When income rises, expenses tend to follow, but with a few simple strategies, it’s possible to stay ahead of the curve

For many of us, the thrill of a pay raise or promotion can be tempered by the reality of increased expenses. This phenomenon, known as lifestyle creep, can be a subtle yet insidious force, eroding our financial security and making it harder to achieve our long-term goals. But there are ways to stay ahead of the curve and keep lifestyle creep under control.

Take Deidre Cross, a 40-year-old Toronto resident who learned the hard way about the dangers of excessive spending. In her early 20s, she had a maxed-out credit card, student loans, and a love for luxury goods that didn’t fit her income level. But after years of struggle, she developed a budgeting strategy that has allowed her to stay on track and avoid the pitfalls of lifestyle creep.

Cross budgets for any expense one to two months ahead of time, and every potential purchase gets the same treatment: she takes a photo of the item and writes down the price, including taxes and shipping. This approach helps her to avoid impulse buys and stay focused on her financial goals. “When I go to budget the next month, most times, I don’t even want it anymore,” she said. “It was just the idea of having it. That’s one tip that I swear by.”

Financial advisers say that lifestyle creep can be a gradual process, often taking years to become apparent. “People’s income goes up, but they never really seem to get ahead of the game,” said Hans Friedrich, a Sun Life financial adviser and managing partner of Evolv Financial Solutions. “It’s only when they realize they’re not meeting their financial goals that they start to notice the problem.”

So how can you spot lifestyle creep in your own life and take steps to prevent it? One approach is to run the numbers and project your net income for the next five to 10 years. This will help you to see how much you need to save each month to stay within your budget and achieve your long-term goals. “If your goal is to save for a down payment or new car, this cash-flow analysis can show you how much you need to put away monthly to stay within your budget,” said Friedrich.

Another strategy is to use dedicated accounts, also known as sinking funds, to save for specific future expenses. Cross uses eight high-interest savings accounts to save for categories such as dog care, vacation, and gifts. She also sets aside three months’ worth of expenses in an easily accessible savings account, so that she can cover unexpected expenses without going into debt.

In addition to budgeting and saving, it’s also essential to be honest with yourself about your spending habits. Aderimike Lala, a senior business analyst at a children’s game company, realized that she was spending too much on Uber rides and food delivery after she received a pay raise. “I had to really sit down and be like, ‘Okay, let’s actually dig deep to find out what was happening,’” she said. “I found out that I wasn’t enjoying the food, and that’s when I realized that I was just spending money out of habit.”

Lala now practices what she calls “loud budgeting,” where she shares her financial goals with friends and family and keeps herself accountable. She also recommends saving a percentage of your income rather than retaining a set figure, so that savings grow in proportion to earnings.

Finally, it’s essential to stay vigilant and avoid unnecessary expenses, even when income rises. Taylor Van Luven, a 23-year-old content creator from Ottawa, lost her job earlier this year but had prepared for the eventuality by saving a three-month cushion and sticking to a tight budget. “I’m not constantly being bombarded with what people are buying and feeling FOMO for not buying them,” she said. “And you can’t feel FOMO when you don’t know what’s happening.”

By being aware of the dangers of lifestyle creep and taking proactive steps to prevent it, you can stay ahead of the curve and achieve your long-term financial goals.