, not realizing that these seemingly small purchases add up over time.
Those regular expenses stray away from your budget, and you may find yourself saving less or wondering where your money is going. You have less to spend on your summer vacation, or maybe you work long hours to build your emergency fund and miss baseball season.
This steady increase in spending is lifestyle creep. It starts as a few “treat yourself,” but if you don’t identify the habit it can have a large influence over your finances and security.
Here are 3 ways to create healthy saving and spending habits to avoid lifestyle creep.
1. Create a Family Budget
Budgeting can eliminate financial stress from your life and help you better manage your money. The budget doesn’t have to be dollar to dollar, but knowing where a certain amount of money is going ahead of time gives a sense of comfort. Your budget not only tracks what’s going out of your bank account, but money coming in.
Make a list of all of your expenses and sources of income to see where you stand. Breaking things down into categories allows you to organize each area better and see what can be cut back. Maybe you have a kid that loves sports, so you know the sports seasons will have to be included in your expenses. If you have monthly subscriptions from streaming platforms, take note of that, too. Staying on track with your budget will reduce impulse buying.
2. Reduce Impulse Buying
Impulse buying can be tough to beat. You see a great deal on a new pair of shades that you just have to get, even if that means not fitting in your month’s budget. Over time, impulse buying will also cause financial damage. Spending money outside of the budget starts to impact financial goals such as emergency funds or college funds. Don’t be secretive with your spending, communicate if something is done outside of the budget.
If you have a habit of impulse buying, try setting up a dedicated checking account or monthly cash allowance used for whatever you like. This way you still enjoy your purchases without overspending your budget.
A set limit can also encourage mindfulness, which makes you think twice about your purchase and how much it really means to you. With practice, you’ll better be able to recognize frivolous spending versus a treat that genuinely benefits you.
Communication plays an important part of your spending and savings habits and helps you avoid money conflicts. If the children are involved in budgeting, this also allows them to understand spending habits, too.
First, make sure everyone in your family is on the same page about your budget and finance goals. Chat with your partner to decide how often you’ll enjoy perks like weekend brunch with friends or date nights out. You don’t have to eliminate entertainment, but set a spending limit for each of you to manage your budget.
It’s also smart to align on your savings priorities. Discuss what goals are most important. For example, are you focused on your summer trip to Disney or buying a new house with a bigger yard? Both are great goals you can continue to save for, but having priorities can help you decide where to spend extra money or restrict when you need to tighten your budget.
Healthy spending and saving habits will allow you to invest more time and money into your family. Check out the visual below for more tips when the lifestyle creep sneaks up on you.