Latest / Budgeting for Beginners with Fexingo: Cash Envelopes, Apps, and Simple Money Tracking / The Budget Category That Grows With Your Raises
Transcript
- Lucas: You get a raise. It feels great. And then, six months later, you look at your bank account and somehow you're not saving any more than before the raise. Luna: That is the classic lifestyle creep story. And I think almost everyone has lived it at least once. Lucas: Right. It's not that you're irresponsible — it's that your budget didn't have a mechanism to protect your raise from yourself. So today I want to talk about one specific budget category that solves for that. I call it the 'future self' category. Luna: Okay, I like that name already. How does it work? Lucas: It's dead simple. Whenever your income goes up — whether it's a raise, a bonus, a side hustle bump — you immediately allocate a fixed percentage of that increase into a category that is off-limits for current spending. The percentage is up to you, but I'd say at least fifty percent of any raise should go there. Luna: So you're saying, before you even see the extra money in your checking account, you redirect it? Lucas: Exactly. Automate it. If your raise is $500 a month after taxes, you set up a transfer of $250 into a separate savings or investment account the day the direct deposit hits. The remaining $250 can go into your regular spending categories if you want. But the key is that your lifestyle only expands by half of what it could have. Luna: That's a very different approach from the typical advice of 'keep living like a college student' or 'don't change anything.' Lucas: It is. And I think that's why it works better for most people. Pure deprivation is hard to sustain. But this gives you permission to enjoy some of your raise — just not all of it. The structure does the heavy lifting. Luna: I want to bring in a real example. A listener named Priya wrote in. She got a 15% raise last year, from $80,000 to $92,000. She was so excited. But when she checked her savings rate six months later, it had actually dropped from 12% to 10% of her income. Lucas: That's the exact pattern. The raise increased her spending more than it increased her savings. Let's do the math. On $80,000, 12% savings was $9,600 a year. On $92,000, 10% savings is $9,200. So despite earning $12,000 more, she's saving $400 less annually. Luna: Right. And Priya wasn't buying anything crazy. She just upgraded her apartment, started eating out more, took a couple of weekend trips. It felt warranted. Lucas: Of course it did. And that's the thing — lifestyle creep is rarely about a single big purchase. It's dozens of small upgrades that compound. The future self category is a counterweight. If Priya had set it up, she would have automatically diverted maybe $500 a month from that raise into savings. Her lifestyle would still have improved, but she'd be saving more than before. Luna: So the percentage is key. You said at least 50% of any income increase. Why that number? Lucas: Fifty percent is a strong default because it strikes a balance between present enjoyment and future security. If you do 100%, you might feel deprived and rebel. If you do 10%, you barely move the needle. Fifty percent gives you a real improvement in your standard of living while still making meaningful progress on your long-term goals. Luna: I've also heard the rule of thirds: one third to savings, one third to debt, one third to lifestyle upgrades. Lucas: That works too, especially if you have debt. But the key principle is the same: don't let 100% of your raise flow into lifestyle. Decide in advance what portion is reserved for your future self. Luna: And this category doesn't have to be one thing. It could be a mix — emergency fund, retirement, a house down payment, whatever. Lucas: Exactly. The category is a container. You can split it further. But the act of creating the container is what matters. Without it, your raise just disappears into the cost of living. Luna: One thing I find interesting is that this works even for small raises. Like a 3% cost of living adjustment. Lucas: Absolutely. If you get a $100 a month raise and you funnel $50 into the future self category, that's $600 a year. Over five years, assuming modest returns, that's over $3,000. And you barely felt it. Luna: So it's not about the size of the raise. It's about the habit of always paying your future self first when income increases. Lucas: That's the core of it. And it's a habit that compounds beautifully. Every raise, every bonus, every windfall — you apply the same rule. Over a career, the difference between someone who does this and someone who doesn't is hundreds of thousands of dollars. Luna: Let's talk about how to set this up practically. Step one: know exactly when your next raise hits. Step two: calculate the after-tax increase. Step three: set up an automatic transfer for the percentage you choose. Lucas: And I'd add: put that money into a separate account that you don't check daily. An online savings account, a separate bank, even a different institution. The friction of accessing it helps you resist the temptation to dip into it. Luna: Do you recommend naming the account or category something specific? Like 'Future House' or 'Financial Freedom'? Lucas: I do. Behavioral science research shows that specific labels increase saving. If you name it 'Retirement' or 'Early Exit Fund,' you're more likely to keep the money there than if it's just 'Savings.' Luna: That's a great tip. I'm going to rename my accounts tonight. Lucas: One thing I want to caution against is perfectionism. You might not get the percentage exactly right every time, or you might miss a raise entirely. That's okay. The goal is to get it right most of the time, not all of the time. Luna: I think a lot of listeners worry that this approach means they'll never enjoy their money. But you're saying the opposite, right? Lucas: Completely. You're still spending more than before. You're just not spending all of it. And over time, the future self category builds into something that gives you real freedom — the ability to take a lower-paying job you love, retire early, or weather a crisis without stress. That's enjoyment of a different kind. Luna: We've talked a lot about raises, but this also applies to bonuses, tax refunds, inheritance, even side hustle income. Any new money stream. Lucas: Right. The principle is universal. Every time your income jumps, your future self gets a vote. And you decide what share of the vote they get. Luna: You know, it's funny — we talk about budgeting as if it's all about limiting yourself. But this category flips that. It's about giving yourself more later. Lucas: Exactly. And that's the kind of budgeting mindset we try to promote on this show. Not restriction, but intentionality. Luna: Speaking of promoting — and this ties right into that idea — a handful of listeners actually help keep this show going by supporting us at buy me a coffee dot com slash fexingo. It's a small group, but it's what allows us to keep these episodes ad-free and focused on what actually works. Lucas: Yeah, and we're really grateful for that. It means we can spend time on topics like this one without worrying about sponsors or selling anything. Just honest, practical advice. Luna: And if you've gotten value from any episode, that's a way to give back. No pressure. But it's nice to know that the show is listener-supported. Lucas: Completely agree. And now, back to the future self category — if you want to take this to the next level, consider what happens when you also apply it to any windfall. Say you get a $5,000 bonus. Put $2,500 into the category. The rest you can enjoy guilt-free. Luna: That's a concrete rule. And I think the biggest takeaway from today is: don't let your budget be static. Make it dynamic. Every time your income changes, your budget should change with it — but in a way that protects your future. Lucas: Exactly. The future self category is a simple structural fix. It's not about willpower. It's about design. And good design beats good intentions every time. Luna: Alright, next week we'll talk about how to budget when you're carrying credit card debt — and whether the 'future self' category still applies. Lucas: Spoiler: it does, but the math looks different. We'll break it down. Until then, keep your future self in mind.