Avoid This Money Trap: How Lifestyle Inflation is Hurting Your Future!

Foreign. Why has your income increased over the years compared to when you first started working, but you still feel like you're not making any financial progress? I mean, you have zero savings, zero investments, and haven't hit any of your financial goals. Despite earning more, you find yourself just as stressed about money as before for doctors, healthcare professionals, often due to one silent but powerful issue. This is called lifestyle inflation or lifestyle creep. Just because it creeps upon you when you're not looking. And it's very different from the inflation for which you blame the government. The good thing is you can actually do something about it. It doesn't depend on who wins the next election. Yeah. So the key is often to mind the gap. What do I mean by mind the gap? It's minding the gap between your increasing income and your escalating expenses. I'll explain that. If you stick around, I'll show you how to recognize it, manage it, and still enjoy the fruits of your labor without jeopardizing your financial future. Alright, I'm gonna let you in. We've got a quick update. We've got some seriously powerful financial insights coming your way regularly, every week. And trust me, you don't want to miss out. But here's the kicker. Only 25% of you watching this are certain to get this Golden Nuggets when we drop them on the podcast. Why? Because 75% of you have not subscribed yet. So if you're in the 25% club, thank you. You're the real MVP and we appreciate you. But to the 75% who are watching regularly but not subscribing, let's change that quickly. Or tell me in the comments, why haven't you subscribed? Come on, do it quickly. Hit the subscribe button to make sure you don't miss out on the content. That way you're doing yourself and even me a favor because then it lets YouTube know that we're doing something right. All right? So join the club and never miss another episode filled with financial wisdom, tips and fun. Hit the subscribe button. Let's make sure you're always in the know. Alright, let's jump right back into the video. Thank you. Now. Welcome Back to Moneywise Dr. Channel. I'm Dr. Andy Green, former Salary JP, founder of MoneywiseDoctor.com entrepreneur and investor, as well as a portfolio GP. Our mission is to help doctors and healthcare professionals to make smarter financial decisions and avoid costly mistakes. If you haven't already done that, head over to moneywisedoctor.com there's loads of resources there that can help you in your financial journey. And you can subscribe for free to our weekly newsletter. In the description you find the links to get all those resources and the newsletter. Now, what is lifestyle inflation? I mean lifestyle inflation, also known as lifestyle creep, it happens when your spending increases to catch up with your income. So instead of saving or investing the extra money, you spend it all on different items. And some people might say it's essential item but somehow your essential items tend to increase and this can also lead to financial stress. Doctors and healthcare professionals are particularly vulnerable to lifestyle inflation. After years of rigorous training and you know, accumulating, accruing student debt, many times you feel the urge to reward yourself. And once you start thinking I'm earning a substantial amount of money now, you can quickly, your expenses can quickly spiral out of control leading to, you know, higher expenses that tend to match your income. So there's no gap between your income and your expenses. Now why is lifestyle inflation such a trap? Imagine you start your career earning 30,000 or 40,000 a year. You live comfortably within your means. You're renting a small flat, enjoying occasional luxuries, and fast forward to a few years and you're earning £60,000. But instead of saving the extra income, you upgrade to a bigger house, a luxury car, you eat out more frequently, you buy more expensive stuff. Before you know it, expenses have ballooned to match your income, leaving you with no additional savings or investment. You have nothing put aside for the future. According to a study by the Money advice service, around 40% of adults in the UK do not have enough savings to last them even a month if they lost their main source of income. So this, this is quite shocking statistics and it's quite common for my work in Moneywise Dr. I come across thousands of doctors every month. So a lot of doctors don't have emergency fund. But this is something really quite important. So if you mind the gap, you can save some money and start putting away some for your savings and investment. Some areas you can look at is your house and sometimes you're living in a modest apartment or you're living in a nice house, but suddenly you realize I've got more income. I'm a consultant now, I'm a jp so I need a bigger place. Could even be with your car. I've got nothing against a nice car, I drive one, I love it. But sometimes you think about it, do I really need a new one? I've driven the same one for a few years now. Do I really need a new One the same applies to travel and entertainment. This doesn't mean that you're not going to spend any extra money, obviously. But the idea is that your extra income don't allow your expenses to catch up with your extra income. So despite earning more, lifestyle inflation can make you feel just as financially stressed as you were before you started earning more. It happens because your spending increases in line with your income, leaving you no room for savings or investments or financial growth. Over time. This can hinder your ability to achieve your long term financial goals. Like maybe buying a home, saving for retirement, or even just building a nice healthy emergency fund. Now there are a few useful tips to manage lifestyle inflation. The first thing obviously is to recognize the signs that's mining the gap. Once you recognize that, look, my expenses are going up if you notice that you're spending more. In fact, the best way to do it is if you have any promotion. You've gone from being a jp, it's from being a consultant, a registrar, sorry, it's being a GPO consultant. You can decide to keep all your expenses. Don't change your lifestyle for a year or two or three before you start spending so long. So if you can keep your expenses and your lifestyle just about the same, just for a few years. I'm not saying you're never ever going to change your lifestyle, but just for a few years. Drive the same car. Living the same house for two or three years can make a massive difference. 2. Obviously have a clear goal. If you have a clear financial goal, that can drive what you do, it can drive your behavior, it can drive how you save and invest your money. If you have a clear plan, number three, create a budget that goes again into having a clear financial plan. If you have a budget and you set it up automatically, I always talk about automatic savings so you can call it a mass automated monthly activated savings system. What that means is that you set up direct debits so that your income goes by percentage into your savings account, investments account, your giving account, so you know exactly what you're spending on. So don't increase it just because your income has increased. Now again, it's important to differentiate between needs and wants before making a purchase. Ask yourself, is it a need or a want? I mean sometimes you're going to end up buying things just because you want it, not because you need it. And that's life, that's enjoying your money and that's applying the money dials, which is one of our videos. If you haven't looked at it, head over to playlist somewhere here to look at the money dials. But be intentional about your spending. Be mindful in your spending. Don't just sort of balloon your spending because you've got like some extra income. So in conclusion, lifestyle inflation is a common challenge and is one that you can overcome with awareness and discipline. By recognizing the signs and setting clear financial goals and making intentional spending choices, you can enjoy the benefits of your increased income without jeopardizing your financial future so that you're not like running around in a hamster wheel all the time. Thank you for watching this episode of money wise Dr. Channel. If you found this video helpful, please give it a thumbs up and subscribe to our channel. And for more financial insights stood out for doctors and healthcare professionals, don't forget to visit themoneywisedoctor.com subscribe to subscribe to the Newsletter so what's your opinion? What was the experience of lifestyle inflation? Has this affected you in any way and have you managed to combat lifestyle inflation? Tell me in the comments what has been your experience? Let me know. Alright then. Bye bye.