Lifestyle Creep: How To Avoid It And Protect Your Hard-Earned Money

How to avoid lifestyle creep
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We all want to live our best life. And there’s nothing wrong with that. 

You’ve been working hard lately, and all that hard work has paid off. You’ve gotten a 5k raise or a new job that pays significantly more than your old one. It feels like the world is your oyster. It’s time to celebrate!

But then things start to change for the worse: you start spending more money than you can afford on frivolous items that don’t bring any real value into your life. 

You’re not doing anything wrong—you’re just enjoying yourself once in a while. We all love nice things.

But what happens when those luxuries become necessities, and once-forbidden treats become part of your daily routine? That’s the problem with lifestyle creep; it doesn’t happen overnight—it sneaks up on us until we realize how far down our bank accounts are dwindling away.

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What is lifestyle creep? How to avoid lifestyle creep

What Is Lifestyle Creep?

“Lifestyle creep is when the cost of your lifestyle rises in tandem with your income. Any income bump goes toward paying higher expenses.” — Jesse Mecham

Lifestyle creep refers to the gradual increase in spending as your income increases. It’s a fancy way of saying that you’re making more money but also spending more money at the same time.

It’s also called lifestyle inflation, and it’s a natural tendency of people to start spending more as they earn more. It can happen to anyone, regardless of your income or earning potential. It’s not just about how much money you make; it’s also about how you choose to spend it.

It happens when we replace practical items with those made primarily for luxury purposes. In many cases, these luxuries become necessities because they make our lives better in some way (or at least easier).

Examples Of Lifestyle Creep

Lifestyle creep involves making changes to your lifestyle when your income increases, even if you don’t need to. It’s a slow and subtle process but can greatly impact your finances.

Some of the most common examples of lifestyle creep include:

  • Getting a bigger house or apartment
  • Buying a new car
  • Traveling more often and staying in fancier hotels
  • Eating out more often, ordering higher-priced meals at restaurants, and paying for the convenience of takeout during busy weeks
  • Having more clothes, shoes, and accessories than you need to fill your closet with “good” pieces that will last longer (or so you tell yourself)

When you get used to spending more than you need, it can be hard not to continue making similar decisions even if they don’t make sense financially.

What Causes Lifestyle Inflation?

The road to lifestyle inflation is paved with good intentions. In the beginning, it’s easy to make excuses for your spending: “I deserve this. I worked hard for it.” Then you start to convince yourself that you deserve even more.

Fall into that mindset too often, and you won’t be able to see when your spending has become out of control until all of your money is going toward lifestyle inflation instead of savings, investments, or debt payments.

There are so many things that can cause lifestyle inflation. Higher income is one of them, as is social media. 

Social media and the constant comparison of lifestyles have only made this worse. 

After all, if your favorite Instagrammer can afford those $1,000 shoes and she looks great in them, then why shouldn’t you be able to buy them too? 

And if your friends are traveling around Europe while you’re still living paycheck to paycheck, then maybe it’s time for some lifestyle inflation.

Perhaps you see someone with a nice watch or expensive bags, and you tell yourself that you deserve something just as lovely because you’ve worked hard for your money.

If this all sounds familiar, you may be experiencing lifestyle inflation already. The good news is that there are ways (more on this later) that we can avoid falling victim to financial ruin later on down the road.

What Are The Effects Of Lifestyle Creep?

Lifestyle creep can be damaging to your financial health.

Here are some financial effects of lifestyle inflation:

  • You have to work harder to make up the difference.
  • You won’t be able to save for retirement or any other financial goal. 
  • You’re constantly living paycheck to paycheck (if not overdrawn).
  • You can’t afford to pay off your debt without going into debt yourself, let alone buy a house or quit your job.
  • You can’t go on vacation because you don’t have enough money to get away from it.

Is Lifestyle Creep bad?

Is lifestyle creep a bad thing? Yes and no.

Lifestyle creep is not inherently bad, but it can have negative consequences if you’re not careful to keep your spending in check.

If you’re spending more than you earn and living beyond your means, then lifestyle creep can be a problem that prevents you from achieving your goals and dreams (like saving for retirement or your kid’s college education).

On top of that, overspending can lead to credit card debt, health problems related to stress and anxiety, and other financial trouble. It can also cause conflict with loved ones when they realize the level of debt that lifestyle inflation has caused.

In this situation, it’s important to be aware of what drives your spending habits so that you can make adjustments accordingly—either by cutting back on certain expenses or finding ways to earn more money each month (or both).

How Do You Know If You’ve Been Affected By Lifestyle Creep?

It’s easy to fall into the trap of lifestyle creep without even realizing it, as it happens silently and slowly. 

If you spend more than you earn and can’t seem to save any money, then there’s a good chance that the way you live has crept up on you. 

Here are some common signs of lifestyle creep:

  • You spend more than you make.
  • You are spending more and more on things you don’t need.
  • Your budget isn’t enough for your spending habits.
  • You have maxed out your credit cards, and now you’re barely making payments each month.
  • You have spent all the money in your savings account and now have to borrow from other people to pay for things that should really be paid for with cash (like an emergency fund).
  • Your savings is decreasing every year, or you have difficulty saving money

Lifestyle creep is especially common among those who have just started earning serious money for the first time. The new feeling of prosperity can lead them to make impulse purchases or engage in other financial behavior that they might regret later on.

Near-retirees are also particularly susceptible to lifestyle creep. They have been saving for decades. And it’s more tempting than ever to start spending on a big house, a new car, and travel opportunities. The pressure from peers and family members may intensify as those around them start buying houses and cars with cash without any second thought, but this doesn’t mean that these purchases are necessary or wise for everyone.

How To Avoid Lifestyle Creep

Now you know the definition of lifestyle creep, the causes, and the effects. Let’s look at the practical ways to fight against this insidious trend.

Have A budget

A budget is your first line of defense against lifestyle creep. If you haven’t created one yet, now would be a good time to start!

Once you have a budget in place, it will be much easier for you to keep track of how much money is coming in and going out each month. You can also identify these bad money habits that hold you back from financial freedom.

If something doesn’t fit into the budget, such as an extra trip or an expensive purchase, you’ll know right away what needs to change so that those purchases fit within your monthly budget. 

Also read: 

Upgrade Your Lifestyle Later

Just as you wouldn’t want to go into debt buying a car and then have your bank account empty before even getting home from the dealer, don’t let lifestyle creep happen to you by purchasing expensive things too often and too fast.

When the urge strikes, take a step back and ask yourself whether you really need it. Is this purchase going to make you happy? And how long will that happiness last? 

You may find that we often buy things because they’re on sale or because our friends have them—but neither of these is a good reason for buying something.

The key here is balance: You don’t want luxuries taking over your life and draining your bank account (or using up time that could otherwise be spent doing other enjoyable activities), but it’s important not to be too frugal either.

Instead of buying a bunch of expensive stuff that you might not even need, save up and buy one affordable item that is high quality and adds value to your life at a time. When you’re shopping mindfully, you can make informed decisions about what’s best for your life.

Enjoy Saving Money 

Setting aside some cash every paycheck will go a long way towards preventing lifestyle creep from creeping back up on ya later down the road (we’re looking at YOU here). It’s even better if you open a high-interest savings account like a CIT savings account

Start with making sure you’re saving at least 10% of everything that comes into your account—or whatever amount feels comfortable to you—and then use automatic deduction to make sure those savings go straight into their respective accounts. So there won’t be any temptation when it comes time for an impulse buy.

Remember, the more money you save, the less likely you will fall into lifestyle creep.

And don’t spend your raises and bonuses. Save them as investments later on in life when college tuition is due or when retirement is approaching, not just for immediate gratification.

You also want to have an emergency fund to help you avoid paying off unexpected expenses on a credit card and give you peace of mind when disaster strikes; after all, no one wants their home flooded or burglarized.

Related articles about saving money:

Declutter Your Life

Decluttering is one of the best ways to combat lifestyle creep. 

The act of purging your home of items you don’t need helps you save money and gives you a chance to analyze your past spending habits. 

Plus, once all the clutter has been cleared out, it’s easier for your future purchases to be more intentional.

Spend some time at home organizing your stuff (keep, sell, donate, or toss). 

  • Keep items you are still using or will use within the next six months. 
  • Sell unwanted items online, such as old books, CDs, video games, and other electronic devices that are collecting dust on top of your closet shelf. You can use Decluttr (a free app) to sell your unwanted items for cash quickly and easily.
  • Donate items that are still usable but no longer bring joy into your life. They might help someone else while still giving back value by making room in your home for better uses.
  • Throw away useless stuff that can’t be sold or given.

Related: Things I Stopped Buying To Save Money (Save $10,000 Each Year)

Don’t Let Your Income Dictate Your Lifestyle

The most common way people get into financial trouble is by not paying attention to their budgets and lifestyles. They let their income dictate the lifestyle they lead, and then they end up paying for it later in the form of debt or bankruptcy.

When you get a raise, it’s tempting to spend more money. After all, you’ve got more money now. Your friends will be impressed with this leap of faith on your part. You deserve some new clothes or that fancy dinner out—just because you can.

However, if you want to stop lifestyle creep, consider living on the same amount of money you had before you got the raise. Only spend what comes in each month without increasing your expenses or debts beyond what is necessary for living comfortably and responsibly.

As for the additional income, you can save it or use it as an opportunity to pay off debt rather than increase your spending. If no debt or savings goal needs funding, just keep saving. Spend less than you earn and save the difference.

Invest In Yourself

“The most important investment you can make is in yourself.” — Warren Buffett

Whether gaining new skills or developing new hobbies, you can shift your focus from spending money on unnecessary stuff to improving yourself.

Invest in yourself and build up your career capital. For example, if you like social media marketing, take some free online courses in that field to build up your knowledge base (and resume). Then apply for jobs that require those skillsets and use them as leverage when negotiating salary offers with employers. You can also start offering related services through sites like Fiverr or Upwork.

And don’t forget to learn more about personal finance (saving, earning, and investing), so you can use your knowledge to maximize your earning potential, pay off your debt faster, and make smarter decisions with your increased income.

Final Thoughts On Lifestyle Creep

Lifestyle creep can happen to anyone, even those who are good with money. 

By understanding the causes of lifestyle creep and taking steps to combat it before it happens, you can avoid the pitfalls of unhealthy spending habits and overspending.

We also have separate sections dedicated to helping people save money and make money, so they don’t fall into lifestyle creep. 

If you’re feeling inspired to learn more about personal finance, follow Create Earn Live here on Pinterest for more great content like this one. 

And finally, share this page with your friends and family. 

Lifestyle creep definition, example, effects, and ways to avoid lifestyle creep

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