Lifestyle Creep: What Is It & How Do I Avoid It?

You’ve been working hard and you’ve finally gotten your reward. You got a raise at work! Or you got a well-paying, new job! Or your business has finally taken off! Whatever it is, you’re earning more money and life is good. Now, you’re eyeing up that swanky new car and booking an all-inclusive vacation at your dream resort. While there’s nothing wrong with treating yourself, it’s easy to fall into the trap of lifestyle creep. So, what is lifestyle creep, why is it bad, and how can you avoid it?

What is Lifestyle Creep?

Lifestyle creep happens when your spending increases as your income goes up. It’s a gradual process where your wants become your needs. For example, suddenly you need to eat at expensive restaurants. You need to buy more pricey clothes because you’ve moved on from that cheap stuff. You need to play mas in the front line every year.

You feel as if you need these things because you start telling yourself, “I work hard and I deserve the best,” or “I can afford it now,” or “I want to have the same standard of living as my friends”. So, instead of saving or investing extra income, you spend it on things you don’t truly need. Before you know it, your standard of living has inflated to match your new income, leaving you with the same financial stress as before.

Why is Lifestyle Creep a Problem?

Decreased Savings: Not only can lifestyle creep prevent you from saving, it can actually reduce your savings. Lifestyle creep is hard to reverse. So, it may be tempting to dip into your savings to maintain your standard of living.

Increased Stress: if you dramatically increase your financial obligations, you’ll need to earn even more to maintain your new lifestyle. More money doesn’t have to mean more problems; but if you’re a victim of lifestyle creep, you could also become a victim of stress and burnout.

Missed Opportunities: By not saving or investing, you miss out on opportunities to grow your wealth and achieve financial independence. Instead of spending all that extra cash, you can choose smart saving options with high interest rates to build a better future for you and your family.

Unmet Financial Goals: Lifestyle creep can derail your long-term financial goals, like buying a home or saving for retirement.

How to Avoid Lifestyle Creep

Avoiding lifestyle creep doesn’t mean you can’t have nice things. It’s all about finding a balance between treating yourself and being financially responsible. Here are some practical tips to help you stay on track:

Create a Budget: Think of your budget as a financial roadmap. The popular 50-30-20 budget strategy dictates that you allocate 50% of your salary towards needs, 30% towards wants, and 20% towards savings and investments.

Live Below Your Means: Just because you can afford something doesn’t mean you should buy it. Remind yourself that there are many inexpensive but meaningful experiences that bring you joy.

Avoid Lifestyle Comparisons: Unfollow the social media influencer who makes you feel as if you must have the latest clothes. Remind yourself that life is not a competition and you do not need to keep up with your friends or strangers on the internet.

Review Your Expenses Regularly: It’s called lifestyle creep because it creeps up on you. Regularly reviewing your expenses can help you identify any new areas where you’re overspending.

Avoid Emotional Spending: According to Psychology Today, “Emotional spending differs from regular spending because it occurs when we allow our feelings (such as fear, panic, overwhelm, anger, and insecurity) to drive our financial decisions.” Try to avoid significant financial decisions when emotions are running high.

 Embrace Mindful Spending: Instead, spend money thoughtfully, with a cool head and a heart at peace. Pay attention to your financial habits and make conscious choices that align with your long-term goals.

By staying mindful, you can enjoy your hard-earned money without compromising your financial future. Remember, it’s okay to indulge, but make sure it’s part of a balanced financial plan. So, next time you earn some extra cash, celebrate wisely, and keep lifestyle creep at bay!