Lifestyle creep is the common pattern of spending more money as your discretionary income increases. The increase in discretionary incomes can come from an increase in income or a decrease in costs. I have fallen into lifestyle creep many times. It can happen very fast. Its easy to get used to spending more, and not looking back.
4 Signs that you are experiencing lifestyle creep:
1. Your savings are stagnant. When you come by more money, either by getting a raise, completing the pay-back of debt, or receiving money unexpectedly (stimulus check, inheritance, tax refund) —you tend to spend it. Often without much analysis or planning.
2. You live pay check to pay check even though your income continues to rise. You are not accumulating wealth. You don’t have money set aside for an emergency.
3. You don’t have specific money goals. You are not clear on where your money is going every month, you just have a pretty good idea that you are spending most or all of it.
4. You compare what you have to those around you, and spend to “keep up.” Sometimes this happens because you are embarrassed to say no, or you feel like you SHOULD be able to afford something. You are probably not spending in line with your values.
4 ways you can avoid lifestyle creep:
Here are some things I have done in my personal finances, and with my clients, to help break the cycle of lifestyle creep:
1. Start to track your spending. You can’t be more intentional about your money if you don’t know where its currently going. This can be an uncomfortable exercise when you do it for the first time. Consider this a loving reminder that you are not doing this to judge yourself or make any drastic changes. You are getting to know yourself better. Try to do that with compassion.
2. When you get a raise, increase your retirement percentage contribution. You will miss it less if you make the change as soon as you get the pay increase. Set incremental goals. First try to get to the match if your company offers one. Then, try to increase by a percentage point every six months. Try to get to 10%. If you can do 15%, even better.
3. Make savings automatic. Set up an auto transfer to a High Yield Savings account for every time your get paid. Watch it build up! You are building wealth.
4. Before you buy something new, ask yourself some important questions: Do you have to get rid of anything you are already have to make space for this new thing? Are you buying this thing because it lines up with your values or because it seems trendy? Did a previous version of you find this important, or do you value this now? Are you trying to fill a void with this purchase that can be filled another way?
The most important thing to remember is to be kind to yourself. Giving yourself the gift of grace as you build self awareness and change your relationship with money is key.