Lifestyle Creep Explained | Do you suffer from this affliction?!?

Heard the term lifestyle creep but were confused as to what it actually meant? You’re in the right spot! What exactly is lifestyle creep?

Lifestyle Creep Definition: Lifestyle creep is the phenomenon that occurs when a person’s spending increases as their income increases.

Said differently, lifestyle creep is when increases in discretionary income cause a change in psychology and behavior that results in increased spending and consumption. Goods or experiences that were formerly wants creep into needs.  The result of lifestyle creep is the individual has no additional savings or wealth than he did before the increase in income. Instead of using the income increase as an opportunity to invest into assets, the income is spent on non-essential items. It is very easy for a person’s lifestyle to creep upward when they receive a raise or new higher-paying job as it’s easy to convince yourself that “you deserve it”.

Lifestyle creep is a major factor in people never building true wealth or becoming financially independent. It can be curtailed through budgeting and careful discernment between needs and wants when making purchases.

 

Examples of Lifestyle Creep

You received a raise. 🥳 Yay. Now what are you, precious lifestyle creeper, planning on doing?!?

  • Buying a Peloton bike
  • Joining a better gym
  • Eating out more often
  • Taking a more luxe vacation
  • Hiring a cleaning person
  • Moving to a better apartment when your current lease expires
  • Taking more Ubers or taxis instead of public transportation
  • Getting a nicer car
  • Upgrading your wardrobe
  • Buying a second home
  • Purchasing a fun toy like a boat

You may be suffering from a moderate to severe case of lifestyle creep if you have or are planning to do any of the above items. But fear not; there is still time to find the antidote to lifestyle creep.

How to avoid lifestyle creep?

  • Before making purchases take a moment to honestly assess if you really need whatever is you are about to buy. Would you future self be happy you spent the money on this item?
  • Give yourself a 3-day waiting period before making any purchases above $100. Often times the burning desire you felt to have something wears off after a couple days
  • Build a budget and stick to it even when your income increases
  • Raise your 401k contribution when you receive a raise so you notice no difference in take home pay
  • Be aware of the natural tendency to spend more as your earn more. The more we have the more we want; it is so easy to fall into this trap.

Avoiding lifestyle creep is one of the keys to become wealthy. If you can steer clear of its alluring pull you will be on much firmer financial footing. Your future self will thank you for being disciplined and responsible.

Lifestyle Creep Psychology | I Deserve It & The “Treat Yo Self” Culture

Wanting & Unhappiness | Why Does Wanting Make Us Feel Unhappy?

American culture is deeply rooted in consumerism. Buying stuff like cars, houses, phones, TVs, clothes, shoes, jewelry, video games, etc. The culture of buying stuff is so omnipresent we hardly even notice it at all. Advertising is everywhere all the time. Our entire economic systems depends on people buying more and more goods and services.

And to be honest it’s hard to see people on Instagram with all sorts of cool stuff and not want it too. I think 99.9% of us feel that way at times. Along the same lines, when we are having more professional success we often feel the urge to signal our success to other people in our lives. This is often done by buying things. So when you do get a raise or a new job it’s only natural to say “I deserve it“. You worked hard for it after all. So why not treat yourself? It’s such an easy story to tell ourselves but unfortunately it can interfere with our financial goals and even more importantly our long term happiness.

I remember the first time I took a trip to Mexico. I was struck my how happy everyone seemed to be. Full of life, color, energy and passion. The people I encountered were really living! They weren’t sitting in cubes day after day collecting dollar bills so they could buy a Peloton and a BMW. No way! I didn’t understand it; how could the United States (i.e. the “best” and wealthiest nation in the history of the world) feel like a less happy place than anywhere else? It seems there isn’t a perfect correlation between wealth and happiness.

Why does wanting make us so unhappy?

  • Wanting creates dissatisfaction with our current situation; it is hard to feel content in our current situation if we are craving something else
  • Wanting takes us out of the present moment; being present and “in the moment” tends to lead to greater happiness than being future focused
  • Wanting doesn’t go away after we obtain the object we so desire; we pick up new wants and enter a never-ending loop of wanting more and more

Learning to appreciate what you have can take a shift in mindset but it can truly free us to feel less stress, more happiness, and be less prone to lifestyle creep. It sounds trite but being grateful for what you have is the best medicine to help get a person break out of this cycle. We often jump back and forth between fear of running out of money and greed leading us to desire more stuff. That keeps us working, day after day, year after year, in jobs that don’t make us happy so we can buy things that don’t make us happy. It’s a vicious cycle. Being mindful and appreciative for what we do have is best way to break the cycle.

Becoming wealthy isn’t about having a bunch of stuff but instead having freedom. We know our time on this earth is short. Time is the most valuable commodity we possess along with our health. Becoming wealthy allows you to jump out of the rat race and focus on living life on your own terms. The FIRE movement (Financial Independence Retire Early) is centered around the idea of turning away from consumerism and living a life of simplicity and frugality. A life where one spends time on the things that really matter like friends, family, interests, passions, and doing good for the world. If interested you read more about FIRE here.

Ok this is all fine and good. I can work on wanting less stuff. But that won’t alone make me wealthy to the point I can spend my days doing whatever is I want. What is the secret to becoming wealthy?

How to become wealthy. Hint: Don’t buy a Peloton bike 😉

  • Maximize Earnings: Find a career with high earning potential and/or start your own business. 
  • Minimize Consumption and Avoid Lifestyle Creep: Holding your spending steady even as you make more money is so hard to do but it is essential if you want to build wealth. 
  • Invest Savings: Pour savings into income producing and/or appreciating assets such as stocks, bonds, and real estate
  • Remain patient: Becoming wealthy is not something you do over night. and let compound interest (the 8th wonder of the world according to one Warren Buffet) work for you. 

Did you find this article helpful in explaining lifestyle creep? Let us know in the comments below.

Want to learn more about how to become wealthy? Check out our article on 7 Proven Ways to Become Wealthy