How to stop lifestyle inflation: 6 habits to adopt after a pay rise
Camilla Foster
Fri, 24 July 2026 at 1:36 pm GMT+5:30
5 min read
Have you ever received a pay rise but still not felt any more financially secure? If so, you’re far from alone
New research from Compare the Market suggests that lifestyle inflation, also known as “lifestyle creep”, is eating into many people’s pay rises
The poll of 2,000 UK adults who had received a pay rise within the past 12 months found that almost half (47%) said their spending had increased in line with their income
Many respondents admitted they were spending more on items they had previously considered luxuries, including takeaways (24%), eating out (22%), new clothes (21%) and beauty treatments (15%)
The findings also revealed that nearly half (48%) had not managed to save any extra money since receiving their pay rise. Meanwhile, 41% said they had been able to increase their savings, while 7% reported that they were actually saving less than before
We spoke to Laura Pomfret, personal finance expert at Compare the Market, who shared her top tips on the habits people can adopt after receiving a pay rise to help strengthen their financial future and avoid lifestyle creep from taking over
“When a pay rise comes out of the blue and you aren’t expecting it, it can feel like free money. It’s easy to get swept up and not slow down or be methodical and be a bit mindless because it’s exciting,” says Pomfret
However, if you are expecting a pay rise or have a review coming up, being proactive and planning ahead will put you in a much better position
“Having a list of what you would do with a pay rise helps guide you when you start making those decisions,” says Pomfret
She encourages everyone to have a realistic bougie budget in mind to prepare for potential salary increases or bonuses
“If you had a little bit more money coming in every month, think about what you would do with it,” recommends Pomfret. “We all have different priorities and for some people it might be getting a cleaner once a week, for others it might be going on one extra holiday a year.”
2. Think about what goals you can reach quicker
Pomfret recommends shifting your mindset away from viewing a pay rise as extra spending money, and to instead see it as an opportunity to reach your financial goals quicker
“Think about how much more you can contribute towards your financial goals monthly after a pay rise, whether that be towards a holiday, a saving account, or plans to move house,” says Pomfret
3. Prioritise tackling debt and building an emergency fund first
If you are in high-interest debt or haven’t got any emergency savings, focus on that first
