Maybe you just got a raise, or figured out a way to bring in more money each month through a side hustle. Congratulations! But as you earn more, it’s important to try to use the extra money sensibly.
What is lifestyle creep?
The tendency to spend more as you earn more, particularly on non-essential items.
What is net pay?
Net pay is what’s leftover in your paycheck after state and federal taxes have been taken out, as well as deductions for Medicare and Social Security.
- Stick to your budget, whether it’s the 50-30-20 rule, or another way you prefer to keep track of your money, and allocate it to monthly expenses and savings.
- Consider using the extra monthly cash to build your emergency fund, for short-term and long-term savings goals. Short-term savings goals could include buying a car or a home, even going on a vacation. Long-term goals include saving for retirement.
- Don’t forget “fun” money. Consider setting up an account just for things you want to simply enjoy, whether that’s clothing, dinners out, or entertainment.
- Automate your savings. Each time your paycheck hits your checking account, have a percentage moved automatically to your savings accounts.
Consideration: Lifestyle creep isn’t always a bad thing. If you previously had to make a choice between buying groceries and paying your electric bill, and now you can afford to do both, that’s great! Lifestyle creep gets to be a problem when luxuries—such as always needing the latest and greatest new smartphone or handbag—become essentials.
Put that extra money from your raise or promotion to work for you, and remember to have some fun!