The One Money Mistake You’re Probably Making Right Now 💸

Do you ever feel like you’re not overspending but are barely scraping by, eagerly awaiting payday at the end of the month? The truth is, most people unknowingly fall into a financial trap that silently drains their wealth, costing them their financial future in a subtle but devious way.

But don’t worry—once you spot the pattern, you can slowly unlearn what your brain has subconsciously absorbed as fact and start seeing real progress immediately. Without further ado, the number one money mistake people make? ‘Lifestyle Creep.’ 

Think about it: how many times have you been promoted at your job, received a pay raise, and still felt like you are at the exact same level as before, if not worse? This is due to something personal finance experts call ‘Lifestyle Creep.’

In simple terms, ‘Lifestyle Creep’ happens when you start spending more as you earn more. Instead of saving or investing your extra income, you upgrade your lifestyle—buying nicer clothes, eating out more, getting a fancier car, or moving to a more expensive home. Over time, these small upgrades add up, making it harder to save and keeping you stuck in the same financial position despite earning more.

Imagine this: a few years ago, you were living comfortably on whatever salary you had. You drove a reliable car, lived in a modest house, and went on a few holidays here and there—you lived within your means. You get a promotion. Congratulations! I’m certain that this was well-deserved. However, instead of maintaining your lifestyle and saving the extra income for the future, you started upgrading without fully realizing what was happening.

You moved out of your humble abode into a nicer apartment. All of a sudden, that Toyota Yaris does not fit your ‘aesthetic’; it looks old and dusty parked outside your house—some German engineering would do the trick, maybe a brand new Mercedes Benz on car finance, or perhaps a brand new Tesla Model X? Don’t forget about the expensive excursions—the quick weekend trips to Europe won’t cut it anymore—Dubai, Thailand, New York, and Singapore are more your kind of taste now.

At first, it felt like you were “rewarding” yourself for working hard. But soon, your new lifestyle became the norm. Now, despite making more money, you’re still living pay check to pay check with little savings to show for it. We have all been there. I too am guilty of ‘Lifestyle Creep.’ There is nothing wrong with travelling to nice places but we must do this in a a way that I will discuss later on in order for you to maximise your potential wealth.

The key thing here is to recognize the behaviours leading to this mistake and be mindful when it comes to how we spend our money. Awareness is the first step to recovery, and on top of that, it is a quick fix, but this alone does not slay the monster—we must implement a long-term strategy to combat the issue.

Implement these three essential strategies into your long-term plan to effectively manage 'Lifestyle Inflation' while still celebrating your financial achievements:

1. Adopt the “50/30/20 Rule”

Stick to a 50/30/20 budget, which consists of:

- 50% Needs (housing, utilities, groceries, necessities)

- 30% Wants (entertainment, travel, dining)

- 20% Savings & investments

I would suggest saving at least six months’ worth of expenses (an emergency fund of some sort) in a separate savings account so that it is out of sight and out of mind. This will act as your safety net and must only be used on a rainy day. Once you hit your target figure, you can now look to use the 20% to grow your money, whether it be via channels such as investing in index funds, saving for a deposit for an investment property, investing in high-income skills, etc.

2. Automate Your Financial Goals

Set up automatic payday transfers to:

- High-yield savings accounts to beat inflation

- Retirement accounts

- Investment accounts

By automating your savings before you even see the money, you prevent lifestyle creep from taking over. Remember to always pay yourself first.

3. Upgrade Thoughtfully, Not Impulsively

Instead of immediately increasing expenses with every raise, delay big lifestyle upgrades as much as you possibly can. You never know; you might not really want that new car or new apartment next month once you take time to really reflect. When considering a big upgrade (whatever it may be), ask yourself the following questions:

- Will this truly improve my life, or is it just to keep up with the Joneses?

- Does this fit into my long-term financial goals?

For example, instead of upgrading your car after a raise, drive your current one for longer and invest the difference. Your future self will thank you for it.

By avoiding this one mistake, you’ll free up money for savings, investing, or reaching your financial goals faster.

Have you made this mistake before? Hit ‘Reply’ and share your experience! Next week, I’ll reveal another common mistake people make when it comes to their finances. Stay tuned!

Thank you for reading,

Rashid from Savvy Pockets

@RashidSaves on Twitter