Money Like A Woman means spending with purpose

You got the raise! Maybe it was 5%. Maybe it was 15%… Or maybe you finally landed that “dream job” with the salary you’d been working toward for years.

So…why does your account balance look exactly the same as it did before?

Blame lifestyle inflation, sometimes called lifestyle creep.  It’s all too real, and it’s what happens when our spending rises right alongside our income, gobbling up all the extra money in your checking account before we can put it to work for our futures.

The crazy thing is that lifestyle creep rarely looks like driving off the lot in a brand-new luxury car or flying first class as you cross the pond. “It’s incremental, and it feels earned,” says Douglas A. Boneparth, CFP and founder of Bone Fide Wealth. “The grocery upgrade, the bigger phone plan, the dinners out that used to be a treat and are now just a regular Tuesday.”

In other words, lifestyle inflation means getting comfortable spending just a little more here and there until suddenly that raise you worked so hard to earn has pretty much disappeared.

But if you can put on the brakes and prevent your spending from expanding quite as quickly as your paychecks do, you can start saving (and investing!) in a way that will literally change your life. That’s what spending with purpose is really all about — making sure more of your money is going toward the things you actually want today, and decades from now.

Watch Your Savings Rate + Have A Little Patience 

Most of us would probably say that we want to save more. But not all of us love the idea of obsessively tracking every single individual purchase we make, right down to the last pack of gum. Thankfully, Boneparth says that degree of micromanagement is not necessary as long as you’re keeping an eye on your savings rate—the percentage of your income that you’re consistently saving and investing.

As your salary rises, the percentage that you’re saving should rise proportionately. Boneparth suggests saving or investing at least half of every raise and then giving yourself permission to enjoy the rest!  So, if you got a 5% raise, for example, you should bump up your savings rate by at least 2% to 3%.

What about celebrating your raise with the splurge you’ve been waiting for? Give it a week, Boneparth suggests. “The urge to reward yourself is loudest right when the money hits your account,” he says.

Use that week to take a long look at your financial foundation. Is your emergency fund where you want it to be? Are you saving enough for retirement? Do you have credit card debt you’ve been meaning to knock out? Or is there another goal (like buying a home or a car) that you want to prioritize? Your job is to decide what your raise should accomplish before that money becomes part of your everyday life.

Once you’ve made your decision, automate it. If retirement is the priority, then increase your contribution to your 401(k), IRA, or similar account. If you’re building up cash, then schedule an automatic transfer to savings. Essentially, your goal is to make the money disappear into “Future You’s” accounts before “Present Day You” gets accustomed to spending it!

As Boneparth puts it: “You can’t inflate a lifestyle around money you never see.”

Spend More on the Things That Actually Make Life Better

You may be thinking that “keeping lifestyle inflation in check” may sound suspiciously like code for you’re never allowed to have anything nice.

That couldn’t be further from the truth. In fact, spending with purpose can actually mean spending more in certain areas of your life.

Some life upgrades can really deliver lasting returns — particularly in instances when money buys us time, Skee Orr says. For example, you could pay someone to clean your house twice a month, get your groceries delivered, or hire a neighborhood teenager to mow the lawn.

“When extra income buys back your time by delegating the tasks that drain you, freeing up your evenings, simplifying your week, the emotional return tends to be real and lasting,” says Skee Orr, Certified Financial Planner and Founder of Kinetic Wealth Financial Planning in Knoxville, TN. “Time is the one resource that can’t be earned back.”

The only thing that may best get time back in your day is using some of that extra money to fund experiences with people you love. This could be a family vacation, dinner with old friends, or a weekend away with your partner. Anything where you’re making memories and connections delivers greater returns than those from “stuff,” Orr says.

Give Every Raise a Job

One reason controlling lifestyle inflation now is so powerful is that it’s much easier not to increase your spending by $500 a month than to get accustomed to spending that extra $500 and then later try to claw it back. Essentially, once a new expense becomes part of our lives, giving it up can be surprisingly difficult. (This is because we are very quick to “adapt” — in other words, we get used to what we have! That’s why, if you’re not careful, two weeks after you get that raise, it will be very difficult to remember how you ever lived on less. So, it’s important that you take a moment NOW to give a certain percentage of your raise a “job” to do that’s future-oriented!)

That’s why Boneparth says his most successful clients tend to make their raises pretty much “invisible.” “Their money goes to work before it reaches their lifestyle, so their income climbs faster than their spending, and the gap does the heavy lifting over time,” he says.

That “gap” can be a bigger retirement account, a fully funded emergency fund, a down payment on a home, college savings for your kids, or myriad other things. If it’s on your agenda as a life goal, it’s possible as long as you make room in the budget.

Because the ultimate luxury isn’t owning the most expensive version of everything — it’s having choices. Funny how the money that can give us the greatest freedom is the money we decided not to spend!