What You Need to Know About Lifestyle Creep and Your Money
Overspending is easier than ever. You might attribute this reality to words like “funflation”, “money dysmorphia”, but don’t ignore another insidious tendency: lifestyle creep.
While lifestyle creep is a common and natural phenomenon, it does have its downsides. HuffPost asked financial experts to share their advice on how to avoid such problems.
What is lifestyle creep?
“Lifestyle creep refers to the fact that we often spend more money as our income rises,” said Kimberly Palmer, a personal finance expert at NerdWallet. Lifestyle creep is often caused by a desire for ‘keeping up with the
,’ when we see others spending more money so we follow suit. There are also less extreme examples across the spectrum.[Joneses]”You get a raise, and suddenly, you’re upgrading your phone, eating out more often, and splurging on vacations,” said Bola Sokunbi, the founder of Clever Girl Finance. “It’s tempting to spend more because you feel like you can afford it or you might feel you deserve to treat yourself, leading to higher spending.”
It’s only natural to want to improve your quality of life by purchasing nicer things or to feel drawn to the picture-perfect lifestyles you see on social media. Lifestyle creep is often nefariously gradual.
“This is a slow increase in spending that often goes unnoticed until it starts to affect your lifestyle and savings,” said Dasha Kennedy, creator of The Broke Black Girl blog and a financial activist at Chime. As your income grows, so do your expenses, which are often spent on items that add no value.
“Some benefits of lifestyle creep are an improved quality-of-life where you can enjoy the fruits your labor,” Sokunbi explained. You might feel more motivated to achieve your goals. That said, the downsides are that you may have less savings because you are spending so much, which can lead to financial stress and cause less flexibility in your life overall due to your expanded financial obligations.”
If your spending keeps pace with your increasing salary, then you’ll have a hard time saving money and building a financial safety net.
“You could be earning more but still living paycheck to paycheck,” noted Kara Stevens, author of “Heal Your Relationship With Money” founder of The Frugal Feminista. When we earn more money, we want it to be enjoyed. But it can be a slippery slope if we’re not careful.”
LIfestyle creep is particularly sneaky because it can go unnoticed for a long time, Kennedy added. She said that it can lead to financial strain and deplete savings. It’s important to keep this under control.”
Klaus Vedfelt via Getty Images
Enjoy the fruits of your labor, but make sure you don’t overspend. It’s important to keep this under control.”
Klaus Vedfelt via Getty Images
Enjoy the fruits of your labor, but make sure you don’t overspend.
What’s the best way to deal with lifestyle creep?
“Lifestyle creep is unavoidable for most people, but understanding and managing it plays a major role in maintaining financial stability,” Kennedy said. “Being mindful of how your spending habits change with your income can help you stay on track and avoid overspending.”
One of the best ways to keep lifestyle creep from wrecking your finances is to closely track your spending each month and pay attention to changes.
“Reviewing your credit card and bank statements can help, as can using a budgeting app,” Palmer said. “Anything that makes it easier for you to track your spending and make adjustments can be a useful tool.”
Determine what your financial objectives are and how to achieve them.
“Set clear goals for your finances,” Sokunbi advised. Know what you’re trying to accomplish financially. It could be saving for retirement or an emergency fund, or saving up for a home. Create a budget to track your income and expenses.”
It’s OK to enjoy nice things, but try to stick with your budget. “Just because you are able to afford something does not mean that you should purchase it,” Sokunbi said. “So before making a big purchase, ask yourself if it’s necessary and if it aligns with your financial goals.”
Keep long-term financial stability and security front of mind by allocating a portion of your income to savings and investments ahead of or alongside any lifestyle adjustments.
“Automate your savings,” Sokunbi advised. “Set up automatic transfers to your savings and investment accounts to ensure you’re saving consistently.”
