Receiving a bonus or tax refund? Avoid lifestyle creep.

An annual bonus or tax refund can feel like an invitation to spend—a well-earned reward. After all, it’s extra (or “free money”) that’s rightfully yours, right? But without a plan, those extra funds can disappear as quickly as they arrived.

This is how lifestyle creep begins. Upgrading to a nicer apartment, replacing a perfectly good phone with the latest model or finally splurging on that luxury gym membership—these choices can gradually increase living costs, leaving you wondering why your paycheck never seems to stretch far enough.

But that doesn’t have to be the case. When extra income is used wisely, it can become a steppingstone to better money decisions, according to Edgar Zetina, consumer product manager at BOK Financial®.

Why lifestyle creep happens
For many young professionals, earning more doesn’t always mean gaining financial security. A 2023 study found that 66% of Gen Z and 73% of millennials live paycheck to paycheck, even as some see their wages rise. One reason? When more money comes in, spending often follows, sometimes in small, incremental ways that don’t seem like a big deal.

According to Zetina, lifestyle creep is often emotional and social.

“It’s natural. Once you start making more money, it’s easy to want to enjoy the fruits of your labor,” he said. “A lot of times, you’ve worked pretty hard to reach that next level, so when that bigger paycheck or bonus comes in, it feels like a reward.”

Another big factor: social comparison. For young professionals, social media amplifies this pressure. Zetina notes that people receive bonuses around the same time, making it easy to get swept up in what others are doing.

“You see people going on vacation or buying a new car, and it makes you wonder, ‘Should I be doing that too?’” he said. Avoiding lifestyle creep doesn’t necessarily mean refraining from some splurging. However, Zetina emphasizes that the key is being intentional—making sure extra income supports your financial goals instead of quietly raising your cost of living.

Make the most of your new income
The key is striking a balance. Before going all in on lifestyle upgrades or splurges, consider the following:

1. Pay down debt
If you have outstanding debt, especially high-interest credit card balances, Zetina recommends prioritizing repayment. High-interest debt can quickly become unmanageable making it harder to pay off the principal the longer you wait.

“Coming off the holidays, a lot of people might have higher credit card balances than they normally do,” he said. “Using your refund or bonus to pay off that debt—whether it’s credit cards, student loans or even a car loan that’s close to being paid off—can be a great way to put that extra money to good use.”

2. Build a financial buffer
Unexpected expenses like car repairs or medical bills can happen anytime, and having a financial cushion makes them easier to manage when they do. However, many young people lack emergency savings. In fact, 34% of millennials have no emergency fund at all—the highest percentage of any generation. Without savings, unexpected costs can quickly lead to reliance on credit cards or loans.

"If you don’t already have an emergency fund, this is a great chance to build one,” Zetina said. “A savings or a money market account that earns interest can help keep your money accessible while also helping it grow.”

3. Put it where it can grow
For those who want slightly higher returns without locking up their money long-term, Zetina also suggests considering a certificate of deposit (CD).

A CD offers a fixed interest rate, or annual percentage yield (APY), in exchange for leaving your money untouched for a set period. For example, depositing $5,000 into a 12-month CD at 4.05% APY would grow it to about roughly $5,202.50 by the time it matures. The longer it stays, the more it grows.

“Some CDs offer a better rate than traditional savings accounts but still allow access to funds if needed,” he explained. “Keeping emergency savings separate from everyday spending also helps avoid the temptation to dip into it.”

But, whether it’s a CD, a 401(k), or a Roth IRA, the idea is the same. Putting extra money to work now can help set you up for the future.

4. Set a spending limit
It’s okay to enjoy part of your bonus or refund. What matters is setting limits so you don’t regret it later.

“I don’t think people need to put every dollar into savings,” Zetina said. “When people try to be too strict with themselves, they end up doing nothing at all. Go in with a plan.” Zetina suggests setting aside 10-20% of the extra money for something you want so you can enjoy a reward while still putting your money to work toward your financial goals.

The power of starting early
For young professionals, time is your biggest advantage when it comes to money. Compound interest can work for you or against you; it helps savings and investments grow but can also make debt harder to escape. That’s why tax and bonus season is a great time to be intentional with this extra income instead of letting it disappear without a plan.

“Compound interest definitely works both ways,” he said. “You want to avoid starting your financial life with large amounts of debt hovering over you. But on the flip side, the earlier you start investing, the more time your money has to compound and grow, putting you in a better position down the road.”