How much ‘lifestyle creep’ can I really afford?

I just got a big raise, and I’d like to move into my own place or buy a nicer car. I’ve heard I’m supposed to avoid overspending now that I make more. But shouldn’t I enjoy my higher salary? should be an opportunity to build wealth and protect yourself from inevitable financial setbacks.

Strike a balance between spending more and developing financial security. Follow these steps and you’ll forgo excessive lifestyle creep for, simply, a good life.

Give money a destination

As soon as you learn a raise is coming, decide how to allocate it. That way, the money won’t sit in your checking account and fall victim to a shopping spree.

“Being intentional is absolutely essential,” said Philip Olson, a certified financial planner in Austin. “Otherwise, it’s just going to fall through your fingers.”

Suppose you’ll earn $200 more per month after taxes. One option, Olson says, is to go 50/50: Spend half your raise, or $100, on whatever you want each month. Put the other $100 toward financial goals such as savings and paying down debt.

Assess financial security

What exactly should you do with the financial goals portion? It depends where you stand on the basics.

If you were living paycheck to paycheck and have no savings cushion, send all the extra money to a savings account specifically for emergencies. That will provide backup if, for example, a larger-than-expected medical bill arrives in your mailbox. Fill up the fund until it hits at least $500. Continue adding to your emergency fund, while working toward the other goals below, until you have the equivalent of three to six months of basic expenses saved.

Your next priority should be to pay off high-interest debt. Credit cards in particular typically have higher interest rates than student loans, auto loans or mortgages. The longer your credit card balance grows with interest, the harder it will be to get rid of, which will take a bite out of your future earnings, says Jason Kirsch, a certified financial planner in Santa Monica, Calif.

Finally, it’s ideal to save 10 percent to 15 percent of income for retirement. A retirement calculator will let you know if you’re on track. Get closer to that guideline by increasing your contributions at work or opening an individual retirement account.

Hide new savings from yourself

Since it will probably be harder to save than to spend, set up automatic transfers so you avoid having immediate access to the money. Time your emergency fund and individual retirement account transfers so they occur the day after you’re paid.

Olson recommends opening new savings accounts for other goals, too (if your bank charges fees for this, consider saving at an online bank). If you decide to save $50 per month in a house fund, name it “Beach Bungalow.” The goal is to reward yourself now while also building excitement for the future — and keeping your spending in check.

“Your lifestyle can creep,” Olson says. “Just don’t let it creep in perfect pace with your income. Because then you’ll be broke.”