Stop lifestyle inflation
As your salary grows, there’s the temptation to buy yourself nicer things, and go out more often for dinner or drinks. And as you get used to these indulgences, your cost of living permanently increases. This can be a trap that eats up a tremendous amount of money that could otherwise be saved. To counteract lifestyle inflation, focus on maintaining the same standard of living—even as your salary increases.
Make savings a fixed cost
The most effective strategy is also the simplest: Spend what is left after saving, not the other way around. Saving should be the first thing you do with every paycheck. If you don’t have the discipline to do this, have a portion of your paycheck deposited automatically into a separate savings account–or increase contributions to your retirement account. That way, you won’t see the money and be tempted to spend it.
Don’t rely on bonuses
The natural reaction when you receive a bonus is to spend it on yourself. After all, it’s a reward you’ve earned for hard work. But don’t assume that you’ll be able to repeat your performance and earn the same bonus amount next time around. So, the best thing to do is treat every windfall—be it a raise, bonus, or stock dividend—as a one-off, and save as much of it as you can.
Treat yourself—to a point
It’s great to celebrate life’s wins. But you need to be able to reward yourself without jeopardizing your future. So stop acting like you’ve hit the jackpot on every payday. Before buying that designer bag or taking an exotic vacation, check your budget to make sure that you can actually afford it. The long-term financial reward of keeping a lid on celebrations will far outweigh the short-term fear of missing out that you may have.
Ask for advice
Most people have a financially accomplished friend—someone who has cleared their debts, joined all the right rewards programs, and who seems to have the money to go on every vacation, fancy dinner or concert that comes up.
This person can be a great source of guidance on how to manage your own money. If that’s not a comfortable conversation for you to have, consider asking a close family member or even a professional financial advisor. Getting good advice on managing money is easily one of the best investments you’ll ever make.