#KicktheCreep
What is lifestyle creep? Lifestyle creep or lifestyle inflation is the phenomenon where the more money you earn, the more money you spend. As your income increases, your discretionary spending increases as well, leading to certain “luxury” items becoming needs rather than wants. “Luxury” is in quotation marks here because the term “luxury” can be misleading. I’m not talking luxury cars and fur coats here; I’m talking fancy cheese and gas station coffee – because that’s the sort of luxury most people fall victim to – little things, small comforts, minute splurges. In this context, a luxury is really anything above a basic necessity. Lifestyle creep is when luxuries became a norm. It’s a slippery slope, but you can avoid it, and even come back from it. You might be surprised how much money you find once you’ve identified lifestyle creep in your life and followed these easy steps to stop it.
Lifestyle Creep is Insidious
It usually happens one of two ways. The fist is very gradually, so much so that people don’t even realize it’s happening (hence the “creep” part of “lifestyle creep”). Say you get a raise. Not a huge raise, a couple percent at most. A few extra bucks a pay check. Money is a little less tight, and you starting finding little things you can now afford, like slightly nicer cheese. Instead of getting the cheapest possible, might not actually even be cheese, off brand option, you get the nice cheese. It has a brand name; is actual cheese and it tastes so good! But, the nice cheese is a luxury.
The second way it happens is less gradual and is really more lifestyle inflation than lifestyle creep. Basically, you get a good job or a great raise and it substantially increases your income. Right away you can afford things…better things… and you start buying them. I mean, you earned it, right? So you begin buying the things your new salary allows and your lifestyle becomes inflated by your new spending power. You could live on what you used to make but the temptation is too powerful, so you create a new – higher – standard of living.
These improvements in standard of living are EXACTLY what lifestyle creep and lifestyle inflation are all about. They’re sneaky little bastards.
The change in standard of living caused by lifestyle creep and lifestyle inflation isn’t necessarily about going out and buying new things. It’s little things like getting the name brand instead of the store brand. Its getting a coffee at the gas station or Starbucks in the morning instead of brewing your own. It’s these seemingly small changes in consumption that lead to your spending increasing right alongside your earning. As it’s happening it seems normal, even deserved. Soon enough, it IS your norm and no longer feels like a something you want, it feels like something you need.
Is Lifestyle Creep bad?
That depends. Lifestyle creep is a slippery slope. It starts small and can quickly progress if unchecked. That said, living a life completely devoid of things that bring you some sort of happiness or joy isn’t the solution either. There should be balance. Living frugally and avoiding lifestyle creep leads to long term wealth as does making well thought out decisions to purchase something that genuinely adds value to your life. It’s okay to buy things, or even chose a more expensive version of something, as long as it is done sparingly, consciously and with consideration for opportunity cost.
Do You Have Lifestyle Creep?
Here are the signs of lifestyle creep. Whether its lifestyle creep or lifestyle inflation, these signs may indicate you have fallen victim:
- You go out more often
- You go to nicer places
- You make more money than you used to, but don’t feel like you do
- You find yourself paying full price for things more often
- You buy better brands
- You splurge on little things – a lot
- You think less about the money you spend, because you know you can afford it
Steps to Avoid Lifestyle Creep
Only you can control lifestyle creep. Seriously. It’s on you. Regardless of whether you are trying to avoid lifestyle creep, or you’ve gone sliding down that slope and are wanting to claw your way back out, these steps will put you on the right path.
1. Create a Budget
If you are unfamiliar with how to budget or allocate savings, consider looking into the 50/20/30 rule. This rule is a baseline, a starting point. It’s a basic allocation of how much of your budget should be spent on needs, savings, and wants.
2. Track your Spending
On paper, via app, or in a spreadsheet, track every single purchase. Indicate where it was made, what category it falls in, and how much it was. This is the single most important step you can take against lifestyle creep. It will help you see very clearly just how much you are spending unnecessarily.
3. Save
You should be saving AT LEAST 20% of your income. This is the minimum. Pay yourself first, and make it automatic.
4. Reevaluate Wants Versus Needs
Part of the problem with lifestyle creep is that the line between what a want is versus what a need is gets blurred. Once you’ve tracked your spending for a month or two, take another look at what you are spending money on. Are those things truly needs?
5. Plan for Wage/Salary Increases
Be prepared to handle increases in income. The easiest way to combat lifestyle creep is to prevent it from happening altogether. If you see a windfall, a raise, an increase in income, save it. If it’s a raise, say 4%, simply increase your 401k savings rate by that 4%. You are already living on your income. You know you can live on it. Keep living on it. Anything additional should go directly to savings.
Don’t Let Lifestyle Creep Creep Up on You
Lifestyle creep is a trap. It’s a phenomenon that works against you, and will keep you from meeting your financial goals. The only way to avoid the creep is to be aware and cognizant of your spending. You must take control, and not fall into the temptation of “more”. Instead, recognize your power over the situation and chose “enough” instead.