(Investigation on TV) — Discount rate found that 61% of workers got a raise last yearbut many have fallen victim to what is known as “lifestyle drift.”
Virginia Credit Union Financial coach Cherry Dale said the term derives from lifestyle is the idea that the more money you make, the more you tend to spend.
“And if you’re just absorbing it with your spending habits, you’re not really investing money to build long-term savings or wealth,” Dale explained. “So if you can set a savings goal around that extra income, it will really help you with your overall financial plan.”
For example, a car is often a first purchase when someone discovers they will make more money. But Dale said they should first think about how much the monthly payment will be. Is the increase really useful?
Maybe the family is growing and the workers want to improve their home. Dale advised them to be strategic about additional revenue.
“Don’t go into this impulsively. If you know income is coming, look at it over 6 months, a year, additional income, putting it aside to help with your down payment,” she urged. “The overall home purchase, and you have that cushion. And you can even predict what a higher house payment might look like.
Dale said to go ahead and put in an extra $200 a month. Save the extra money first to get a true understanding of what the budget will actually look like with this increase.
Copyright 2024 Gray Media Group, Inc. All rights reserved.