A promotion, bonus, or pay raise is always an exciting achievement. However, with this newfound financial freedom, there’s a temptation to upgrade your lifestyle — more food delivery orders, a few new streaming subscriptions, high-end products, or even a fancier apartment or home. This phenomenon, known as lifestyle creep, can quickly eat away at your extra income, leaving you no better off than before the raise. Read a few tips below to help you avoid the disadvantages of lifestyle creep.

Remember Your Financial Goals: Before you let your spending habits adjust to your new income, take a step back and remember the financial goals you set. Whether you are saving for a down payment on a house, building an emergency fund, or planning for retirement, having specific targets can help you prioritize where your money should go. By directing your extra income toward these goals, you’ll make progress toward long-term financial security rather than short-term indulgences.

New Income, New Budget: Budgeting is one of the keys to successful financial management, and it’s even more crucial after a raise or bonus. Take your new income and allocate it according to your financial goals, necessities, and discretionary spending. Look at your past spending and identify if there are areas that need to increase, like your grocery or energy bills. It’s okay to treat yourself a little, but keeping your budget in check will prevent your lifestyle from inflating beyond your means.

No Immediate Lifestyle Changes: When you receive a raise or bonus, it’s tempting to make big purchases or lifestyle changes immediately. However, it’s wise to wait and allow the excitement to settle before deciding how to use your extra income. This pause gives you time to assess whether these changes align with your long-term goals and values. After a few months of spending with your new budget, there may be a small abundance that you can use for slight lifestyle improvements.

Automate Your Savings: One of the most effective ways to avoid lifestyle creep is to automate your payments and savings. If you have debt, increase the amount of your automatic payment to get out of debt faster. Set up or increase automatic payments to your savings account. You can also increase your 401(k) contribution toward your retirement savings. This way, you’re prioritizing your future and financial goals first, and you won’t even miss the extra cash.

Lifestyle creep can be a sneaky threat to your financial health. By setting clear financial goals, creating a new budget, avoiding impulsive lifestyle changes, and automating your savings, you can enjoy the benefits of your increased income without compromising your financial future