Another big financial mistake that a lot of people fall into is something called lifestyle creep.
Lifestyle creep is basically spending money as you make more money, right? As you get those raises every year, maybe a promotion, you have a choice.
Do you save that extra money or do you spend a little bit more than you used to? The problem with lifestyle creep is that our expenses are very sticky.
We're creatures of habit.
Once you get used to going out to eat two or three times a week, it's very hard to dial back those expenses.
But increasingly in the modern world, our income is variable.
We have good years and bad years and lifestyle creep makes it very hard to save money or even stay solvent when your income decreases.
The best way to avoid lifestyle creep is to remember you don't have to spend more money just because you're making more money.
If you get a three or 4% adjustment to your compensation every year, consider just not spending that money and instead using it to boost your savings rate so you make it easier for you to hit your long-term financial goals.
Lifestyle creep is a reality for everyone, but if you're consciously spending money on only things that you really need or that bring you true joy, you'll find that you don't need to spend everything that you make.
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Please note that the information contained on this page is for educational purposes only and should not be considered tax advice. Any calculations are intended to be illustrative and do not reflect all of the potential complexities of individual tax returns. To assess your specific tax situation, please consult with a tax professional.