Avoid the Seduction of Lifestyle Creep

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6 weeks into lockdown and the inevitable cabin fever had well and truly set in. To alleviate some of the boredom, I finally started poking around in boxes that hadn’t been opened for years.

What did I find? A bunch of items harking back to my spending habits of years before. A time when a regular pay cheque from a fairly stressful job encouraged me to treat myself each month – a ‘reward’ for all my hard work.

An iPad mini, used only a handful of times. A dress with the tag still on it. Several items bought from holidays abroad (you know, those things you have to have to remind you of that incredible holiday that really don’t fit in with your home décor so never see light of day?).

It’s embarrassing really. What a waste of my hard-earned money.

Less embarrassingly, I’m not alone. There’s even a term for this type of spending – Lifestyle Creep.

And the thing about Lifestyle Creep? Is that it’s sneaky…

Have you fallen victim to Lifestyle Creep?

While you may have never heard the term, you’ll definitely understand the concept, and you might even recognise its effects on your behaviour.

Think about the following questions:

  • When you get paid, do you plan on saving a large chunk of it, but then you never quite get around to doing so?
  • Do you regularly rely on your credit card for extra luxury expenses?
  • When looking at a list of your expenditures, do you see a gym membership that you never use, subscriptions to platforms you didn’t even know you still had, and hundreds of pounds spent in restaurants and coffee shops every month?

If the answer to these questions is yes, it’s likely that you’re a victim of lifestyle creep. So, what can you do to stop it in its tracks?

So what is it?

Lifestyle creep occurs when your living standard or lifestyle ‘improves’ as your income rises. Its key characteristic is that things that used to be luxuries are now your new necessities.       

This increase in lifestyle spending can occur when you get a promotion or a new job. The amount of money that you start to spend on new apps, gadgets, and subscriptions creeps up, and you start to think of them as critical for your happiness.

Lifestyle creep can threaten your financial security, and if you don’t identify and stop it, it can negatively impact your future finances and stop you from attaining your goals. One of the main indicators that you’re becoming a victim to lifestyle creep is a shift in your thinking and behaviour. Your spending habits will change, and you’ll begin to see nonessential items as ‘needs’ rather than luxuries.

Some everyday examples might be spending several pounds on a cup of coffee every morning, or travelling everywhere in first class as opposed to standard or economy. Maybe you start ordering an expensive brand of cosmetics or razors delivered to your house monthly on a subscription basis, or you regularly rack up your credit card shopping online while on your daily commute. Slowly, the things that you used to think of as rare treats now become a weekly (or even daily) occurrence.

If you’re a victim of lifestyle creep, you’ll soon stop thinking of luxury goods as a splurge – and that’s a problem for your finances.

mans hands holding open empty wallet

How can it affect your future finances?

Lifestyle creep can have an increasingly negative effect on your future finances. Sure, buying a few extra treats here and there may have started when you got a raise or a new side gig, but soon you feel like you can splash out on luxury items all the time. What was once a rarity soon becomes a daily occurrence, all because of your newfound perceived financial security.

Even though it feels good at first, lifestyle creep has the potential to disrupt and jeopardise your new financial clout. You might start treating yourself to expensive smoothies and craft beer on a daily basis, and thinking of yourself as a high roller when it comes to holidays and consumer goods. Before you know it, you’ll be living far above your means in all aspects of your life.

If you start purchasing expensive cars or refinancing for a home above your financial means, you are likely to stop putting money away and saving for your future. Your new lifestyle will cost a lot more than your old lifestyle, which was likely what you had budgeting for in your retirement plan.

Unfortunately, lifestyle creep results in people being unable to sustain their new luxuries. At its most severe, it can prevent you from being able to retire when you originally planned. Do you really want to be forced to work well into your 70s? If the answer is no, now is the time to nip lifestyle creep in the bud.   

How you can avoid lifestyle creep

The best way to avoid lifestyle creep is to be honest with yourself – are you engaging in the activities above? Now is the time to go through all of your monthly charges and filter through your apps, subscriptions, and expenses. What can you cut?

What things that were once luxuries do you now perceive as vital to your life? It’s time to get real and say goodbye to the constant stream of posh sandwiches, expensive cocktails, designer duds, and decadent travel. That’s not to say you can’t treat yourself! But that’s exactly what they should be – a treat.

People that are near to retiring age are a crucial group that may experience lifestyle creep. If you know that your retirement is approaching and you have paid off a lot of your expenses (such as your mortgage) you might now feel that you have achieved financial independence and are set for your future. You might think that now’s the time to splash out on a posh car or a holiday home abroad! However, by increasing your lifestyle costs and replacing your usual needs with new luxurious necessities, you may jeopardise your retirement. Does this hit close to home?

Key tips for avoiding lifestyle creep

1. Stick to your budget – Yes, you now have an increased income, but it is important to stick to your budget and allocate a certain amount of money to each activity. Create a budget for how much you want to spend on fun activities or luxurious items. The key message is to try and stick to this budget, and not overspend on things that aren’t essential.

2. Create long-term goals – Lifestyle creep can threaten your future goals, and so it is a good idea to keep your goals very much at the forefront of your mind. That way,  when you have an impulse to spend an excessive amount of money on anything, you can remind yourself of what else you could use that money on in the long run.

3. Make gradual changes – While it can be tempting to begin splashing out on lots of new swag, it is vital to make gradual changes to your lifestyle. For example, if you are looking to renovate your home, consider working on one room at a time instead of planning to gut the entire place at once. This way, you can keep on track of your spending, ensuring that you only spend what you can afford.

4. Avoid accruing new debt – When your income increases, you might think that now is the right time to buy a new car or finance a massive holiday. However, try to avoid signing up for a new credit or financing until you have saved enough money for a significant portion of the cost. These sorts of bills add up, so be careful not to accrue any new debts unless you have truly thought them through.

Remember to treat yourself!

Everyone loves getting a promotion or a raise. That boost in income feels excellent, and you can and should treat yourself!

However, it is imperative that you choose to treat yourself in moderation. Don’t go and splash out every day for a month to celebrate, as you’ll soon feel like this is your new normal. Here comes that lifestyle creep…

Instead, think carefully about what you want to buy or do to treat yourself in a reasonable way. Maybe get your hair done, go on a weekend break with your friends, or buy a new golf club to add to your collection. However, try spreading these treats out, and remember they are treats. The biggest mistake you can make is turning these luxuries into everyday activities!

If you can stick to a relatively simple lifestyle and avoid lifestyle creep, you will be able to save more of your income and reach your financial goals at an earlier age.

Avoiding lifestyle creep is all about spending your money wisely and sensible. However, this doesn’t mean that you can’t reward yourself for your hard work, or that you must to save every penny possible. By budgeting and being on top of all your finances, as well as planning your financial future all while treating yourself in moderation you will be able to enjoy your life to the fullest.

Have you been a victim of lifestyle creep? Let me know!


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