What is Lifestyle Creep: How to Identify It And Avoid It Before It’s Too Late

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July 27, 2022
By: ADAM K

Lifestyle creep, also known as Lifestyle inflation, is a gradual increase in one’s spending, often resulting from an increase in income or wealth.

Mall
Just got a raise? Time to upgrade apartments? Think again.

Lifestyle creep. We have all seen this behavior pattern bubble up amidst our circle of friends or family. First, your friend Nicole receives a huge promotion at work. Suddenly, the three-bedroom apartment in Brooklyn with two other roommates doesn’t cut it anymore. Nicole then moves into a one-bedroom apartment and increases her rent by 30% percent. Now, her larger paycheck is mainly going towards the new apartment with no increase in savings—the resulting increase in net worth of $0.

The unfortunate part is lifestyle creep almost seems like a normal progression of people who find themselves in their 20s and 30s.

What is Lifestyle Creep?

Lifestyle creep, also known as lifestyle inflation, is a gradual increase in spending due to a rise in income or wealth. In many cases, one feels expected to keep up with appearances as items once considered luxuries become necessities.

Why does Lifestyle Creep Happen?

As many young professionals enter their late 20s and early 30s, they often experience their first jump within the corporate ladder. The former associate is promoted to a managerial, leadership, or supervisory role.

Or…

they are no longer vying for entry-level positions. Therefore, salary raises and bonuses are significantly more significant than most entry-level positions.
But that’s only part of the equation…

Social Media and Your Peer Group Play a Large Factor

In the age of Instagram, in-your-face-advertising, and seemingly “overnight success,” young professionals feel entitled to or perceive societal pressures to live in a way that seems desirable, glamorous, and materially enriched.

As someone who works in finance in NYC, it’s easy to get caught up in lifestyle creep without even realizing it. There is always someone with a nicer apartment, nicer clothes, more exclusive vacations, and high-end meals. If they have it, so should you. It’s just what you do.

And the moment that becomes more accessible, usually via a promotion or a raise, the money goes straight to a slow but inflated lifestyle. You typically don’t even realize it’s occurring until it’s too late.

Kim Kardashian GIF spending money
Kim Kardashian makes spending money look easy..

Examples of Lifestyle Creep

As the name implies, lifestyle creep slowly makes its way into our everyday lives through seemingly minor changes in routine activities that are often justified easily.

Let’s look at a few examples:

  • Working out at a high-end gym instead of somewhere like Planet Fitness because you like the amenities.
  • Eating out more frequently instead of cooking at home for convenience purposes.
  • Does the stylist in the more trendy area of downtown seem better just because they cost more than the “barber” to whom you’ve become accustomed? That is also lifestyle creep.
  • Upgrading to a larger, more expensive apartment because “you’re too old for roommates.”
  • Taking Ubers or Lyfts when public transportation used to be just fine.

These changes can be seemingly inconsequential, with often valid justification.

And, it’s true, as time goes on, our needs and wants do change, but that doesn’t mean we should always opt for the more comfortable or convenient option just because we can afford it.

When you find yourself vying for the more expensive option, take a step back and reflect on whether you need it or are looking to satisfy a more profound feeling. It’s a complex and almost unavoidable scenario most millennials will face at some point.

How To Avoid Lifestyle Creep

To avoid lifestyle creep temptation, below are a few easy-to-implement strategies to curb your spending before you’ve gone off the deep end!

1. Automatically Deposit A Portion Of Your Paycheck Into A Savings Account

Adjust your direct deposit to automatically send a portion of your paycheck to a high yield savings account like HMBradley

The key here is to transfer a reasonable amount. This way, you won’t find yourself dipping into your savings account for extra spending cash.

Sometimes the mantra “out of sight, out of mind” holds true.

2. Create A Monthly Budget And Actually Follow It

Since I started my professional career, I’ve always used budgeting tools. Whether it’s an excel spreadsheet, a Google Doc, or a free app like Personal Capital, you need to know where your money is going. Plain and simple.

Seeing the numbers on paper, metaphorically speaking, can do wonders. Create a basic budget to get a sense of where you are currently spending and where you can cut back, having a budget is one of the key factors to financial success.

You don’t need to check your spending every day compulsively. However, having a general idea of where and how you are spending your money is an essential step to avoiding lifestyle creep.

3. Look For Reoccurring Ways To Save

Reducing reoccurring expenses such as your cell phone bill, memberships, or unused subscriptions is a great starting point. It may not be tremendous savings, but you do it once and reap the benefits month after month. 

4. Automatically Deposit Any Raises or Bonuses into Your Retirement or Savings Account

This is a personal favorite of mine and something I’ve consistently implemented. If you are fortunate enough to receive a bonus or raise, automatically put that money to use by investing or saving the extra income.

This way, you won’t end up spending the cash on a vacation, and you will be thanking yourself later.

If you could get by before without that extra income, why do you need the money now?

The Bottom Line

Money is a tool, not an end.

If you get a raise or promotion, that is a reason to celebrate. You only live once, after all. You shouldn’t feel ashamed to celebrate success. And you shouldn’t expect yourself to be eating ramen noodles and canned tuna after ten if while simply hoarding 90% of your salary. That’s not healthy either.

The point is that we should be aware of how and where we are spending our money and manage our finances accordingly. You never know when an unexpected expense may occur.

Have you experienced Lifestyle Creep? How did you realize it was happening to you, and what did you do about it?

Comment below and let the Real World Personal Finance audience know!

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