Did you ever get a pay rise? Or your take home pay increased because of some action implemented in the budget and you think, great, those extra funds will relieve a bit of pressure each month. But, 3 or 4 months on, your bank account looks just like it did before the increase and you can't figure out why this is the case. You begin to wonder how you ever got by before your income increased.

If this ever happened to you, then you have fallen victim to what is known as lifestyle creep.

A term originally coined by Michael Kitces, lifestyle creep occurs when your income increases so do your outgoings in a proportionate manner. And the changes in your outgoings may be subtle from year to year that you don’t even realize it’s happening – thus the lifestyle changes just “creep” up on you.

And why people don't notice this happening is I think for two reasons.

The first is when they incorporate small little treats into their daily routine that they hardly notice. And interestingly these small little treats may once have been seen as luxuries i.e. the weekly Starbucks latte now becomes the every second day, must have normal thing you buy, or you go out to lunch everyday rather than brown bagging your lunch as you used to before.

The other reason the increase in our outgoings creeps up on us is because now that we have more disposable income available to use, our mind-set and thinking changes almost immediately.

Suddenly the car you were perfectly happy with a week before your raise, looks more run down. You think your phone needs to be upgraded so you change it and go on a better plan. You could also do with some new clothes, that sports and TV channels suddenly become affordable, and in some cases people will even look at up-grading their house, and suddenly their mortgage repayments have become bigger.

And look all of this is understandable. You may have more breathing room in your budget now that your income has increased and you want to fill your lungs so to speak, so you loosen the purse strings and begin to reward yourself and who can blame yourself, we have been through some difficult times, but you need to be careful nonetheless.

If you have received a pay rise or your income has increased for whatever reason, here are some suggestions you can apply it to and improve your finances, so you don’t succumb completely to lifestyle creep;

• Increase your savings by applying the % you are presently saving to your new salary. Let me explain, if your previous monthly income for example was €3,000 and you were saving €150, that is 5% of your salary. If your new salary is €3,200 then you should be saving €160 (€3,200 X 5%) or better still increase your savings rate by 1% and save 6% of your new, salary which would be €192.

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• Consider increasing your pension contributions by 1%. Using the above numbers, if you increased your contribution by just 1%, you would see your salary reduce by only €27.50 per month after tax relief.

• If you have debt, consider increasing the amount you are paying by some of your extra income. Overpaying a €250,000, 25 year, variable rate mortgage by €50 each month will take 18 months off the term of your mortgage, saving you c. €9,962 in interest payments.

By applying the above to a €200 pay increase each month, you are achieving quite a bit and you still have c. €80.50 left over to spend on whatever you like.

The key to following through and making these happen is setting up the extra savings or payments automatically from your account or even better still from your pay check if you can, because what you don't have you won't miss.

And some people might put off saving that extra money now because they are in their 20’s, 30’s or 40’s, and tell themselves that when they are older, they will begin to save more and catch up on their pension contributions etc. but that is assuming they will see consistent earnings growth throughout their entire career. But there is strong evidence which challenges this assumption. Two recent studies show our assumption that income will continue to grow throughout our adulthood is NOT TRUE. Most earnings growth occurs in 20s and 30s, slows down in 40’s and turns negative in our 50’s.

This information is not to be underestimated and is very important to know. Yes, the temptation is strong to put off saving until later, and enjoy living in the moment on our new higher salary. However if our income begins to decline in our 50’s, when we had planned to play catch up, after years of self-inflicted lifestyle creep, you could be squeezed into having to save more to reach your financial goals while your income is declining, and that is a tough ask.

One way of avoiding lifestyle creep is by re-visiting your financial goals. Changing jobs or getting a raise, has a way of forcing you to re-focus on your financial goals. Because if you do it will remind you what is important to you, and you can then make sure, that is exactly what you are spending your extra money on.

And if you don’t have any clear objectives about what you would like to achieve financially, then now is the time to consider some, because if you don’t, without having any clear objectives for what you want to happen for you and your family, you could end up spending that extra cash on things that don’t bring you closer to what’s important to you.

So, sit down with your spouse and talk about where you want to be financially in two, five, or even ten years’ time. Whether you want to travel more, save for your kids’ college educations, pay off debt, or buy a home, redefining your goals and sketching out a game plan can reveal where that extra money needs to go.

In short, you’re less likely to experience lifestyle creep if you stay focused on your goals and understand how this extra money can help you achieve them.

Avoiding lifestyle creep doesn't mean you have to save every extra penny you earn, of course it doesn't. You work hard and you deserve to enjoy some of that extra money now, so please spend some of it on whatever you want to, but save some of it as well so you can spend it when you are older.

When you get a raise it should really put you ahead, but if it doesn’t and making more money means you are in exactly the same position as before, then you are just working harder without living better, or getting ahead financially, and that's not what you want.