Managing Your Expat Spending Habits After A Salary Increase

Expats are being advised not to let a salary increase turn into a financial disaster.

For expats who don’t run a household budget linked to their salaries, an increase in wages can lead to a spending trap, especially if they’re living and working in luxury locations such as Dubai, Paris, Switzerland or New York. Salary increases are good news, but can turn a carefully planned budget into a debt crisis within a surprisingly short time. Known as ‘lifestyle creep’, the syndrome is easy to understand but difficult to reverse.

When a salary increase is received, it’s normal to treat oneself to a few newly affordable luxuries as a reward, but these former luxuries have a habit of becoming necessities in a very short time due to the instant gratification culture of the 21st century. For those who aren’t careful, day-to-day costs can spiral, justified by the fact of extra earnings and the reward therapy creating a better standard of living. Happiness follows, but financial disaster isn’t far behind as bad spending habits multiply out of control, leaving expats worse off than before their salary increase.

This doesn’t even have to be a result of a pay rise, with removals of expenses such as crippling international school fees after graduation often having the same effect. Splashing out on luxuries that aren’t really needed is habit-forming, with entitlement as the excuse. Also, it’s a lot more fun than saving for a future which seems aeons away. Worst at risk seem to be those whose employers cover major expenses, leaving salaries to be misunderstood by expat recipients as spending money. Eating out every night is an obvious symptom of lifestyle creep, as is keeping up with the Joneses and overspending as a result.

The cure for this syndrome isn’t easy, and needs to be taken one step at a time, starting with charting your income and expenditure on a very regular basis. Setting a target for the monthly spend as well as setting aside an amount for emergencies is a good start as it trains you to notice how much you’re spending and on what. Cutting out all the little luxuries at once is the worst possible idea, as it can lead to a binge of impulse buys during which you’re breaking all your carefully set financial rules. Determining your needs and controlling your wants is the end game, after which your addiction to spending is gone.