What is Lifestyle Creep and How Can I Avoid It?

lifestyle creep and how to avoid it

Lifestyle creep is a passive increase in the amount of discretionary spending we have in our personal finances. It’s passive in that we often don’t notice how when our income increases. That extra income often goes to new subscriptions, hobbies, vehicles, etc.

Sometimes there are big, active choices we make with lifestyle creep. But it’s more often the invisible increase in spending that keeps us feeling like we never have enough money.

How Does Lifestyle Creep Happen?

Lifestyle creep is a fairly natural occurrence. If we’re not following a plan to achieve something, it’s easy for this world’s temptations to pull us in.

We are often more tempted to fall into these temptations when we perceive that we have the money for them. This is not necessarily the case when our financial margins are very tight. In that situation, we already know we can’t afford more expenses.

For example, let’s say we get a raise at our job. It’s easy to see that larger paycheck and think, “I should get a new car since I can afford it!”

It may not even be as large a purchase as a new car. Even eating out more frequently can lead to a significant amount of money disappearing. All it takes to spend $10,000 a year is around $27.40 per day.

And how easy is it for a lunch or dinner out to cost that much or more?

The point about lifestyle creep is that it’s something that can happen in big leaps, or slowly. There may be easily visible choices we’ve made, or a long and invisible road of spending without any markers showing us just how much we’re actually spending.

What Are Some Steps to Avoid It?

steps to avoid lifestyle creep

A key part of avoiding lifestyle creep is to have something you’re aiming for. This applies no matter what your income or wealth level is.

If you’re on a debt-free journey, use your extra income to pay off that debt more quickly. Without those monthly payments, you put that amount back in your pocket.

If you’re trying to pay off your house, do at least 2 extra payments a year. This can help you knock off up to 7 years off the life of a 30-year mortgage.

Even if you’re totally debt-free, determine what you’d like to do next. Something that is rooted in your personal values. Make sure that all of your financial decisions can be traced back to something that is important to you.

Travel, generosity, starting a business, etc. Ensure that all of your daily decisions propel you toward these things. When you make financial decisions in a consistent manner, lifestyle creep is not as much of a threat. That’s because you’re making active decisions toward a particular place.

If you receive a raise, think about how that extra money can go toward whatever your current goal is.

Let’s say you want to do an international vacation with your family. The price tag on such a trip can easily be $10,000 or more.

If your raise gives you an extra $1,000 a month, you can put that aside into savings for 10 months. When you’re ready to book, you can pay for it upfront. The alternative is to finance the trip and pay interest to the lender on top of the $10,000.

Final Thoughts on Lifestyle Creep

social security in trouble

When it comes to lifestyle creep, it can happen to anyone. Our underlying mentalities are revealed by money. When we get more of it, our true disposition toward money (and life more broadly) are truly revealed.

Clarify what your values are, and reflect on your daily decisions to make sure that you are living consistently.

A consistent financial lifestyle will lead not only to achieving the goals you set for yourself, but also greater trust. If we say something is important to us, and we act in a manner consistent with that, we trust ourselves more.

When we get money, we’re not scared of it disappearing on it if we make values-based decisions. It’s the impulsive things that take away our ability to have financial freedom.

Our future is the sum of our daily decisions. Know how each additional step of lifestyle creep impacts your ability to have what you want in life. With this mentality, you’ll be better equipped to keep things under control.

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