What Is Lifestyle Creep? (and How to Avoid It)
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Congratulations, you are moving up!
You are bringing in more money and starting to get a bit more comfortable financially. But, do you need to rush out to buy a new car?
There are a few things you may want to consider first.
What You Will Learn
- How You Can Develop Better Habits by Learning about “Lifestyle Creep”
- What Is Lifestyle Creep?
- Are You Experiencing Lifestyle Creep?
- How to Avoid Lifestyle Creep
- Write down your goals.
- Remember to pay yourself first. Better yet, make it automatic.
- Choose free rewards for yourself.
- Start a fun/entertainment fund.
- When experiencing an increase in income, make gradual changes to your lifestyle.
- Differentiate between needs and wants.
- Stay frugal.
- Keep your old, cheap hobbies.
- You Deserve to Enjoy the Fruits of Your Labor, But…
How You Can Develop Better Habits by Learning about “Lifestyle Creep”
If you are able to learn how to be frugal and stick with those behaviors even when your income increases, then you will be unlikely to make financial mistakes that could lead to excess stress in the future.
Learning how to be frugal and maintaining that lifestyle will help you become financially disciplined and build habits that will make you content with your life without spending a lot of money. It will also teach you how to reward yourself without buying new things or blowing your budget.
What Is Lifestyle Creep?
Lifestyle creep refers to a condition where one's income rises or their bills decrease, and this creates a temptation for a lifestyle inflation. When bringing in more discretionary income than normal, one's lifestyle or standard of living could possibly go up along with their excess funds.
As this happens, and more money is spent on one's lifestyle, goods and services that were former luxuries are now considered to be necessities. This means that things that are now considered to be “splurges” are even more out of their budget's range.
Are You Experiencing Lifestyle Creep?
If you have recently started to bring home more money, could you possibly be spending more than you should be? Here are a few signs that you might be experiencing lifestyle creep yourself.
Increase in lifestyle expenses
Take a look at your unnecessary gadget upgrades, data plans, and cable subscriptions.
Are you eating out more, drinking fancy coffee, and buying more clothes?
Are you starting to find that things you once “wanted” are now considered to be things that you need?
If you are blowing money on excess clothes or dinners out with your friends, it may be a good idea to reconsider your budget.
If you were once happy making coffee at home every morning and bringing it to work in your travel mug, there is no reason to stop doing that and begin stopping at a coffee shop each morning. This is the type of small expense that adds up over time and wastes excess money that could be spent elsewhere.
Owning a public storage unit (for all your extra stuff)
If you have grown out of your living area and own too many things to store, leading you to purchase a storage unit, you likely have more than you need. Think about the things that you use every day, every week, or even just a few times a year.
These are the things that you should keep. If you have something that you haven't picked up in years, it is probably a good idea to rethink its purpose in your house. A good rule of thumb is to never buy anything unless you are prepared to get rid of something you currently own.
A decrease in financial goals progress
When you were living on a tight budget, you probably had some serious financial goals. Do those goals still exist, or have you forgotten about them at the expense of spending money on frivolous things?
Revisit your goals and see if you are still on your way to achieving them. If you are getting close to them, set some new goals to reach even higher.
Neglecting your budget
If you are neglecting your budget, it may be because you didn't make it in an effective way. You can rework your budget if you start to bring in more money, but it is still important to follow one very closely so you don't end up spending money on things that you cannot afford.
How to Avoid Lifestyle Creep
Write down your goals.
Keep them somewhere that you can refer back to often so you can track your progress. Look ahead to see how long it would really take you to achieve your goals while still being able to pay your bills and enjoy yourself every once in a while. Set small goals along the way and reward yourself appropriately when you meet them.
As long as you keep your goals written down, consider them to be set in stone. Make these a priority in your life and adapt your lifestyle to these goals so you will be successful in achieving them.
Remember to pay yourself first. Better yet, make it automatic.
Whenever you get paid, put some money into savings before anything else. If you can set up a savings account to do this automatically for you, then you won't even have to notice that the money is missing when your check hits your bank account. Decide how much money you want to save out of each paycheck and make that a priority.
Once you get used to your original amount of money being taken out of your paycheck, stretch it a bit farther. You will always thank yourself in the future for saving a bit of money now for important purchases when they come along.
Choose free rewards for yourself.
Maybe you want to catch up on your favorite show, or even give yourself an entire day to binge-watch something on TV. Or, maybe you want to make cookies for yourself and possibly share them with a friend. Whatever you can do to reward yourself without spending money is a good way to keep motivated to continue setting and reaching your goals.
Free rewards can often be more satisfying than things you can buy. Offering yourself time to spend with your friends or even a walk on the beach can be much more rewarding than a new electronic gadget that will only last a few weeks.
Start a fun/entertainment fund.
Aside from putting money into your savings account each week, put some aside that you can spend on having fun. If you just put a little bit of money into this fund from every check, it will add up quickly and you will have a hefty amount of money to be able to spend on going out and having fun. This way, when someone asks you to go out, you will have the money ready to go!
When experiencing an increase in income, make gradual changes to your lifestyle.
Don't do it all at once. If you get a raise and there is something you want to add to your lifestyle, such as going to brunch once a week or getting a magazine subscription, go ahead and do that. However, if you have a long list of things you have been wanting to do or buy, take it slow. Start with one or two things before diving in and spending all of your extra money. Some of the other things can wait until your next raise. And remember, the first change you should make is to increase the amount of money that you are paying yourself.
Differentiate between needs and wants.
If you stop to think about this for too long, you might begin to justify some “wants” as “needs.” Sure, you need to have clothes, but do you absolutely need that designer shirt that costs as much as your cable bill? Yes, you need food, but do you need that filet mignon with a side of lobster, or is that something you are just craving?
There are four things that everybody needs to survive: shelter, food and water, basic health care and hygiene products, and appropriate clothing. Anything beyond these things is a “want.”
This doesn't mean that you should only buy what you absolutely need all of the time. It is fine to buy things that you want as well, but they should be considered a bit more to determine if you are wasting your money on an impulse purchase or buying something that will add some sort of value to your life.
Think about the things that you absolutely need, and the things that you just want, but that will be extra stuff around your house. This also applies to experiences. Maybe your friend wants to go to the movies. You could suggest renting a movie and watching it at home instead to save some money.
Despite our best efforts, we all struggle to stay frugal sometimes. Maybe you notice a big sale going on at your favorite store, or you find a bargain website that you can't resist. While you may be saving 50% on an item, is that an item you would have had to purchase anyway?
Big sales and bargains often lead us to believe that we need things that we don't, or that we are going to miss out on a once-in-a-lifetime deal if we pass it by. Instead of shopping for prices, shop for products. If you see something on sale but you know that you don't actually love it, you will just be wasting your money.
Chances are, during times that you had less disposable income, you were able to teach yourself a few tricks about living frugally. Keep this mentality and stay frugal as your income goes up. This will allow you to save more money for larger and more important purchases in the future.
Keep your old, cheap hobbies.
Maybe you enjoy hiking or playing basketball. Whatever inexpensive hobby you have enjoyed your entire life, keep it up. If you have a group of friends that you love to play board games with, don't ditch them to start going out shopping every Thursday night instead.
There is no reason to let go of the things you enjoy just because you can afford more luxurious hobbies. Stick with your old friends who love to do the same things that you do, and continue to have fun doing those things.
You Deserve to Enjoy the Fruits of Your Labor, But…
The truth is, you deserve to enjoy your success and the fruits of your labor. Life is meant to be lived and enjoyed, not just survived with your basic needs all of the time. But be sure to guard against lifestyle creep.
It can be tempting to upgrade your standard of living when you have more money coming in, but keeping a simple lifestyle and staying within your budget provides you with peace of mind, and will prevent you from letting your spending get out of control.
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