LIMITING LIFESTYLE CREEP

WHAT IS LIFESTYLE CREEP?

Lifestyle creep is what often occurs when we make more money and inflate our lifestyle. Over time as our income goes up, we begin doing things like upgrading the car, skipping the bagged lunches and eating out more, buying more expensive wine or coffee, buying more expensive groceries, going on more expensive vacations, etc. It is when you inflate your expenses to match your inflated income. So even though your income has increased, you don’t really have much to show for it.

Lifestyle creep can prevent us from achieving the financial goals that we may have. This is because we are using increased income to increase our discretionary spending. If this continues, you can end up living paycheck to paycheck regardless of your annual income. This is not to say that you should not ever make some upgrades to your lifestyle. It’s that you do not want it to happen without you realizing it. You want to avoid looking back years later and saying where did all of this extra money go?

WHY DO WE WANT TO AVOID LIFESTYLE CREEP?

We should really be mindful about how we upgrade our lifestyle. By upgrading too much it can make things that were once fun and special just part of the norm. For example, if in the past you only went out to dinner for special occasions.  When you went out to dinner, it would feel special and be a real treat. If you start going out to dinner every Friday night because you are now earning more income, it no longer feels like a special treat.  You might have to upgrade the way you celebrate to make it feel special.

Some lifestyle inflation is good as long as it is done intentionally. Of course, as we make more income, it is natural to want to be able to have some of the things that we were not able to be able to have or do at lower income levels. If you are intentional about where you increase your spending, you can get some of those things that are most important to you, and still be able to put some of your increased income towards your financial goals.

Unless you are very wealthy, I think it’s safe to say that all of us have some things we would like to save up for. So, you want to make sure that you are not upgrading so many things in your life that you have none of your increased income to put towards those goals.

INCREASE SAVINGS AND BE INTENTIONAL WITH INCREASED INCOME

One tip that I have is to increase your retirement contribution to match your salary increase. If you are not already maxing out your retirement savings, you could consider increasing your contribution rate at the same time as you receive a pay increase. This will not allow for any lifestyle creep because you will never see the additional income.

Another tip is to really be intentional with any increased income that you receive. If what you really love in life is going out to dinner, then maybe that is an upgrade you choose to make.  You might want to put a portion of your additional income towards going out to dinner more often. But, when you are not purposeful about what you do with that income, you could spend it all before you have anything left to show for it.

The point is that you want to be aware of any increased spending. You want to be purposefully choosing it, and not just allowing it to happen without any thought.

KEEP YOUR BUDGET

Even if you are making more money, you still need a budget. Don’t forget that a budget is telling your money where you want it to go. The more income you have, the more important your budget is. Higher-income means there is more money that can be wasted if you are not on top of things.

Make sure to have a plan for your increased income. Having a plan for additional money coming in will help keep you on track and avoid lifestyle creep.

MAKE A LIST OF YOUR SAVINGS PRIORITIES

Instead of taking all of your increased income each year and doing as much as you possibly can. Try keeping a list of the things that you want to save for. These could be various home improvement projects, a vacation, or new wardrobe items. Whatever it may be, keep a list of these things with the estimated cost and prioritize them.

By having a list of your priorities you can choose to save for them in priority order. Rather than trying to do everything all at once, you can be better prepared. When you are in the habit of doing things based on your priorities, you will likely take it a little slower. It allows you to be more aware of what you are spending your money on.

PRACTICE CONTENTMENT

When you practice gratitude, you are taking the time to acknowledge and appreciate the things that you have. When you recognize and appreciate what you already have, it can lessen the desire to want to purchase more. You will be more likely to put that money towards the goals you are trying to accomplish. People often overspend when they feel like they need a treat or a reward.  If you can give yourself that by acknowledging all that you are grateful for, you will be less likely to increase your discretionary spending.

DON’T COMPARE YOURSELF TO OTHERS

Sometimes we can get caught up in comparing ourselves to others. The problem is that there will always be someone with a better car, a nicer house, better clothes, or fancier vacations. You might see are these material things, but have no idea how these things are being paid for. The person you are comparing yourself to could have tons of debt funding this lifestyle. Or maybe they save money on other things that you like to spend money on so that they can have those things in their life.

The point is that you don’t know the whole story on why they have those things and you don’t. Maybe you never even wanted those things until you saw someone else had them! This really goes back to contentment in what we have. By being content with what we have, we can practice being happy for others in getting what they want. It does not have to cause us to make bad financial choices so that we can have the same things.

REVERSING LIFESTYLE CREEP

If you take a look back at the last few years and are unhappy with what you have done with any increased income that you have received you can take steps to change that. You don’t need to cancel all subscriptions and bring your life to a screeching halt. But take a closer look at how you are spending your money and make some decisions on what you would like to cut out.

By taking the time to look at what you are spending your money on, you can take action to stop spending on those things that are not important to you. You can then put that extra money to better use!

Thanks so much for checking in! If you would like to hear the podcast version of this topic to check out Lola’s Frugal Life Podcast! Also, be sure to check out my other blog posts on this site!