3 Guiding Principles for Managing Lifestyle Creep

After years of perseverance and dedication, you're ready to savor the fruits of success. While you should absolutely reward yourself for working toward your goals, it's important to keep making smart decisions about saving and investing. Otherwise, you could find yourself suffering from a regrettable condition: lifestyle creep.

Lifestyle creep occurs when your spending increases as your income grows. It reflects the natural reaction you may have after working so hard to enjoy the finer things in life.

Of course, there's nothing wrong with wanting the best for yourself and those you care about. But while your circumstances may have changed — for the better — the need to protect your financial future hasn't.

Here are some guiding principles to keep lifestyle creep in check.

1. Stick With What Works

In reality, while you can afford to spend more on both necessities and luxuries, you can also afford to save more. Equally important, achieving major career and financial milestones doesn't mean it's time to downshift into neutral. On the contrary, it's time to stay the course. As in any important journey, you adjust to circumstances along the way, but you want to be sure you keep moving in the right direction.

This is how others who have achieved success think. Based on a survey of 100 American millionaires by ESI Money, most are big believers in the notion "If it ain't broke, don't fix it." To adhere to the millionaire mindset yourself, consider applying these three principles to your increasing income and savings plan:

• Focus on building wealth. Most of the respondents to the ESI Money survey noted that they sock away much of what they earn. In fact, research by economists Emmanuel Saez and Gabriel Zucman reveals that high-net-worth individuals typically save at least 15% of their incomes. By the same token, a Federal Reserve study identified a strong positive correlation between personal savings rates and lifetime income.
• Think and act like professional money managers. Institutional investors are big believers in strategies designed to enhance long-term performance. They recognize the value of diversification, the benefits of sticking with a disciplined approach and the advantages of owning safe-haven assets such as high-yield savings accounts and certificates of deposit (CDs).
• Invest in yourself. Aside from "spending" on outlays that help boost their efficiency and earning power, many high-net-worth individuals manage their personal finances like a business. They invest a substantial share of regular income and one-off windfalls such as bonuses and inheritances to build rainy-day reserves and accumulate the resources necessary to take advantage of future opportunities. This strategy could work for you, too.

2. Craft a Plan for Success

Needless to say, planning is essential when more money is coming in and your wealth is increasing. For some, this means working with a financial advisor to create budgets and plans, and to have a professional on call who can help minimize the adverse impact of emotional decision-making.

Others prefer to do it themselves. You may decide, for example, that the 50/30/20 strategy — where 50% of your income is spent on what you need, 30% on what you want and 20% on savings and paying down debt — is the best way to secure your financial future. Alternatively, you may opt for a simpler approach, where, say, the first 20% of what you earn is automatically "spent" on growing your wealth.

3. Leverage the Psychology of Savings

Whether you choose to work with a team of professionals or go it alone, remember that disciplined spending can pay big dividends. Yes, you might suddenly notice plenty of nice-to-haves when you have money in the bank, but that doesn't mean it's time to splurge. In fact, those who have "made it" tend to wait before opening their wallets. As psychotherapist Ilene Strauss Cohen writes in Psychology Today, "Studies show that delayed gratification is one of the most effective personal traits of successful people."

Even if the urge to spend remains strong, there are adjustments you can make to delay gratification. For instance, New York Times' best-selling author James Clear has suggested starting small and making decisions to hold off on spending "so easy you can't say no." Another approach Clear recommends is retooling habits around saving money by 1% each day and benefiting from the power of regular compounding.

Other strategies can also help separate genuine needs and wants from those that don't really mean that much. This includes the "24-hour rule," where major spending decisions are postponed for a day to ensure they still feel right after a good night's sleep. It also makes sense to compare cost with value: Just because something has a high price tag doesn't mean it's worth the money.

When your hard work is really paying off, it's easy to think you can spend away — and in many cases, you're able to. But like most successful people, you understand that lifestyle creep can lead you astray. The key to securing your financial future is to keep doing what got you here.