Nine ways to avoid lifestyle creep

Picture this: You receive a raise at work, or you start having more regular paying clients, and suddenly, your bank account feels a little more robust. You start treating yourself to small luxuries—a fancier suit, a trendy gadget, or a spontaneous weekend getaway. It feels great, doesn't it? But there's a hidden trap lurking in the shadows: lifestyle creep. Of course, we all crave and deserve comfort and some level of luxury, especially if it is within our means. But the harsh reality is that not everything that is within our means is healthy for our finances, especially in the long term.

In this article, we'll explore the insidious nature of lifestyle creep, how it affects your financial well-being, and practical strategies to combat it.

What is lifestyle creep?

Lifestyle creep is the urge to spend more and increase your living expenses because of an increase in your income. It's a trend where people tend to adjust their standard of living to match or even exceed their increased income, leading to a constant need for more money to sustain their lifestyle.

Undoubtedly, we all have our dream homes, dream cars, vacation plans, etc., and we sure deserve to fulfill all these dreams when we can. The only problem is that our dreams tend to become bigger as our income bracket widens. Interestingly, some of these “latter dreams” are impulsive indulgences creeping in to eat up our finances.

For instance, you’ve always wanted to own a Mercedes; then you suddenly have an increase in income, and you now think you can finally get a Mercedes. One day you go to the car dealership and return with a Mercedes and an Audi.

This especially happens with upgrading our wardrobes.

Lifestyle creep isn't limited to extravagant purchases. It can manifest in everyday choices that slowly chip away at your financial stability. Gradually increasing dining-out habits, subscriptions to multiple streaming services, or constantly chasing the latest tech gadgets can all contribute to lifestyle creep. These seemingly harmless expenses can accumulate over time, leaving you financially stretched.

What makes it particularly tricky is that lifestyle creep is a master of disguise. It disguises itself as progress, success, and luxury. You convince yourself that you've earned these little indulgences because you're working hard and making more money, right? But here's the catch: as your lifestyle expands, so do your expenses, leaving you with less room for saving and investing in your future.

Now, don't get me wrong, treating yourself and enjoying the fruits of your labor is important. But it's crucial to strike a balance between indulgence and financial responsibility. The key is being mindful of your spending and consciously deciding where to allocate your increasing income. Take a step back and evaluate what truly brings you long-term happiness and fulfillment.

How it all begins

The thing with lifestyle creep is that you always seem to have a good reason to spend some more. It all seems rational until your account balance stops making sense or you’re not able to save as you should. But here is how it all begins to help you decipher whether you’re already a victim or on the path.

1. Increased income

It all begins with an increase in your income, maybe you've just landed a better job, or you’ve scaled your business to become more profitable, and suddenly, your income gets a significant boost. It feels great, right? You start thinking about all the possibilities, like upgrading your apartment or treating yourself to a fancy dinner. This is where lifestyle creep often finds its entry point.

2. The growing urge for upgrades 

As your income rises, your expectations and desires tend to expand accordingly. You might start comparing yourself to others or want to keep up with the latest trends. Before you know it, you are tempted by bigger, better, and more luxurious things. Maybe it's that sleek new smartphone or a fancier car. These upgrades seem justifiable because, hey, you can afford them now!

3. The convenience traps 

Now that your income has increased, it's natural to seek convenience and comfort in various aspects of life. You might decide to eat out more often, hire someone to clean your house, or even opt for a higher-priced gym membership. These choices seem reasonable because you're saving time and effort. However, they also contribute to lifestyle creep by inflating your monthly expenses.

4. The expanding definition of "necessities."

As time goes by, our perception of what is essential tends to shift. What was once considered a luxury might become an everyday necessity. For example, dining out in posh, expensive restaurants used to be a luxury, but now you consider it a necessity. As our income grows, so does our tendency to include new "necessities" in our lives, and that's when lifestyle creep creeps in.

5. The influence of social circles 

A study by the U.S. Department of Health and Human Services establishes that our social circle influences us much more than we think. Implying that the people around us unconsciously influence a lot of our decisions. Our social circles play a significant role in shaping our spending habits. As we surround ourselves with friends or colleagues with higher incomes, we may feel compelled to match their lifestyles. You might find yourself joining them on lavish vacations, dining at expensive restaurants, or buying designer clothing. It's all about maintaining appearances and fitting into the group. However, this pressure can fuel lifestyle creep without us even realizing it.

6. A new habit is developed. 

Remember those small upgrades we talked about earlier? Well, they have a way of quickly becoming the new normal. Our brain adapts to the increased level of comfort or luxury; before we know it, we're no longer satisfied with what used to be enough. We become accustomed to the upgraded lifestyle, and the cycle continues. The more we earn, the more we spend, and the more we crave.

The effects of lifestyle creep

Lifestyle creeps can have various negative effects, including financial strain, debt accumulation, etc. Let’s consider a few.

• Financial strain and debt accumulation 

One of the major negative effects of lifestyle creeps is the financial strain it can cause. When people continuously increase their expenses without saving or investing wisely, they often live paycheck to paycheck or even accumulate debt. A recent report suggests that nearly half of Americans live paycheck to paycheck. Unfortunately, this has little to do with earning capacity; rather, it’s a problem of spending levels. Overspending can lead to financial instability and the need to rely on credit cards or loans to sustain their lifestyle.

• Difficulty in building wealth and saving 

Lifestyle creeps make it challenging to build wealth and save for the future. Instead of using the additional income to invest or save for long-term goals, individuals get accustomed to higher spending patterns, leaving little room for saving or investment opportunities. Consequently, it becomes more challenging to achieve financial milestones like buying a home or pursuing other significant life goals.

• Increased stress and financial anxiety 

Constantly trying to keep up with an inflated lifestyle can lead to increased stress and financial anxiety. The pressure to maintain appearances, afford luxury goods, and indulge in lavish experiences can create a constant state of worry about money. This stress can negatively impact mental health and overall well-being.

• Limited freedom and flexibility 

Lifestyle creeps can limit personal freedom and flexibility. As expenses increase, individuals may become tied to their current jobs or career paths solely to maintain their inflated lifestyle. This lack of flexibility can hinder opportunities for career changes, entrepreneurship, or taking risks that could lead to personal and professional growth.

• Reduced saving for emergencies 

According to a CNBC/Momentive survey, over 50% of Americans report not having any savings for emergencies. This is truly a worrisome situation. Living beyond one's means due to lifestyle creeps often leaves little room for emergency funds. Financial emergencies such as medical bills, car repairs, or unexpected job loss can have a severe impact when there are no savings to fall back on. In such situations, individuals may resort to debt or face significant financial hardships.

• Strained relationships and social pressure 

Lifestyle creeps can strain relationships, particularly if partners or family members have different spending habits or financial priorities. Financial disagreements and struggles can lead to tension, arguments, and even relationship breakdowns. Additionally, the pressure to maintain a certain lifestyle to fit in with a particular social circle can create a sense of inadequacy and perpetuate a cycle of overspending.

image source

How to avoid lifestyle creep

Le’s discuss practical steps to teach you how to avoid lifestyle creep and have a healthier financial life.

1. Always have a budget

One of the most effective ways to combat lifestyle creep is to create and stick to a budget. Start by identifying your essential expenses, such as housing, utilities, transportation, and groceries. Then allocate a portion of your income towards savings and investments. Finally, set aside a reasonable amount for discretionary spending that allows for some pleasure without going overboard. By having a budget, you'll be more mindful of your spending habits and less likely to fall victim to lifestyle creep.

2. Set savings goals 

Instead of immediately increasing your spending when you receive a raise or promotion, consider allocating a portion of that extra income towards savings or debt repayment. Set specific savings goals, such as building an emergency fund, saving for a down payment on a house, or investing for retirement. By focusing on your long-term objectives, you'll be motivated to resist the urge to inflate your lifestyle unnecessarily.

3. Automate savings

Set up automatic transfers from your earnings to a separate savings or investment account. By doing this, you're prioritizing saving and investing before your money has a chance to be spent on unnecessary expenses. It's a simple way to build wealth without relying solely on your willpower.

4. Avoid comparison traps

In the age of social media, it's easy to fall into the comparison trap. Seeing others flaunting their luxurious vacations or extravagant purchases can make you feel like you're missing out. Remember that everyone's financial situation is unique, and what works for others might not be suitable for you. Instead of trying to keep up with others' spending habits, focus on your own financial well-being and what brings you true happiness.

5. Delay gratification

When faced with a desire to splurge on something, practice delaying gratification. Give yourself a cooling-off period, like a week or a month, before making the purchase. During this time, reflect on whether it aligns with your financial priorities and if it's a necessary expense. Often, you'll find that the initial excitement fades, and you can make a more rational decision without succumbing to impulsive spending.

6. Be mindful of small expenses

It's not just major purchases that contribute to lifestyle creep. Small daily expenses can add up over time and have a significant impact on your finances. Keep track of your spending and identify areas where you can cut back. For example, brewing coffee at home instead of buying it every day or packing your lunch can save you a substantial amount of money in the long run.

7. Question your expenses

Regularly review your expenses and question whether they are truly necessary. Look for areas where you can cut back and reduce unnecessary spending. This could include subscriptions you no longer use, dining out less frequently, or finding more cost-effective alternatives for certain products or services.

8. Regularly review and adjust.

To stay on top of your financial situation, make it a habit to regularly review your budget and expenses. Monitor your progress towards your savings goals and make adjustments as necessary. If you experience a significant increase in income, resist the temptation to inflate your lifestyle immediately. Instead, consider increasing your savings rate or investing more for the future.

9. Track your earnings

If you’re a business owner or freelancer, you most likely do not have a fixed income. This implies that you have to track and monitor your income. Tracking your earnings allows you to create a realistic budget based on your average income. It helps you allocate your resources wisely. It also provides valuable insights into your income patterns and enables effective budgeting and financial planning.

Tracking your earnings as a freelancer or independent professional can be quite tacky, and you may miss out on some vital data if you do it manually. But with a smart solution like the Workee software, you can easily manage and track all your income by issuing automated invoices and managing your income from a dashboard.

Beyond finance management, Workee also enables you to manage your business and client relationship with ease by providing smart and automated tools that promote efficiency and enhance client-business relationships.

When you sign up for Workee Pro, you have access to the following tools in one click;

• A free and branded no-code website for your business

• A CRM enables you to manage all your clients effectively

• Booking and scheduling functions that make it easy for your clients to book your services and schedule sessions with you.

• Video collaboration for easy and efficient communication with your clients

• And seamless integration with some of your favorite tools like Google Calendar, Stripe, PayPal, Zoom, Google Meet, etc.

You should check out Workee here and sign up now!

Conclusion

Lifestyle creep may be a common trap, but with awareness and conscious decision-making, we can prevent it from derailing our financial well-being. Remember, it's not about depriving yourself of enjoyment but rather finding a balance between present indulgence and future security. So, embrace the journey towards financial freedom, and let lifestyle creep know who's boss!