3 days ago
I got a £10k pay rise but ‘lifestyle creep' meant I had no money left each month – how you can avoid it happening to you
WHEN Victoria Leyton moved from Cardiff to London 10 years ago to take up a job in financial services, she couldn't believe it when her salary jumped by £10,000 a year.
Victoria, now 40, went from struggling to pay her bills every month to being able to afford what had previously seemed like luxuries.
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But after just a few months, she found herself back in the same position she had been in before she made the move.
Despite earning £830 more a month, she still had no money at the end of the month and felt skint.
'At first, my new salary felt like silly money, even though the cost of living in London was higher,' Victoria, who now lives in Sheffield, told The Sun.
'So, I started buying myself little treats. I got taxis instead of the tube, I bought flashier presents for people, I started buying 'investment' clothes that were way more expensive than my usual brands.
'They all seemed like small upgrades, but they added up and I was basically just using the extra cash to have a more expensive lifestyle rather than saving any money.'
How I was hit by a 'lifestyle creep'
Victoria's situation is far from uncommon - she is one of thousands of people who have fallen victim to so-called 'lifestyle creep', where your spending increases with your salary to the point that you don't feel any better off.
Recent research by Starling Bank found that almost a third (30%) of people earning over £100,000 don't have enough money to pay for essential bills and groceries because they are overspending on luxuries.
Becca Stroud, personal finance expert at Starling Bank, explained: 'If you've ever felt that despite having a pay rise and a bigger pay slip, you're still feeling equally stretched at the end of the month, the culprit is likely 'lifestyle creep', where your spending increases in line with your salary.
'Knowing you have more disposable income available is likely to increase your odds of buying yourself lunch out or that top.
"But spending to keep up with lifestyle creep quickly adds up and it's easy to lose track."
While you may be able to manage your spending as long as you maintain your salary, lifestyle creep can become an issue if your income suddenly reduces and you can't keep up with your spending.
Experts say this often affects retirees, as pension income tends to be lower than your salary in your working life, and people who are made redundant and can't match their old salary.
This is exactly what happened to Victoria when the pandemic hit and she was forced to take a job with lower pay.
Before she knew it, she found herself racking up debt to keep up with her spending habits.
I ignored wake-up calls and got into debt
'I was finding the bills coming in at the end of the month were harder to cover, so I started using credit cards to supplement my income,' she said.
'This should have been a wake up call, but I was convinced my situation was temporary and I would find another job at my old salary.
"But then I lost my new job and found I couldn't pay my credit card bill at the end of the month. It's taken me years to get my debt under control.'
Increasing your spending in line with your income means you aren't putting away any savings for longer-term goals, like buying a home.
If you have fallen for lifestyle creep, there are steps you can take to get your finances back on track.
You should start by paying off any debts, according to Cyra Mackintosh, a chartered accountant at Medics Money.
'Start with high interest debt first and then budget to pay down the rest,' she said.
'If you have a big spend in future, use a 0% credit card and pay it off equal instalments.
'Don't spend more on the card if you cannot afford to pay it off by the end of the 0% term.'
She added that if your credit score is poor, you could buy your food shopping on a credit card with a low limit and pay it off immediately.
'This shows you can manage credit well and are reliable, which can boost your score,' she explained.
Once you are out of debt, you can focus on budgeting and saving money.
Free apps like Snoop are designed to help you budget, while some banks like Monzo offer their own budgeting tools in their apps.
Chris Henderson, save and pay director at Tesco Bank, said: "Using a budget tracker can help you assess where your money is going and whether you need to make any changes."
You could then consider opening a savings account to put money aside.
"Giving yourself a goal to work towards is a great way to stay motivated," Mr Henderson said.
"Setting up a monthly transfer into your savings account will stop you spending the money elsewhere. A good time to do this is right after you've been paid."
Some banking apps have tools to help you save, like rounding up your spending so the extra goes into your savings pot.
Make sure your savings account is paying a competitive interest rate to boost your balance.
The top easy-access savings accounts currently pay 5% interest, according to Moneyfacts.
How to avoid lifestyle creep in future
To avoid falling back into lifestyle creep, work out your 'spending triggers' so you can avoid them, Ms Stroud said.
"Firstly, remember that having more money doesn't mean you need to spend it.
"FOMO is real, so if you realise you're spending more money with friends, let them know you're trying to spend less and suggest going to cheaper places.
"You could also turn on notifications for each time you make a purchase to give you a reality check."
Ms Stroud also advised adding some friction to make it harder for you to spend.
"For example, get rid of Apple Pay and un-save your card details for shops where you often spend online."
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@
