So, now that you’ve done a budget (you did do one, right?), you know where you’re spending all your money. And you were brutally honest about what’s a necessity and what’s not. Were you surprised by how much money was going towards non-essentials?
Don’t be. The truth is, it’s not uncommon for us to increase our spending as our income goes up. There’s even a couple terms for it, Lifestyle Creep, also known as Lifestyle Inflation. Lifestyle creep is when, as your income increases, you start to spend more money on an improved lifestyle (a more expensive phone, a nice car, a bigger apartment or home, a ridiculously expensive gym membership), and/or you start spending more on rewards for all your hard work (a new outfit, a new toy, extra trips to coffee shops and restaurants). And pretty soon, you’re struggling just as hard to make ends meet as you were before you got that raise.
This is the reason for accounting for every penny you spend. After a short time, this spending no longer feels discretionary, even though it absolutely is. It happens at all income levels. The more money you make, the more ridiculous the spending can be (as we will demonstrate for you with our own story in an upcoming post).
Scott here, I would like to take a moment to talk to you about a service we love and use called You Need A Budget.
We tried a lot of different personal finance software options and none of them seemed to do what we needed. You Need A Budget really allows you to see where your money is going and most importantly it helps you develop and stick to a budget. They offer a 34 day trial so you can take your time and see if you really like it before paying.
Click here to try it out for free!
I’m not going to dictate how much of your income should be saved and how much it’s acceptable for you to spend. That is something you have to decide for yourself. I am going to provide some insight into how bad it can get if you don’t keep it in check. I will also talk about some suggestions on how to save money and point you to some tools to help you decide if spending now (especially if it is a repeated, regular thing) is worth what it will cost in the long run.
And now for the tough love part.
I am going to dictate one thing to you. If you have any loans or credit card debt, and you are not keeping up with those payments and/or adding to your credit card debt, you need to stop spending on all those discretionary items immediately. The same is true if you’re currently only paying the minimums on your credit card debt. You will never going to get yourself out of debt if you don’t stop spending.
If you have little to no debt or excess spending, and you’re still struggling to make ends meet or save money, don’t worry. We’ll talk about things that you’re probably wasting money on, and ways to decrease necessary spending in future posts as well. But we’re starting with the most egregious shit first.
And if you haven’t done a budget (shame, shame, shame), do one now, before you read another word. Reading about how to get out of debt isn’t enough. You have to do the work, if you want things to get better. And isn’t that why you’re here?