Surely the point of money is to attain the things you need and want? Therefore, the more money you have, the further down your bucket list of your needs and wants you can go, ticking off each purchase with a sense of accomplishment. Go you! I get a lot of enjoyment out of watching other people enjoy their money.
There are many positive aspects to lifestyle creep. With a rising income, you can plan more adventures, take more holidays, create more memories, become more generous, and buy the nicer things in life instead of always looking for bargain alternatives. This is the goal of financial success; when you make more, you can have and do more.
You made more money and acquired more of your heart’s desires, whatever they were, all while planning for your future financial well-being. It’s the complete package! You’ve budgeted for it, so go right ahead and maximise your lifestyle creep!
If you are financially on track with your goals, enjoy your money. But if you are not, perhaps you are not quite ready to let lifestyle creep start inflating your lifestyle. It’s likely to be hazardous to your wealth.
Before you bank your latest pay rise and book a table at the Michelin-starred restaurant instead of the local takeaway shop, you need to look back from where you once came and ensure you have your financial ducks nicely positioned within a row.
Additional income added to an excellent financial situation where your money management is on point elevates your life. Additional income added to a flimsy financial life can exacerbate your problems. In this personal finance space, I’ve observed a lot of lifestyle creep as people I meet move up the income ladder.
I’ve observed two groups of spenders whose lifestyle has a slow upward creep:
In both cases, those who have not built themselves solid financial systems and goals yet have some awareness of personal finances and growing their net worth struggle with lifestyle creep. You can remain blissfully unaware of lifestyle creep, but once you become aware of it, it nags at you constantly. They ‘know’ what to do with their money but do the opposite, opting to spend on short-term lifestyle instead. It’s a mental game, and they can see the long-term consequences of succumbing to lifestyle creep, both financially and personally. They know where they want to get to, and they have some goals in place, yet their overspending is scuppering their plans.
They know it, but they feel powerless to stop it.
You know your lifestyle creep is inching out of control when:
The bad news is it is up to you to control it. And it’s up to you whether you make it easy or hard on yourself.
The solution is to create a realistic plan that encompasses your entire financial life, is firmly focused on your future, and allows you to enjoy the excellent income you are currently making.
You know where it all begins — there are no surprises here: Budgeting. Working out how much you make and spend in a given period is crucial, and PocketSmith easily allows you to work out what you spend in each category. Only once you know where your money is going can you plan where it should be going. You decide how much is enough in each category.
For those in debt, the next step is to create automated systems to pay each debt off and give each debt an end date. This will ensure that you become debt-free as quickly as possible. Payments to these debts are non-negotiable. You forbid yourself from utilising this money elsewhere.
Whether you are in debt or not, allocate a budget for spending and enjoying your money. Yes, I want you to enjoy your increased income! But it also comes with limits and rules. Maintaining awareness of your spending habits is crucial as your income increases so that while you have a bit of fun with your money, you are still prioritising your long-term financial well-being, reducing your stress about money and gaining greater freedom and flexibility in life choices.
Lifestyle creep stops in its tracks when you have a longer-term plan for your money. The whole point of creating savings and investments is to draw future income from them. Therefore, if you change your mindset from depriving yourself of something today to one of a future full of choice and freedom, then you won’t mind not buying something today, instead investing that money so you can 10x it for your future. Then you can buy all the ‘somethings’ you want! Prioritizing money for debt payments and investing is a positive thing you can do for yourself. You can enjoy life today and know it will be even better in the years ahead.
Those with financial goals that extend well beyond their next pay cheque have no trouble allocating themselves a ‘spend and have fun’ budget today and allocating money to other goals.
The term “lifestyle creep” has allowed us to justify its action in many ways. The most significant defence you have, when you know that your spending habits are becoming a problem and that your lifestyle is creeping beyond your means, is to employ a simple word that I think really works: NO.
If you are managing your money in a way that you don’t like or is setting you back, stop that behavior and think about the potential long-term consequences of succumbing to lifestyle creep, both financially and personally. Say no to yourself more often and remind yourself that your financial future is blindingly bright with discipline and a good plan.
Ruth blogs at thehappysaver.com all about how she and her family handle money. What’s the secret? Spend less than you earn, invest the difference, avoid debt and budget each dollar that flows through your hands. She firmly believes that if you can just get the basics right, life becomes easier from there on in.
