Skip to main content

FEATURED ARTICLES

Lifestyle Creep: What It Is and How To Control It

Life is full of ups and downs. And where life takes us is often where the money goes, too. While there is much talk about the rising cost of living, another factor is how our lifestyles can catch up with us.

Take a moment to assess how your everyday purchases have changed over time. Have you:

  • Picked up a new hobby?
  • Signed up for a lot of streaming or subscription services?
  • Incorporated a new trend from social media into your daily life?
  • Made going to a specific restaurant or coffee shop a part of your routine?

All these things cost money, which can add up over time. Your monthly expenses may have run out of control without you realizing it.

Many financial planners call this phenomenon “lifestyle creep,” a gradual rise in a person’s standard of living as their discretionary income increases. According to Investopedia, lifestyle creep is when former luxuries become new necessities. It happens little by little without being noticed: it “creeps” up on people.

Let’s talk about how lifestyle creep may have affected you and what you can do to control it.

How Lifestyle Creep Spreads

At its core, lifestyle creep occurs when someone has access to more discretionary income—the money someone has after paying for living costs. Some ways that more money becomes available to spend include:

  • Getting a raise at work or switching to a job that pays more
  • Paying off a large debt completely (think a mortgage or car loan)
  • Changes in living arrangements that reduce expenses (like moving in with someone)

When more money becomes available, there’s an impulse to spend it. And this behavior can snowball out of control in many surprising ways.

Let’s say, for example, you got a raise at work. Your effort has not gone unnoticed, and now that bump in pay has opened up more options. So, instead of brewing your morning coffee before work, you visit a coffee shop as part of your routine.

The coffee is more expensive. Also, getting to the coffee shop lengthens your morning commute, which burns up more gas. The extra money you got from that raise is now being used on luxury goods and extra effort to gain access to them.

However, the costs aren't immediately noticeable since this is a new behavior you added to your life. The impacts of these subtle changes won’t be known until you get your monthly statement.

As you can see from this brief example, lifestyle creep occurs when the cost of more luxuries effectively cancels out the benefits of having more income.

Lifestyle Creep Affects Everyone

Let’s be clear: lifestyle creep affects everybody. No matter the stage in your life or career, there’s a good chance positive changes to your income may have allowed you to spread that cash to other things.

  • For younger people, getting a new job that comes with a pay increase means buying goods or services that were previously inaccessible.

     

  • For older individuals, paying off a house or retiring means having more resources to pursue other activities.

As you can guess, all of these changes cost money, and the cost may quickly outstrip the benefits.

Many factors can cause someone to buy or pay for extra things without a second thought. An article on National Public Radio covering lifestyle creep highlights one reason, called a “hedonic treadmill,” the never-ending pursuit of one “thing” to bring happiness after another.

The hedonic treadmill can be seen as a form of “retail therapy.” There’s a compulsion to buy something to achieve some form of validation. However, that feeling wears off after buying that specific something, which starts the cycle over again.

Take a moment to define that “something” that could contribute to your lifestyle creep. It could manifest as:

  • Buying more fashion items, like shoes or clothing
  • Downloading video games and never playing them
  • Signing up for more content subscriptions, like movie streaming or e-book delivery
  • Eating out or ordering food delivery to the point where it no longer feels special
  • Subscribing to multiple sports channels, even during the off-season

These are just some ways that lifestyle creep can manifest daily. Of course, changes to your life or living situation may also increase costs. Consider avoiding:

  • Renting or buying a home with more living space than you need
  • Financing or leasing a new car loaded with unnecessary features
  • Taking more vacations in retirement without a sustainable long-term financial plan

A Few Ways to Tamp Down on Lifestyle Creep

There are many ways to prevent lifestyle creep from overtaking you. Here are just a few suggestions.

Re-evaluate your budget when your income changes. Whenever you pay off a huge debt or get a raise, consider how that extra money may affect your spending. Remember your budgeting basics: categorize your expenses and compare that to how much money you make every month. It may be easier to control your spending when there’s a concrete and actionable plan to cover wants and needs.

It’s OK to treat yourself and your loved ones. This strategy builds off the previous tip. A budget should never be seen as a set of restrictions. Think of it as a guide on what you can do within reason. The “discretionary” or “wants” part of your budget is telling you that it’s OK to spend the money you have on the things you enjoy. After all, what’s a lifestyle if you aren’t living?

Pay yourself first. If you're saving for retirement, consider how additional income may affect your long-term savings goals. Before spending that extra income on a new hobby or trend, rebalance your budget with your various savings vehicles in mind. Remember: the overall goal of saving for retirement is to maintain a lifestyle.

Building up your financial skills makes living the life you want attainable. When you know how to identify lifestyle creep, adjusting to change becomes second nature.

First Florida helps you build financial confidence for a well-rounded life. Explore our articles on financial wellness, budgeting, and more. We also host webinars that can expand your financial literacy. View our webinar schedule and sign up for an upcoming session.

NEW PAGE CURRENTLY BEING DEVELOPED

A new streamlined FFIS page will be launched soon.

In the meantime, to access your accounts, visit

https://myaccountviewonline.com/login/

or call (800) 766-4328, x8806.