My ninth rule of budgeting: Do not raise spending just because you got a raise!

by Nick on August 7, 2010

I love this rule.  It has helped me increase my savings faster than almost any of the others.  I’ve been able to pretty much maintain or reduce monthly spending since last year even when I got a raise. 

This one is all about the mindset.  It’s also a great way to retire early.  It’s pretty self explanatory, but here is a little bit about how it works for me.

We start with the premise that our budget is, as they say, what it is, and the theory that we’re comfortable with our monthly spending independent of how much we actually take home.  That’s the key.  The amount we take home doesn’t matter once our budget is set unless it goes down and we need to reassess our spending.   It was only relevant to setting up the budget and using as a guideline to measure the percentages we save (i.e. for retirement accounts).

Bottom line: If you are happy (or comfortable) spending $3,000 per month and get a raise, why should you be any less happy or comfortable spending $3,000 per month going forward?  It’s great to get a raise.  But don’t start spending more just because you’re making more.  Still see what you can cut.  “Old you” will thank you.

And if all else fails, put the credit card down and slowly step away from the mall!

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