Are you experiencing lifestyle creep, or lifestyle inflation, without even realizing it? Find out if you are and learn how to stop today!
I’ll be the first to admit it, there have been times when we’ve let our lifestyle creep up on us. My husband’s yearly raise is always exciting and each year it seems we let ourselves spend a month buying the things we’d been wanting but waiting for over the last year. Our budget gets thrown out the window, then after a few weeks, we rein it in, discuss our goals, update the budget, and get back to tracking our spending. Here’s how we do it, and how you can avoid it altogether if you’re careful!
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What Is Lifestyle Creep?
Lifestyle creep, or lifestyle inflation, is the gradual increase in spending and standard of living. This is often seen in conjunction with an increase in income, but can also occur without any income changes. It is usually small increases over time that may hardly be noticed. However, these changes add up over time, creating a lifestyle where previous luxuries become an expectation.
Is Lifestyle Inflation Bad?
Lifestyle inflation usually produces negative results, such as less savings, more debt, and an overall inability to achieve long-term financial goals, even if your household income is growing. Lifestyle creep can occur when income increases, such as from a side hustle, freelance work, or promotion. Instead of saving or investing that extra money, you may be tempted to improve your lifestyle in ways that lead to higher costs, such as buying more expensive clothes, upgrading household items, or indulging in other unnecessary luxuries.
What Are Some Lifestyle Creep Examples?
- Buying Things You Don’t Need: Buying extra things that are “nice to have” or upgrading items in your home that were working perfectly well may be a sign of an inflated lifestyle.
- Increasing Subscriptions: Not every purchase needs to be large. Little costs add up over time so those extra subscriptions or upgrades can be a hidden sign of increased spending.
- Decreased Savings: Because lifestyle creep happens when spending on lifestyle habits outpaces income, savings will suffer. If the savings account is lower than normal or if the proportion of the budget designated to savings is lower than it used to be, this is a red flag.
- Financial Stress: Although this feels backward, an increased income does not necessarily coincide with an increased sense of safety. If you’re spending the majority of your new income on luxuries, you might feel more strain when necessary bills or emergencies come up.
How To Avoid Lifestyle Creep
If you just realized after reading that list of examples that you may be experiencing lifestyle inflation, don’t worry! There are ways to change your habits and get back in control of your finances! It will take time and dedication but it’s possible to return to a more stable spending vs. saving ratio. To start, you will need to ask yourself “What is enough?”
- Create a Budget: If you’re new to budgeting, check out my post on budgeting 101 here! A budget is a tool to help you plan and direct where your money will go. Tracking where you planned your money to go versus where it actually went each month will also give you valuable insight. Be sure to check out these common budgeting mistakes before you set up your first budget!
- Set Goals: If you share an income always start with talking to your spouse and getting on the same page about goals. I have a full post about how to budget for a raise and talk about difficult financial questions that may arise. Make sure your goals are aligned with your spouse and that they include savings for the future, and saving for emergencies.
- Avoid Impulse Buys: Know your budget and stick to it. No matter how good of a deal it seems at the time, if it’s an item you don’t need, you are wasting your money. If it’s going out to eat when you have a full fridge at home, it’s a waste of your money. Self-discipline is key to avoiding lifestyle creep.
- Stay True to Your Values: If you value experiences over things, don’t waste your money on items you don’t need. Avoid social pressures to have the newest trendiest foods, clothing, and stuff, and steer clear of anyone in your friend circle who doesn’t respect your decisions to keep your spending within reason. You’ll be happiest if you don’t get influenced to spend more than you planned.
Conclusion
Lifestyle creep can be subtle and sneaky, but with planning and self-discipline, you can avoid overspending your income. Some inflation of lifestyle is okay when it happens in proportion to increased income, but make sure you discuss with your spouse the level of increase you both think is appropriate. Make sure putting money into savings is still a priority! Financial stability is all about making smart money choices and sticking to them. Good luck on your money management journey!
Have you ever experienced lifestyle creep? If you did, what are some habits you found difficult but useful to change?
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