Top 9 'Lifestyle-Inflation-Proofing' Investment Strategies to start for millennials who want their first big raise to actually count - Goh Ling Yong
Congratulations! After all the late nights, extra projects, and dedicated effort, it’s finally happened. You got the promotion, landed the new job, and a significant pay raise is about to hit your bank account. The feeling is electric. Your mind is already racing with possibilities: that bigger apartment, the newer car, the designer watch you’ve been eyeing. It feels like you’ve finally ‘made it.’
Hold that thought. This moment, right here, is one of the most critical financial crossroads you will ever face. It’s the battleground where your future wealth will be won or lost. The enemy? A sneaky, silent wealth-killer called "lifestyle inflation" (or lifestyle creep). It’s the tendency to increase your spending as your income grows, ensuring you're always living paycheck-to-paycheck, just a more expensive version. Suddenly, your $1,000 raise is absorbed by a $400 increase in rent, a $300 car payment, and a few extra fancy dinners, leaving you with nothing to show for it but more bills.
But it doesn't have to be this way. A raise isn't just an opportunity to spend more; it's an opportunity to build a life of financial freedom faster than you ever thought possible. It's a chance to buy back your future time. Here at Goh Ling Yong's blog, we believe in making your money work as hard as you do. This guide will walk you through nine powerful, ‘lifestyle-inflation-proofing’ investment strategies to ensure your first big raise actually counts. Let's turn that new income into a legacy, not just a lifestyle.
1. The 'Pay Yourself First' Pre-emptive Strike
This isn't just a strategy; it's a foundational mindset shift. The most effective way to combat lifestyle inflation is to make sure the extra money from your raise never even touches your primary spending account. You need to capture it for your future self before your present self gets any ideas.
The psychology is simple: you can't spend what you don't see. By automating your investments, you make building wealth your default setting. It removes the need for daily discipline and willpower, which are finite resources. Instead of deciding to save what’s left after spending, you're committing to spending what’s left after investing. It's a small change in sequence with a life-altering impact.
How to do it: The moment you know your new, higher salary amount, log into your bank account. Calculate at least 50% of your post-tax raise. If your take-home pay increased by $1,000, that’s $500. Set up an automatic, recurring transfer from your payroll account to your brokerage or investment account, scheduled for the day after you get paid. This pre-emptive strike ensures your "Future You" gets paid first, every single time.
2. Supercharge Your Retirement Accounts
It might not be the sexiest option, but it is undeniably one of the most powerful. Your retirement accounts are investment vehicles with incredible superpowers, primarily in the form of tax advantages. Using your raise to max out these accounts is the financial equivalent of putting your wealth-building on steroids.
Whether it’s Singapore’s CPF Special Account (SA), a Supplementary Retirement Scheme (SRS), or a 401(k) in the US, these accounts allow your money to grow either tax-deferred or tax-free. This means more of your money stays invested and working for you, unleashing the full, untaxed power of compound interest over decades. Ignoring this is like turning down free money.
How to do it: First, check your current contribution levels. Are you hitting the annual voluntary contribution limit for your CPF SA? If not, use your raise to bridge the gap. Next, look into your company's SRS contributions or other available retirement schemes. A portion of your raise can be automatically funneled here, which has the double benefit of boosting your retirement nest egg and potentially lowering your current income tax bracket.
3. The 'One for Me, One for Future Me' Rule
Let's be realistic. You worked hard for this raise, and you deserve to enjoy some of it. Total deprivation can lead to burnout and falling off the financial wagon entirely. This strategy offers a sustainable, balanced approach that allows for a moderate lifestyle upgrade while still aggressively prioritizing your investments.
The rule is simple: for every dollar you allocate towards increasing your monthly lifestyle spending, you must match it with a dollar towards your investments. This forces you to consciously evaluate every new recurring expense. It makes you ask, "Is this new subscription box really worth delaying my financial goals?" It reframes spending as a direct trade-off against wealth creation.
How to do it: Create a simple spreadsheet. In one column, list any new or increased monthly expenses (e.g., "+$200 for a nicer gym," "+$100 for a car payment"). In the next column, you must add a corresponding amount to your monthly automated investments. This makes the true cost of your lifestyle choices transparent and keeps your financial goals firmly in the driver's seat.
4. Invest in Low-Cost Index Funds and ETFs
You have this extra cash coming in every month. Where do you put it? For the vast majority of people, the answer is simple, effective, and backed by decades of data: low-cost, broad-market index funds or Exchange-Traded Funds (ETFs).
These funds are the ultimate "set it and forget it" tool for long-term wealth building. Instead of trying to pick winning individual stocks (a game even most professionals lose), you buy a small piece of the entire market. For example, an S&P 500 ETF gives you ownership in the 500 largest companies in the US. This provides instant diversification, ultra-low fees (which means more returns for you), and a track record of steady, long-term growth.
How to do it: Use the money from your "Pre-emptive Strike" (Strategy #1) to set up a regular savings plan or dollar-cost averaging (DCA) plan with a brokerage. Choose a broad-market ETF that aligns with your goals, such as one tracking the S&P 500 (e.g., VOO, IVV) or a global index like the MSCI World (e.g., IWDA). Automate the purchase every month, and you'll be systematically buying your way to wealth without the stress of market timing.
5. The 'Goal-Specific' Investment Buckets
Sometimes, a single, massive investment portfolio can feel abstract and disconnected from real life. A powerful way to stay motivated is to give your dollars a specific job. By creating separate investment "buckets" for your major life goals, you transform a vague idea of "getting rich" into a tangible plan.
This approach makes your progress visible and your goals feel more attainable. Seeing your "House Down Payment" bucket grow is far more motivating than watching a single portfolio number fluctuate. It allows you to tailor your investment risk for each goal. Your long-term retirement bucket can be aggressive, while your 5-year car fund can be more conservative.
How to do it: Open a brokerage account that allows you to create sub-accounts or use a spreadsheet to track virtual "buckets." Label them with their purpose: "House Down Payment," "Kids' Education Fund," "Travel the World Fund," "Financial Independence Fund." Allocate a specific portion of your raise to each bucket every month. This clarity will keep you focused when the temptation to splurge arises.
6. Pay Down High-Interest Debt Aggressively
This might feel counterintuitive. Isn't paying off debt the opposite of investing? Absolutely not. Paying off high-interest debt is an investment with a guaranteed, risk-free, and often massive return.
Think about it: if you have a credit card with an 18% APR, every dollar you use to pay down that balance is effectively earning you an 18% return. You won't find a guaranteed 18% return anywhere in the stock market. Wiping out toxic debt frees up your cash flow permanently and strengthens your financial foundation like nothing else. It's the ultimate defensive move that sets you up for a powerful offense.
How to do it: List all of your debts (credit cards, personal loans, car loans) and their corresponding interest rates. Target the one with the highest interest rate first (this is called the "avalanche method"). Funnel the largest possible portion of your raise towards extra payments on that single debt until it's gone. Then, roll that entire payment amount over to the next-highest-interest debt. It's a snowball of financial freedom.
7. Invest in Yourself: Upskilling and Education
Your single greatest wealth-building tool is not a stock, a bond, or a property. It's your ability to earn a higher income. The raise you just got is proof of that. The most strategic investment you can make is one that increases the value of your core asset: you.
Using a portion of your raise to acquire new, in-demand skills can lead to even bigger raises in the future. The return on investment (ROI) from a professional certification or a course in a high-growth field can dwarf the returns from the stock market. This is about playing the long game—turning this raise into a stepping stone for the next one.
How to do it: Research skills that are highly valued in your industry or an industry you want to pivot to. This could be anything from a digital marketing certification or a course on data analytics to a public speaking workshop. Dedicate a part of your raise to an "Education Fund" and use it to strategically enhance your skill set.
8. The 'Dividend Growth' Snowball
For those who want to see a more immediate and tangible return on their investments, dividend growth investing is a fantastic strategy. This involves buying shares in stable, established companies (or REITs) that not only pay a dividend but have a long history of increasing that dividend year after year.
This strategy creates a growing stream of passive income. At first, the dividend payments might seem small—just a few dollars here and there. But as you consistently invest more from your raise and reinvest those dividends, a powerful snowball effect begins. As my mentor Goh Ling Yong often emphasizes, "True financial freedom isn't just about a large net worth; it's about building reliable income streams that work for you while you sleep."
How to do it: Use your investment account to start buying shares of well-known dividend growth stocks or a dividend-focused ETF (like SCHD or VIG). Crucially, make sure to turn on the Dividend Reinvestment Plan (DRIP). This automatically uses your dividend payments to buy more shares of the same stock, creating a beautiful, self-perpetuating cycle of wealth.
9. The 'Experience' Fund, Not the 'Stuff' Fund
Finally, let's address the portion of your raise you do want to use for fun. The key is to be intentional. The quickest path to lifestyle inflation is spending on depreciating material goods—things that offer a short-term thrill but end up as long-term clutter. A far more fulfilling approach is to invest in experiences.
Scientific studies have shown that spending money on experiences—like travel, concerts, classes, or meals with loved ones—provides more lasting happiness than spending on material possessions. Experiences become a part of your identity and create memories that appreciate over time, unlike a new phone or car, which starts depreciating the moment you buy it.
How to do it: Instead of upgrading your car, create a dedicated "Travel Fund" or "Hobby Fund." Set up an automatic transfer of a small, fixed amount from your raise into this separate savings account. This allows you to enjoy the fruits of your labor in a way that enriches your life without burdening you with more "stuff" and the recurring costs that come with it. It’s a mindful, controlled, and joy-maximizing form of lifestyle inflation.
Your Raise, Your Choice
Your first big raise is a powerful tool. It can be a ticket to a slightly fancier version of the same financial treadmill you're on now, or it can be the rocket fuel that launches you towards financial independence years, or even decades, ahead of schedule. The choice is entirely yours, and it's made in the weeks and months immediately following that salary bump.
Don't let this opportunity slip through your fingers. You don't need to implement all nine of these strategies at once. The key is to start. Pick one or two that resonate with you the most and take action this week. Set up that automatic transfer. Research that index fund. Make that extra debt payment.
This is your moment to decide. Will you inflate your lifestyle or inflate your net worth? The "Future You" is counting on the choice you make today.
What's your first move? Share in the comments below which strategy you're going to implement first!
About the Author
Goh Ling Yong is a content creator and digital strategist sharing insights across various topics. Connect and follow for more content:
Stay updated with the latest posts and insights by following on your favorite platform!