Lifestyle creep is a real thing. It’s also called lifestyle inflation and it’s something to always consider at the back of your mind. If you’re not sure what it is, then read on as this post is definitely for you!
What is lifestyle creep?
Lifestyle creep, or lifestyle inflation, is something that happens so slowly that it’s almost undetectable. Until after a year or two when you look back and go “wow – how did I end up here?” Think about an unfit and slightly overweight person joining the gym and going to exercise each day. You won’t notice any difference after a week, and in fact you may not notice much difference after a month or two. To be honest, an outsider may notice more difference than the person themselves as sometimes the changes can be so small and insignificant each day that you simply get used to your new state each day and don’t see the path you have travelled. You need an outsider who hasn’t seen you for a while to exclaim “you look fantastic!” to open your eyes to the changes!
Similarly, when you improve your lifestyle bit by bit it can seem unnoticeable. Lifestyle creep is simply the process of improving your lifestyle whenever you have more money available.
Now let me say that improving your lifestyle is not necessarily a bad thing. Many of us work hard so that we can live a better life than when we grew up; or we want to give our children the best life possible. There are many good and valid reasons to improve your lifestyle so please don’t misunderstand the point of this post.
The thing about lifestyle creep is that if you keep slightly improving your lifestyle whenever you have a little more money, then you will never actually improve your financial situation. In fact if you keep improving your lifestyle without increasing your savings and investments, then you are actually going backwards. Your friends and family may think that you have improved your financial situation when in fact you have not.
Think about your current lifestyle; where you live, where you shop, what you eat, the things you own and what you do for entertainment; pretty much everything you spend our money on. Now think back a few years and compare your lifestyle. It has probably improved right? Now think about your savings & investments; have these improved at the same (or even better) rate?
While you’re thinking about your finances why not look at the Financial Health Calculator and see what your score is.
When special things become the norm
One way to discover areas of your lifestyle that have improved is to look for things that you consider “normal” now but yet a few years ago they would have been really special treats and amazing experiences.
Perhaps when you first got married you could only afford to eat out at a nice restaurant for special occasions such as birthdays and your anniversary. You would plan the evening weeks in advance and really look forward to the evening until it came and then you enjoyed it even more! The whole experience was special. Now though, you eat out every second night and it’s really just a normal part of life. That would definitely be a lifestyle upgrade.
A smaller example would be take-away coffee. Maybe you never had spare money to buy coffee in the morning but now that you have a new job you buy at least 1 cup a day. See where this is going? It’s the small and steady changes that start affecting your finances!
Now look over the past year or two. You have presumably received a salary increase, possibly a bonus and maybe even freed up some money by paying off a debt. Do you save and invest more now? Or are you still in the exact same position of spending too much and having nothing left?
How to avoid lifestyle inflation
The solution is going to seem too simple (because it really is)!
That’s it! As simple as it gets.
Don’t worry though, I know that it’s not actually that easy! You may have new debt commitments that you can’t simply stop, and we all have general expenses in order to live. There are probably too many expenses to list so I do really know that you can’t just stop spending.
Here are 3 places to look at expenses and hopefully this will trigger something that can help you recover from lifestyle inflation.
3 places to look at your expenses
Look in your cupboards, under the bed and in the garage
Everyone has stuff they don’t need or use; even the most proud minimalist. The question though is how much unnecessary stuff do you have?
Have a look in your cupboards, under the bed and in the garage. And don’t forget any extra storage areas you have. Just have a look at what you have, and how much.
Now ask yourself why. Why on earth do you have all this stuff that you clearly don’t need? You may possibly have summer and winter clothes that you use depending on season, or outdoor equipment that is only used every few months. That’s okay, but still go through it all as I’m sure there is some junk amongst it all.
The purpose of this exercise is to make you aware of how much money you spend on non-essential items. Has this spending increased in the past few years as your income has increased? Would it have been better to invest the money rather?
Looking at all you own and how much is unnecessary, will you rethink your next purchase?
The added benefit of the exercise is that it should inspire you to start spring-cleaning!
Check in the fridge
One of my pet peeves is food wastage. We live in such an easy and convenient world where you can buy anything, anywhere and at anytime. How much food do you waste? Whenever you throw food into the bin you are literally throwing your money away. You could take the cash equivalent of the item you’re chucking out and throw that away too just to get that gut-wrenching feeling. It’s terrible and a sure sign of lifestyle creep!
When you go grocery shopping next, can you plan better or shop different to avoid wastage?
Go through your credit card statement
If the first two exercises weren’t scary enough, now go through your credit card statement for the past 2 months and specifically look at silly and unnecessary expenses. Take-outs, coffees, dinners, drinks, and the general category of “stuff”.
Use this as a time to reassess your priorities as well as your budget.
And if you don’t have a budget? Well look at this to see how to make a personal budget.
It is really easy to spend more money when you have more. In fact it’s almost a non-brainer. And what’s worse is that marketing companies know this too and they specifically prey on this!
A really good habit is to work out your budget and work out how much you want to save; and then save that first! So really pay yourself first, and then make ends meet! This small habit can have a huge impact on your finances going forward! You may also find the post interesting; on being honest with yourself and acknowledging your true expenses.
What lifestyle upgrades are eating your future investments away?