The number one rule when it comes to being a financial winner is spending less than you earn.

Those who can regularly spend just a little less than they earn can get ahead, while those who can’t, fall further and further behind.

When most of us first start working, we are not earning much and it’s pretty tough to spend less than we earn on a regular basis. We often borrow for things we can’t afford and for young people today it’s made even tougher with the advent of things like Afterpay.

As we get older, we usually earn more and more through our working lives. It’s then that we often fall into the trap of lifestyle creep.

Lifestyle creep occurs when you earn more and former luxuries become new necessities. It happens when we start to tell ourselves “I deserve it”. Of course, we all deserve a bit more as we earn more… we work hard for it. If that spending, however, comes at the cost of not saving for the future then it’s a habit that needs to be adjusted. Not entirely, just tweaked for success.

When lifestyle creep has set in, if someone wants to follow the number one rule I mentioned above, they are often faced with a choice: find a way to earn more or find ways to spend less.

Earning more is one option. Can you upskill to get a promotion? Can you change industries to a higher-paying role? Can you work more hours?

There are a couple of important things to consider. These things could allow you to earn more, but would you be happy? If you could earn more, would you actually save more or would lifestyle creep mean you just find more things to spend money on?

Spending less is another option.

Write down everything you spend money on for a month and then see if there are things that, upon reflection, you’d choose to spend less on if given your time again. Run through all your bills and consider when you last reviewed them and whether you can get better deals by shopping around.

You may easily find you can be following the number one rule without having to work any harder. An added benefit is that if you can find ways to spend less, you establish habits you’ll likely continue if you do end up earning more in the future… getting a handle on your cashflow is a way to ward off lifestyle creep.

We all have different ways of doing things and we all need to find the path that works for us. The key is awareness. Being conscious of your spending habits and having a plan for what you are doing with your money will mean you’re going to be more financially successful than most.

Cheers,

Daniel