Avoid the Raise Creep

Around this time of year, people lucky enough to work in rather prosperous industries may be receiving their annual cost of living increases, raises, or bonuses.  This is a perfect time of the year to start assessing what your own spending habits and possibly analyzing different ways you can save for the future.  Unfortunately (this is the opinion of a cheap person such as myself), these wage increases generally lead to increases in spending, so in the end, you are really no better off then you were.  This spending increase due to increasing your earnings is called the Raise Creep (you'll notice there are a number of "creeps" in my life).

I'll caveat all of my following opinions with the point that if you are indeed struggling to make ends meat, then a wage increase can truly be a salvation and increased spending may be warranted to make your life a little more bearable.  That said, many of us have some form of discretionary budget for fun and entertainment.  Receiving a wage increase may even be icing on the cake for these type of activities.  However, I encourage you to try and put these funds towards better uses in your own life.

Try living off what you were previously earning and save the raise.  If you were pretty happy with your previous life before the raise, why not keep living that life and pocket the wage increase?  This is a great way to boost your retirement savings and potentially your retired life.  I know, I know, how lame does that sound?  Here I get a big raise, and this guy wants me to save for when I'm in my 60's.  Well, I normally don't believe in "treating" oneself, but you just did a great job at work, so you should at least have a little fun with it.  Maybe, go out to eat or see a movie, but seriously...save that cash!

When new money comes into our lives, its so easy to spend a little more.  This "creeping" of expenses can cause serious problems in your future if for whatever reason you salary decreases or you need to live on a much smaller budget.  Not only is it harder to go back on your lifestyle improvements, but you may not have the necessary savings to retire early.

So do yourself a favor, spend a little on your celebration, and save the rest.

Wonderful moment of the day: Ham steaks for dinner!  Sorry vegans :-(