3 MINUTE READ.

You probably haven’t noticed, but for most of your working life there’s been a creep silently stalking you.

Lifestyle creep!

Investopedia defines lifestyle creep as a situation where people’s lifestyle or standard of living improves as their discretionary income rises, either through an increase in income or decrease in costs. As lifestyle creep occurs and more money is spent on lifestyle, former luxuries are now considered necessities.

In general, most people tend to increase their standard of living as their income rises. If the increase in lifestyle expense is equal to the increase in income, then nothing additional (or maybe nothing at all) is being saved to put towards the future.

It’s the little voice in our heads that causes the problems… “I just got a pay rise so I can afford the coffee and muffin each work day”, “I’m earning more so we should get a better house”, “I can afford a nicer car now with my higher income”.

Don’t try and keep up with Joneses. They’re broke! They’re broke because they are failing at the most important part of becoming wealthy which is spending less than you earn.

Instead, put in place the one rule that could change your financial future dramatically:

PAY YOURSELF FIRST

If you can follow this one simple rule it will guarantee that you have money to put towards your future. If you have a little money to invest regularly, then with time you can create a lot of wealth. If you can create wealth, you can create a way of replacing your income from work and the sooner you can do that, the sooner you can retire. Sadly, most people never get started (starting is the hardest part!) and that’s why the biggest regret of people over the age of 65 is that they didn’t save more while they were earning an income.

Paying yourself first simply means taking something from each pay, on the day you get paid, and putting it somewhere for the future. That is, it’s money you make unavailable to spend now, instead locking it away for the benefit of your future self.

In an ideal world, we’d all save 10% of our income for the future. However, if lifestyle creep has got you a little pinned down from years of abuse then one way to start paying yourself first is to use your next pay rise to kick-start things.

The next time your pay goes up, check the difference between pays and then religiously start saving the difference. You might be surprised to find you don’t miss the extra money (you were living without it before the pay rise anyway) and all of a sudden you are saving and the process has begun.

And then look at what time does if you can manage to save and invest $200 a month:

*Assumes an 8% average annual return

Interested in learning more about how these sorts of concepts can be implemented to supercharge your financial future? Get in touch!

Cheers,

Daniel