How to Prevent Lifestyle Creep
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Here’s a fun question for you: How do you prevent lifestyle creep, or turn it around if you realize it’s happening?
According to Investopedia:
Lifestyle creep occurs when an individual's standard of living improves as their discretionary income rises and former luxuries become new necessities. The rise in discretionary income can happen either through an increase in income or decrease in costs.
A hallmark of lifestyle creep is a change in thinking and behavior that sees spending on nonessential items as a right rather than a choice. This can be seen in the spending decision attitude of “you deserve it,” rather than thinking of the opportunities that saving money would provide.
Here’s what I’ve done when I’ve noticed it happening, but I can’t wait to hear what you do!
{related: not sure what to do first/next in your personal finance journey? here's our money roadmap}
How to Recognize Lifestyle Creep
Have you ever gotten a raise of $5,000 or $10,000 — and felt absolutely no difference in your day-to-day life? Assuming you didn't immediately funnel the money to automatic investments or automatic saving goals, this is lifestyle creep — you are unwittingly, somehow, spending $5,000 or $10,000 you aren't noticing. (Fine, fine, whatever the raise is after taxes is what you're spending.)
That's a lot of money! If you were to lose it all at once you'd say, WHOA. But instead it's just kind of seeping out through all those little purchases and decisions you make on a daily basis.
Maybe you go to Starbucks three times a week instead of two. (Cue the old example about avocado toast…) Maybe you bring your lunch one fewer day a week or start buying more prepared foods. It's probably not big purchases, but instead small, daily choices.
{related: financial tips for new lawyers (or other women in their first high-paying jobs!)}
How to Prevent Lifestyle Creep
Consider the boring financial goals first. Are you maxing out your retirement accounts? Do you have any outstanding debts like student loans to pay off? Always look to the boring, tax-savvy goals first.
Other tax-savvy goals we've talked about: 529 accounts. Roth IRAs. health savings accounts.
Once you've considered the boring stuff, then:
Make it intentional. It’s a weird rule to have so near the top, I know, but the thing that kills me about lifestyle creep is that it doesn’t FEEL like you’re suddenly living a more luxurious life or taking exotic vacations — with me, at least, it’s just that I’m regularly making decisions I wouldn’t make if I had a tighter budget.
So I say it’s important to set your priorities. For example, when I was single and just out of law school, I really had no idea what was coming next, so my goal was to save as much as possible.
Would I stay in BigLaw? In NY? Would I marry someone with debt (etc., etc.)? So in my mind, there were no intentionally good reasons to overspend. I gave myself a reasonable budget, got an affordable apartment, and as quickly as I could, got any extra money out of my checking account.
These days, it might look a bit different — we’re trying to travel more, so the purchases we make along those lines are all OK, at least in my head.
Could we choose cheaper hotels, or get flights at less than ideal times? Sure, but that won’t make us want to travel more, so I’m OK with spending within reason.
Another thing I'm happy to spend money on, at least at the moment, is making our lives easier — so it's worth it to me to buy the pre-chopped vegetables instead of doing it myself, or buying the rotisserie chicken meat that's already been pulled off the bone.
After all, it's OK to spend more on things you love or to make your life better — to me the important thing is that you're choosing to do it intentionally.
Reassess saving goals with these intentions in mind. I’ve written before of my love of automatically saving for multiple financial goals — and this is one of the biggest things that I do first when I realize there's lifestyle creep happening.
What are our goals? Where could we be saving more? For our travel goals, this is easy enough — we start to put extra money into the Vacation fund. If it had previously been $250 a month, I ask myself if we could bump it up to $350 a month — or more. When the account grows large enough, I usually notice and say, gah, I've really got to plan a trip somewhere.
Make a budget for squishier priorities. For example, my “make life easier” goal is much trickier to quantify in terms of bumping up our monthly savings. If you previously had a budget for groceries, it's easy enough to give yourself more money for that budget.
If you haven't already been keeping a budget, you could go back to figure out how much you HAVE spent historically — programs like Mint are great for this — and then adjust accordingly. But if that sounds unappealing, there's always the final option:
Get the money out of your checking account. Because we typically don't follow a strict budget, this is what I usually end up doing — but a warning that it makes you very uncomfortable!
It's similar to the way that some people have a pair of pants that, if they don't fit, they know they need to dial back the food — when I start having to move money around from various accounts to pay the credit card bill, I know it's time to cut back.
Sometimes I even get more austere by intentionally upping other saving or investing goals, or trying to keep only $X in my checking account and sweeping the rest into investment or saving goals. It's uncomfortable for a few months, but it usually works to help me rein in my spending, while keeping us on track for larger goals and priorities.
{related: how to set up automatic investing}
Readers, what about you — how do you prevent lifestyle creep? How do you recognize it's happening, and how do you turn it around when you realize it is happening?
Stock photo via Deposit Photos / SIphotography.
love this post an hour before advertising a $84 hostess gift idea…
I do agree though that often, the ways that spending creeps, do not actually improve our lived experience but they just happen. Being mindful of my spending and aware of my big picture priorities are definitely important here. One particular priority of minimizing my environmental footprint is a great way to stay mindful of the volume of shopping generally. Another thing is to be mindful of my information bubble. That could be how much time I spend on social media, and how the accounts I follow might give me a skewed sense of what level of treat-yo-self is normal. Also how much do I browse shopping sites (including this one), magazines that are full of ads etc.
This helps to trust my gut and follow my own priorities more often than fitting in. I make expensive purchases on things that matter to me. But I am perfectly satisfied to drink 3 buck chuck from Trader Joe’s also.
You don’t have to buy the candle.
My favorite thing about this post is that it comes right before one about an $84 candle.
I have a strict budget system that I follow every month. I give myself fun money every week so I can have a latte now and then. I also have a bunch of ‘sinking funds’ where I put various short term savings. When I have a purchase I want or need to make I always buy the highest quality option I can afford, that way it lasts longer.
Our biggest challenge is groceries. I like good quality food and I like to cook, and to me there is not much point in earning decent money if I can’t feed myself and my family tasty healthy food. Back when I was on maternity leave bringing home half a paycheck and counted every penny, our food budget for two was $400 per month. We ate lots of chili and lentil stews. Pork cushions then cost $0.69 a pound and I made 15 pounds of pulled pork at a time to freeze and use in recipes. A “standard” budget for us at the time was about $800 per month for groceries and restaurants and we felt like it was one of our few splurges. This month alone, I’ve already spent about $2,000 on groceries and have another $350 cart ready for pickup, and we’re not even talking about holiday food or pantry stocking because that will be separate at Costco. I don’t cook anything crazy elaborate but I do buy fruit and berries, beef and lamb. Those items have skyrocketed over the last few years. A big bulk of my cooking is grains like farro, rye, barley and even though they’re objectively cheap for the amount of food you get, the prices have increased three to five-fold on these. Same with decent bread. The weird thing is it’s now sometimes cheaper to buy canned beans than cook from dry. This just doesn’t make sense. Overall, we’re spending five or six times more on groceries and restaurants (which we go to only once a week) than we did five years ago despite only adding one mouth. I don’t know if this can be considered lifestyle creep but my last two raises went entirely unnoticed due to this dynamic. I know I can cook much cheaper like I did on mat leave but it will be more boring and will take more shopping time to find the right stores for the best prices. I’m not willing to make this compromise yet – I don’t want to spend more time to eat and cook boring food after earning my promotions.
How do you spend $2000 on groceries in less than a month? Is it groceries or does it include takeout/restaurants? Are you somewhere crazy expensive?
This is absolutely crazy to me. How is it even possible to eat $2000 of food in a month?
I believe it! We spend about $3500/ month on food( restaurants and groceries) for a family of 4
Same. Inflation dramatically increased my household food costs. We rarely eat meat and increasingly integrate canned veg, where we had used fresh.
We also tripled our donations to food banks.
I could see it – we’re at 1000 a month for my 22 month old, 5 year old, spouse and myself in a MCOL city in the Midwest. We eat a fair amount of meat and my husband prefers ethically raised meat so we’re buying either local or other higher priced options. I don’t buy as much fresh fruit as I’d like and am fairly frugal on other areas of food. If op is buying high quality on every ingredient and in a higher cost area, I could easily see 2k a month on groceries for a family of 4 or more.
how is it sometimes cheaper to buy canned beans than dried?, I would love to just open a can of beans instead of soaking and cooking dried if I could do it cheaper or even for the same cost, please give what you pay for a can of beans and brand name/store purchased at if you dont mind? would be very helpful! TIA
I have 3 children and an ex husband who doesn’t pay anything towards their costs. They attend private school, which is a necessity due to their disabilities. It’s $42k a year. Childcare is $16k a year, which again is a necessity.
Food budgeting is very challenging. $2,000 per month is what I’m spending currently and I’m working on cutting back through reducing food waste. My son is gluten free and follows a keto diet which does make a difference with his autism. It’s expensive and we eat fish 3-4 times a week. I’ve moved to canned fish, we eat sardines and I now buy the side of salmon and cut into 1” slices.
I have so much stress in my life I made the decision to live in a managed building and I have 3 children in one bedroom. In January I’m moving to a 3 bedroom unit in the same building. It’s lifestyle creep but I’m also required to separate my daughters and son into separate bedrooms now my eldest daughter is 11, turning 12 in the coming months. Ironically it’s $1200/month cheaper to rent than own in the local area to my office and the children’s schools. The building has a gym and pool.
MidLaw associate in a MCOL market here. My husband and I are turning 30 this year. We have no student debt left, both max out our 401Ks and HSA, pay extra on our mortgage, have more than 75K in liquid assets as an emergency fund, and put an additional $1500-2000 a month in taxable brokerage, on top of HYSA and regular savings, and I’m still a nervous wreck about our finances. Any advice on how to get over the “but what if this happens and we have no money left” anxiety?