I’ll save when I get a raise.
2 min read


The financial fallacy of “I’ll save when I get a raise” is based on the premise that increased income will inevitably lead to increased savings. However, this idea neglects a common phenomenon known as lifestyle creep or lifestyle inflation, where as a person’s income increases so do their expenditures. This fallacy assumes that with an increase in earnings, there will be a surplus that can be saved. However, if one’s expenses rise at the same rate as their income or even at a higher rate, it leaves no extra money for saving.

It’s quite easy to fall into this way of thinking because, at times, we struggle to balance between meeting our present needs and preparing for the future. It’s very human to prioritize immediate comfort and pleasure over future security, which saving essentially is. Also, imagining having more income can make us feel as though we’ll have more room for saving later, which creates a sense of financial comfort, even if it’s unfounded.

An appropriate financial practice would involve prioritizing saving and investing, regardless of income level. It’s advised to start saving as early and as consistently as possible while maintaining a reasonable lifestyle that does not increase significantly with income. Additionally, each time you receive a raise, it is smart to increase the amount you save or invest accordingly, so the proportion of your savings grows with your income. This behavior is often referred to as ‘paying yourself first’ and promotes good savings habits.

Further readings:

  1. “Your Money Ratios: 8 Simple Tools for Financial Security” by Charles Farrell. Book Link. Farrell addresses this fallacy and offers simple benchmarks for savings and spending at various income levels.

  2. “Stop Acting Rich: And Start Living Like a Real Millionaire” by Thomas J. Stanley. Book Link This book discusses the fallacy of lifestyle inflation and the lack of savings among high income earners.

  3. “The Psychology of Money: Timeless lessons on wealth, greed, and happiness” by Morgan Housel. Book Link. This book explores the psychological reasons behind why we think the way we do about money and how to change our mindset.

  4. “Lifestyle creep” Wiki Link.

  5. “Saving for tomorrow, tomorrow” by Shlomo Benartzi. Ted Talk In this TED talk some common fallacies about saving are exposed and an automatic strategy to fix the system is proposed.

Please note that these resources offer a robust exploration of this topic, suitable for both beginners and those seeking to deepen their understanding of personal finance.