How To Avoid Lifestyle Creep

Three tips from Lance Hall, CPA and founder of FreeLance Finance.

Lance Hall ’17, ’18M achieved success as a CPA but found himself seeking a larger purpose. “I wanted to help people who didn’t necessarily have a lot of money or access to a financial advisor,” he says. 

Hall started teaching financial literacy basics on YouTube, and viewers soon began reaching out for help. In response, he launched FreeLance Finance, a financial coaching firm. “Financial advisors primarily help with managing investment portfolios and retirement planning,” he explains. “Financial coaches, like me, help people get to the point where they have money to invest.”

He shared threes tips anyone can follow to avoid the savings pitfall known as lifestyle creep, the common practice of spending more as you earn more, often resulting in the inability to meet larger financial goals like saving for retirement. 

Use Budgeting and Expense Tracking Tools

The first step in creating a budget is getting a full picture of your expenses. The good news? It’s no longer necessary to pocket every receipt or manually track every purchase. Instead, link your account(s) to income and expense tracking tools like Monarch Money, Rocket Money, PocketGuard, or Quicken Simplifi (a few of Hall’s favorites).  These tools not only reveal the realities of your spending, but also they’ll help keep you on track to meet your goals.

Employ Rules-Based Budgeting

Having firm rules takes the guesswork out of spending. Hall recommends spending 80% of total income on expenses and saving 20%. The 50/30/20 rule is a bit more nuanced but just as effective: Spend 50% of income on needs like rent and groceries, 30% on wants like restaurants and hobbies, and 20% on savings.

“This allows you to reach savings goals while also satisfying the desire to treat yourself for getting a promotion or raise,” Hall says. “Your money is for you to enjoy; we just don’t want it to get out of control.”

Set Clear Goals and Plans

Applying increased income to larger life goals rather than random luxuries ensures that you’re achieving your financial milestones rather than inflating your lifestyle.

“Having no plan can lead to additional money coming in and going right out the door,” says Hall. “When you set goals and give your money a purpose, it’s a lot less likely that the money will dry up unintentionally.” His tip? Set a meaningful goal and arrange for a direct deposit right into a dedicated savings account each pay period. 

Photo courtesy of Lance Hall