It’s always been relatively easy to overspend, but it’s even easier these days. While you may attribute this reality to terms like “funflation” and “money dysmorphia,” don’t overlook another insidious trend: the creeping lifestyle.
Lifestyle creep is a natural and expected phenomenon, but it also has its downsides. To avoid such problems, HuffPost asked financial experts to explain this concept and offer tips on how to resist the temptation.
What is lifestyle creep?
“Lifestyle creep refers to the fact that we often spend more money as our income increases,” said Kimberly Palmer, a personal finance expert at NerdWallet. “Lifestyle creep can occur as a result of the desire to keep up with [Joneses]“When we see others spending more, we do the same.”
As a result of this phenomenon, people may spend more money on experiences and things they don’t need – like designer clothes, luxury cars, or real estate. There are also less extreme examples across the spectrum.
“You get a raise and suddenly you’re buying a new phone, eating out more often and taking vacations,” says Bola Sokunbi, founder of Clever Girl Finance. “It’s tempting to spend more because you feel like you can afford it or because you think you should have treated yourself, which leads to more spending.”
It’s natural to want to improve your quality of life by buying nicer things or to be attracted to the picture-perfect lifestyles you see on social media. However, lifestyle change often happens insidiously and gradually.
“This is a slow increase in spending that often goes unnoticed until it starts to eat into your lifestyle and savings,” said Dasha Kennedy, author of The Broke Black Girl. “As your income increases, so do your expenses, often on things that don’t add value.”
What are the advantages and disadvantages?
“Some of the positives of making a lifestyle change include an improved quality of life where you can enjoy the fruits of your labor,” Sokunbi said. “You might also feel motivated to go out and accomplish more. However, the downsides are that you may have less savings because you’re spending so much, which can lead to financial stress and overall less flexibility in your life due to your increased financial obligations.”
If your expenses keep pace with your increasing salary, you will find it difficult to save money and build a financial safety net.
“Lifestyle creep is insidious because it can go unnoticed for a while. It can eat into your savings and cause financial stress,” notes Kennedy. “It can mean you enjoy the fruits of your hard work, but at what cost? It’s important to keep it under control.”
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What is the best way to deal with lifestyle creep?
“A creeping lifestyle is inevitable for most people, but understanding and managing it plays an important role in maintaining financial stability,” Kennedy said. “Being aware of how your spending habits change with your income can help you stay on track and avoid overspending.”
One of the best ways to prevent your lifestyle from ruining your finances is to closely track your spending each month and pay attention to changes.
“Reviewing your credit card and bank statements can be helpful, 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 your financial goals and how you will achieve them.
“Set clear goals for your finances,” advises Sokunbi. “Know what you want to achieve financially, whether it’s saving for a house, retirement or an emergency fund. Create a budget to keep track of your income and expenses.”
It’s okay to treat yourself to nice things, but try to stick to your budget. Sokunbi recommends living below your means.
“Just because you can afford something doesn’t mean you should buy it,” she said. “So before making a big purchase, ask yourself if it’s necessary and if it aligns with your financial goals.”
Maintain long-term financial stability and security by investing a portion of your income in savings and investments before or in parallel with any lifestyle adjustments.
“Automate your savings,” advises Sokunbi. “Set up automatic transfers to your savings and investment accounts to ensure you save consistently.”