End lifestyle creep by giving yourself a pension raise

Give yourself a pension raise


MoneyPlus Features Team

16th February 2017 at 2:25pm

It’s that time of year when many of us have conversations with our boss around salary changes for the year ahead.

If you’re lucky enough it may be that you’re going to be rewarded for all your hard work with a boost to your pay packet.

But what will you do with your new-found cash? Celebrate?

Well, that’s a given really and so you should. All of those hours you’ve put in have paid off. But what about after the initial honeymoon period?

Lifestyle creep is the income annihilator

Well, this is where lifestyle creep can worm its way in to your life.

When your pay increases your spending creeps up with it, and as Bloomberg explains, you may end up just upping many  of your costs:

‘Once our incomes go up, we often incorporate new little treats into our routine and hardly notice. There’s that cold brew, and then there are more lunches out, and then there’s upgrading the smartphone, having your home cleaned more often, leasing a fancier car.’

This kind of spending quickly leads to your increased income being used to fund a more lavish lifestyle which you simply don’t need – and in the end you don’t really have much to show for it, that extra money just seems to disappear. So what can you do to beat lifestyle creep and get your spending back under control?

How do you cut the creeping costs?

One of the best ways to ensure you don’t fall foul to lifestyle creep is to take a look at all of your outgoings and decide which ones you don’t really need.

Maybe it’s cutting that pricey gym membership for one a little cheaper, or chopping your eating out trips from three times a week down to one.

Find out other ways to save money here

Whatever it is, getting rid of all those surplus costs ensures you can get a better picture of the outgoings you must cover with your income for example rent, utilities and the weekly food shop.

Once you have a better picture of your monthly costs, work out how much money you have left over. You can then allocate money to specific spends like socialising, entertainment and eating out.

You should then have money left over, thanks to your salary increase, but what do you do with this left over cash?

Surely it’s time for another treat, maybe splash out on a weekend away or a fancy trip to the best restaurant in town?

Actually, how about you save some of that money? Because if you don’t you’re effectively wasting that pay increase you worked so hard to get! And guess what; saving makes you feel good too…

Saving, the feel good factor

Thinking about the future, and planning for it, may seem like a lengthy task which will make you worry about tomorrow instead of enjoying today. But research suggests that having a plan in place actually makes you feel good, in the here and now.

According to research we conducted in conjunction with ‘Mind Lab’ and Dr Lynda Shaw, planning for your financial future is profoundly positive. Not only does it set you up well for the future, but it can be great for your emotional wellbeing too;

‘Those that save for a specific time frame and checked their finances regularly are more confident and optimistic than those who do not, and have more intense emotions about their finances…’

The study used a combination of questionnaire and neuroimaging technology EEG (electroephalography) techniques to establish whether saving for the future made the participants feel more positive. And it did just that! Saving for the future gave a clear emotional response from those tested highlighting that having a plan in place to fund your future makes you feel good.

Give yourself a pension raise

So, if saving makes you feel good and gives you a brighter future, it makes perfect sense to save as much as you can.

You could save in to a rainy day fund, or be stashing away your cash to pay for a big expense like a new car or property deposit.

Or why not give yourself a little pension raise to boost your savings pot and make you feel that little bit more secure about the future? If you’ve been lucky enough to have your salary bumped up consider upping your pension contributions with it. And even better, what you save is boosted by tax relief too, it all adds up.

Increasing your monthly pension payments can be a great way to avoid the dreaded lifestyle creep as your extra cash is going towards funding a financially stable future, not being spent on lavish luxuries.

Take a look at our blogs on salary sacrifice and tax relief to see how you can make the most of the money you pop in to your pension.

Stashing away your extra cash for a more stable future is a great way to save, and not only that it makes you feel good too. If you get a pay raise ensure your pension gets a raise along with it, it could do more than just increase your savings, it could improve your mood too.