How to Avoid Lifestyle Creep to Build a Better Future

Lifestyle creep — that sneaky money-stealing financial phenomenon that so many of us will face at one point or another. One day you get a raise, a bonus, or some unexpected surplus of cash, and suddenly, that new income is gone just as quickly as it arrived. 

Sure, you lived the good life for a little bit. Maybe you upgraded to the Platinum package at the gym or decided that you deserve those bi-weekly spa treatments — until you suddenly realize that you’ve wasted all of that increased cash flow on stuff you don’t need instead of investing in your future. This is why it’s so important to know how to avoid lifestyle creep before falling prey to its allure.

What is Lifestyle Creep?

Lifestyle creep, also known as lifestyle inflation, occurs when an individual’s standard of living improves as their discretionary income rises, leading to increased spending on non-essential items. Unexpectedly, all those former luxuries in life become “perceived necessities.”

It slowly creeps up on you, sometimes without you even realizing it. One day you’re content with your modest house and meals made at home, and the next, you’re eyeing that big two-story in the fancy neighborhood and dining out at fancy restaurants, thinking you can order appetizers AND dessert every time.

Let’s say, for example, you’ve been driving the same reliable Toyota for years. It gets you from point A to point B with no trouble. You’ve taken it on road trips, hauled big loads of groceries and the occasional moving boxes in the spacious cargo area, and (if you’re like me) chauffeured plenty of sticky-fingered kids around in it. But then you get a promotion at work with a nice pay increase — and suddenly, your tried-and-true vehicle seems outdated. So you start eyeing the latest model with all the bells and whistles, and before you know it, you’re signing papers at the dealership. 

This, my friend, is lifestyle creep in action.

The Psychology of Lifestyle Creep

We’ve all heard the saying, “Keeping up with the Joneses.” Lifestyle creep is deeply rooted in this concept. We see our friends, neighbors, or colleagues enjoying the finer things in life, and we feel compelled to match or exceed their level of consumption. This phenomenon is sometimes referred to as lifestyle seduction, and it’s a powerful, almost irresistible force.

Our brains are wired to seek pleasure and avoid pain. When we see others enjoying new gadgets, luxurious vacations, and fancy dinners, it triggers our desire to experience the same pleasures. So when we get a little extra money, we immediately chase that luxury high without asking ourselves if it’s really necessary. And while the occasional treat and indulgence can be fun, the problem is that this habit can lead us down a path of endless spending if we don’t keep ourselves in check.

Let’s be honest: the grass isn’t always greener in the fancy neighborhood, and the Joneses probably racked up oodles of credit card debt during that European river cruise. This is why it’s so important that you evaluate your true priorities before that sneaky lifestyle creep can take hold.

How to Avoid Lifestyle Creep

Like anything, how you spend and save your money is your choice. The first step in avoiding lifestyle creep is recognizing that changing your spending habits always starts with a mindset shift. So, before you start googling that new car or adding things you don’t need to your Amazon cart, let’s look at some strategies to help you stay on track.

1. Get honest with yourself

Take a deep, honest look at your spending habits. Ask yourself: What do I really need? Where am I wasting money? What emotion am I seeking when I spend this money? Am I using my money to avoid unpleasant feelings? If so, it might be time for a change in your life to address the underlying issue. 

Understanding your spending triggers is the first step in gaining control.

2. Reframe your mindset

Changing how you think about money is crucial. Instead of seeing money as a tool for immediate gratification, start viewing it as a means to achieve long-term goals. Reframing your mindset from “I deserve this” to “Do I really need this?” or “How will this purchase affect my future?” can make a significant impact on your financial health and overall well-being.

Take a moment to assess your true needs versus wants. This isn’t about depriving yourself but about being mindful of where your money is going. Are you spending on things that bring you genuine joy and value, or are you falling into the trap of impulse buying? This simple practice can help you make more intentional decisions about your spending.

It’s also easy to lose track of those small, frequent expenses that add up over time. You know, like that coffee shop stop you make on your way to work every Friday. Consider tracking your spending for a month to identify areas where you might be wasting money. 

Understanding the underlying reasons for your spending habits can be incredibly insightful. Are you spending money as a coping mechanism? Many people find themselves shopping to deal with stress, boredom, or other emotional triggers. If this sounds familiar, it might be time to explore healthier ways to cope, such as prioritizing self-care or spending quality time with your children and dating your spouse. 

3. Educate Yourself

If you never learned the basics of personal finance, financial management, and budgeting, don’t worry—it’s never too late to start. Educating yourself on personal finance is one of the best investments you can make. 

I personally love the resources provided by Dow Janes. They offer fantastic courses and tools to help you get a solid grasp on your finances. Taking a course can provide you with the knowledge and confidence needed to manage your money effectively and make informed financial decisions.

4. Audit Your Spending

Conducting a thorough audit of your spending is a crucial step toward financial independence. By examining where your money is going each month, you might be surprised at how much you’re spending on non-essentials. Remember, the first step to gaining control over your finances is understanding what you’re dealing with.

Did you know that during the pandemic, we saw a trend in US personal savings rates increase significantly? With fewer opportunities to spend money — thanks to restrictions on dining out, travel, and other activities — people naturally saved more. This unexpected shift highlighted how dramatically our spending habits can change when our circumstances do. It’s a clear reminder that often, what we think of as essential spending is anything but.

Start by categorizing your expenses: necessities, investments, and discretionary spending. Essentials include rent or mortgage, utilities, groceries, and transportation. Investments cover things like savings accounts, retirement accounts, and other financial instruments that build wealth over time. Discretionary spending includes dining out, entertainment, and other non-essential purchases.

Understanding and controlling your spending is the foundation for those aspiring towards financial independence. If you’re looking for more insights on this journey, check out this guide to financial independence for women. It provides valuable steps to help you navigate towards a financially secure future.

Remember, the goal isn’t to deprive yourself but to spend more mindfully. By conducting a spending audit, you empower yourself to make informed decisions and align your spending with your long-term goals.

5. Reset financial goals for the future

Set clear, realistic financial goals for the life you want to live. 

What are your priorities for the next year, five years, ten years, and beyond? Are you looking to buy a bigger house, or are you planning to downsize once your kids have flown the nest? Do you want to help your children pay for their college? Do you have a plan to pay off your debt? Is travel on your horizon? When do you want to retire?

Knowing what you’re working towards can help you stay focused and motivated. By linking your goals to your budget, you are better prepared to ensure that any additional money that comes your way is allotted to achieve something meaningful rather than splurging on something at the moment.

6. Create a budget

Now, with your financial goals in mind, you are ready to establish a realistic budget based on your current financial situation. Think of this exercise as drawing yourself a financial roadmap. 

Start by evaluating your current financial situation in detail. Take stock of all your income sources, from your regular paycheck to any side hustles or passive income streams. Next, list all your expenses, both fixed (like rent or mortgage, utilities, and car payments) and variable (such as groceries, entertainment, and dining out). This thorough assessment helps you see exactly where your money is coming from and where it’s going.

Once you have a clear picture of your finances, make a realistic budget. This isn’t about restricting yourself but rather making informed decisions to ensure your money works for you. Basically, pay the bills, cover your necessities, and then save a little for fun and entertainment. It’s all about balance, right? Tools like Mint, YNAB (You Need A Budget), or even a simple spreadsheet can be incredibly helpful in tracking your budget and making adjustments as needed.

Incorporate budgeting into your monthly routine to ensure long-term success. Set a specific day each month to review your budget. This isn’t just about crunching numbers; it’s about understanding your spending habits and making necessary tweaks. Maybe you notice you’re spending more on dining out than planned; this is your chance to adjust your habits or find other ways to save. Regularly updating your budget keeps it relevant and helps you avoid unnecessary spending. 

7. Put your savings on autopilot

Last but not least, the easiest way to prevent lifestyle creep is to put those extra funds somewhere safe so you aren’t tempted to spend them. 

By setting up automatic transfers to your savings and retirement accounts each month, you ensure that saving becomes a priority, not an afterthought. It’s a straightforward approach that ensures you’re always putting money aside for your future goals, whether it’s buying a home, traveling, or retirement, regardless of your monthly expenses. 

Remember, every little bit counts and adds up over time!

Avoid Lifestyle Creep for a Better Future

I get it, spending money and living a life of luxury is fun. It wasn’t until I made the scary decision to leave my cushy corporate job that I was forced to face my own lifestyle creep. Somehow over the course of my career, I had slowly built an expensive lifestyle of dining out, high-end gym memberships, and mindless shopping to decompress during my downtime. It was a lifestyle that, honestly, wasn’t worth the hefty price tag — and realizing that opened up countless opportunities to save money and focus on the more important and valuable things in life. I only wish I’d realized this a lot sooner.

Avoiding lifestyle creep is essential for maintaining financial stability and achieving your long-term goals. By being mindful of your spending habits, reframing your mindset about money, and setting clear, realistic financial goals, you can ensure your income works for you over the long term. 

Remember, making smart financial choices isn’t about depriving yourself but making intentional choices that align with your values and aspirations. By focusing on the essentials and creating a meaningful life, lifestyle creep won’t have the chance to steal your future.

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Have you ever experienced lifestyle creep? Did you buy a new car or go on an impromptu shopping spree with your company bonus? Or did your tastes (and expenses) slowly grow more expensive over time? Let us know in the comments!