If your spending is going up with your income, then you’re a victim of lifestyle creep. Find out how to conquer it with our five tips.

As your income rises, your spending may increase in tandem. After all, now that you’ve gotten that nice raise or bonus, you may feel much more justified in moving to a bigger place or splurging on a fancy meal regularly.

That’s lifestyle creep.

Also known as “lifestyle inflation,” it’s the tendency for spending to increase as income does. Because of lifestyle creep, some small luxuries that were once seen as a treat become the norm simply because you have the capacity to afford them—for instance, eating out more frequently than before.

Over time, this adds up, and can take a toll on your finances. For instance, you might find yourself with dwindling savings or even sinking into credit card debt.

How to Avoid Lifestyle Creep

Don’t feel guilty if you’ve noticed lifestyle inflation in your own life—the first step to solving a problem is acknowledging it, right? And with self-discipline and willpower, it’s possible to tame lifestyle creep. Here are five tips to help conquer it.

1. Spend less than you earn.

Would it surprise you to find out that the neighbor living in the one-story house across the street and who drives a used car is a millionaire?

Common sense tells us that millionaires are the Hollywood stars and professional athletes who live in mansions and own private jets—but that’s not true for all of them. In fact, many wealthy people live rather modestly, in spite of the fact they can afford more.

In other words, they spend less than they earn.

By spending less than you earn, you’ll inevitably have more money leftover—and that means more savings.

To help curb your spending habits, try:

  • Tracking your expenses. It’ll help you get an idea of how much you regularly spend in a day, week, or month.
  • Setting up an automated deposit so that whenever you get paid, a certain amount goes to your savings account.
  • Ditching the “it’s only a few dollars” mentality. Whether those thoughts come up toward an appetizer, coffee, or cocktail, the money adds up quickly.

2. Make a budget.

calculator, checkbook, and penThere’s no true antidote to overspending, but budgeting sure helps keep it from getting out of control. By planning and outlining where your money will go, you’ll be able to make every dollar of your paycheck count.

Of course, what you earn and where you live will shape your finances in such a way that there is no one-size-fits-all budget. With that in mind, EveryDollar offers rough guidelines for planning one:

  • Donations: 10%
  • Saving: 10%
  • Food: 10-15%
  • Utilities: 5-10%
  • Housing: 25%
  • Transportation: 10%
  • Health: 5-10%
  • Insurance: 10-25%
  • Recreation: 5-10%
  • Personal Spending: 5-10%
  • Miscellaneous: 5-10%

You can adjust categories as needed based on your lifestyle—that might even include a “fun” category for treating yourself from time to time. Just don’t forget about saving as a priority.

Alternatively, budgeting software like You Need A Budget and Mint also simplify the money management process. You can link your bank and credit card accounts to see where each expense goes and monitor in real time how your budget is doing.

3. Distinguish between “want” and “need.”

When you can distinguish between wants and needs, you’ll have a better understanding of what costs contribute to lifestyle creep.

Here’s an idea of how the two differ:

Need

  • Food
  • Housing
  • Electricity, water, and other utilities
  • Work-appropriate clothing, warm clothing, etc.
Want

  • Filet mignon dinner on your favorite rooftop bar
  • Penthouse apartment
  • Netflix subscription
  • A pair of Nike’s newest sneakers

Your wants may be idealized, whereas your needs are practical. In other words, it’s unnecessary to have everything you want—not having what you need, on the other hand… You’d be in trouble.

Admittedly, sometimes it can be hard to see the difference. But when deciding whether or not to buy something, consider:

  • How will this purchase impact you?
  • How often will you use it?
  • If it’s exceptionally pricey, are there more affordable options?
  • If so, what makes a higher cost worth it?

4. Wait on big purchase decisions.

Got your eyes on a nice loveseat or big-screen TV? Instead of buying it on the spot, give it some time—anywhere from two to three weeks, or even longer.

You can think of this wait time as a kind of incubation period for big purchase decisions. When the wait period is over, reevaluate whether or not you still want that item.

Adopting this wait time helps you avoid impulse buying because it forces you to process how much you actually need something.

But wait! What about limited-time offers?

Major promotional sales try to get you by emphasizing their availability for only a short time, forcing you to act quickly. This is when you need to remind yourself, is this purchase something I absolutely need or just something I want?

Decide whether to buy or not buy from there.

Beyond simply waiting to make a decision though, you should also spread your large purchases over a long period instead of making them all at once. Forcing yourself to see how big expenses gradually pile up can help stop you from sliding down lifestyle creep’s slippery slope in an instant.

5. Stop comparing your lifestyle to others’.

women using cell phonesLastly, you can avoid lifestyle creep by living on your own terms—that is, not comparing your lifestyle to others’.

This is far easier said than done, though.

Sometimes, you might be unknowingly influenced by others. For instance, seeing many friends or coworkers wear the same shoe brand may make you feel more compelled to buy a pair. In this example, those shoes are status symbols—things people buy into for their connotation of wealth, or to fit in.

Status symbols can include both items and experiences, such as:

  • Designer clothing and accessories
  • Luxury vehicles
  • Boutique fitness memberships
  • Living in a “fancy” neighborhood
  • Having the latest electronics
  • Going to sporting events and concerts

Of course, it’s perfectly fine to spend money on certain brands and experiences so long as you legitimately like them and can budget accordingly. However, if your purchase is driven more by the desire to impress or keep up with the Joneses, you should reevaluate your financial priorities.

Think and reflect on your own personal values—and try not to let social media convince you what to spend on.

Conclusion

It’s exciting to get a raise and bonus, and you’re by all means entitled to reward yourself for such an accomplishment. Just don’t go overboard and make it a regular habit. That how’s lifestyle inflation happens.

Again, there’s no need to feel guilty about experiencing lifestyle creep. But left unchecked, it can mean losing out on savings in the long run.

Have you experienced lifestyle creep? What are your tips for keeping it under control?

2 Replies to “What is Lifestyle Creep? & How to Conquer It”

  • Great post explaining this toxic habit of lifestyle creep! I have always found it strange that people with all different incomes find a way to be living paycheck to paycheck.

    I have never experienced lifestyle creep myself, but have witnessed it in others. I think it would help if everyone took some minimalistic approach to downsizing. Then work your way up until you are happy and comfortable (but still downsized!). Then stay at that level! Do not let it creep back up to your income level or dare I say it, spend more than you earn. Ewww! 🙂

    • Financial Impulse says:

      Thanks a lot! And yes, I’m with you—it’s crazy that even high earners can live paycheck to paycheck. Not sure if you read personal finance books, but The Millionaire Next Door by Thomas J. Stanley and William D. Danko was pretty eye-opening to me on that subject. The “true” millionaires they describe are those who do as you suggested: people who lead comfortable, downsized lifestyles that are well within their means.

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