Getting a higher-paying job or a significant raise feels good. You'll have more disposable income and more financial stability. Unfortunately, it can also lead to more spending, maybe a new car, designer clothes, a roomier house, not to mention a newfound taste for big-ticket vacations and upscale restaurants. Before you know it, what used to be luxuries now seem like necessities. Welcome to lifestyle creep.
Maybe you existed on ramen noodles and a thrift-store wardrobe in college. After graduating you lived simply, paying your dues in your first job or two. Now you’re finally climbing the career ladder and have a more substantial salary to show for it. Treating yourself to nice things can be a delightful reprieve from all that frugality and hard work. There’s nothing wrong with rewarding yourself. It’s only natural and probably healthy.
The problem occurs when extra income sparks the urge for a higher standard of living. Increased spending can become a habit, one you may not even notice for a while. Indeed, lifestyle creep is gradual, and by the time you realize it you may be living well above your means with only meager savings to show for years of work, as this Reddit thread details. Here are some easy ways to rein in lifestyle creep.
Pinpoint your authentic financial goals
What are your material must-haves — things you need long-term to feel secure and fulfilled in life? Think hard about why you need or want something. It can help to picture yourself in old age. What things will have meant the most to you? A home on two acres? A dream vacation to Thailand? A high-quality college education for your kids? A sailboat?
Unfortunately, lifestyle creep — all those impulse purchases and unconscious spending on things you don’t necessarily care about — can chip away at your ability to save for what you really want. That’s why it's important to keep your list of essential financial goals handy — maybe even in your wallet. Every time you're about to spend money, stop and think whether the purchase fits into your long-term dreams. Will eating out at the cool new bistro in town have such a positive life impact that it's worth siphoning money away from your savings goals? Or are you better off cooking at home and putting the extra cash in your vacation fund? By asking this every time you buy something, you can often head off lifestyle creep before it goes too far.
Pinpoint your goals for creating a meaningful life
While you're laying out your financial objectives, be sure to consider everything you need to be truly happy, as Business Insider explains. You may find that a lot of things you desire don’t cost anything. It's often the intangibles — love, a sunny day, reaching out to help others and teaching your child to ride a bike — that bring the greatest contentment, inner peace and lasting memories.
Remembering what’s truly important, like spending time with family, often reduces the urge to spend more on material possessions, a leading cause of lifestyle creep. (Photo: Damian Gadal/flickr)
Looked at another way, money and material possessions don't ensure happiness. Factor in the invisible things that make life meaningful as you outline your financial goals. You may find you don't need many of the possession you think you do.
Before purchasing something, don't just ask if it will keep you from acquiring things on your financial wish list but also whether it will bring inner satisfaction. Will you remember this purchase in 20 or 30 years? Or is it just an impulse buy, a momentary shot of excitement that will quickly fade without adding anything fruitful or worthwhile to your life? That said, if you ultimately decide that premium cable TV or a backpacking trip through Europe really will enrich your life, then spend the money guilt-free.
Create a savings and budget plan – and stick to it
One way to stay vigilant against lifestyle creep is to carefully monitor your spending and make sure you’re also building up your savings. That requires a plan. To save money, decide on an amount you want to put away each month and have it automatically deducted from each paycheck. That way you won’t feel it. Some people also contribute regularly to an emergency fund. By always paying yourself first for the future, you ensure you won’t spend it all now.
What’s left is money to cover living expenses, your operating budget. Figure out all your expenses each month and draw up a spending plan. These will include fixed costs like your mortgage and utilities, as well as the extras and unexpected expenses that vary month to month. Account for every dollar coming in, and how much will go out. Set up automatic bill payments so the money goes where it should without needing to think about it.
You can also learn more about budgeting in this video:
Create a line item for 'fun'
It's okay to want new things and enjoy the pleasures and luxuries that money can buy. There's no need to be so frugal that you feel deprived. The trick is to spend intentionally on just a few special luxuries and treats. Set aside some cash in your monthly budget for fun and enjoy.
Sock away your raises
Another way to thwart lifestyle creep – and save even more – is to keep living on the same amount you always have, even as your income rises. You can do that by banking your yearly raises (and bonuses, too). Simply increase how much is automatically deducted from each paycheck by the additional amount from your raise. Or if that level of austerity sounds too harsh, save a specific portion of your raise instead. You'll never miss it.
Look for lower-cost alternatives
There are pages and pages written about ways to buy things for less. Examples include going to the library instead of purchasing books, growing your own produce and frequenting secondhand shops. The underlying idea is to look at every expense to determine if you’re spending more than necessary or more than you realized.
Maybe you're not going to the gym enough to warrant that costly membership. Or you can turn down the thermostat to cut heating costs. Or the promotional price for your Internet service expired last year and you’re paying double what another service charges.
One caveat: thrifty shoppers still have to beware of lifestyle creep. In fact, lower prices may tempt you to buy even more (albeit cheaper) stuff. Stay vigilant.
Buy things gradually: You may want to renovate your entire kitchen or replace all your bedroom furniture at once. Before you take the plunge, though, consider whether you can do things in stages. For instance, maybe replace your kitchen cabinets one year, install granite countertops the next and add new appliances the following year. Or buy a new mattress and headboard now, and go for the dressers and night stands later. Upgrading bit by bit can keep you living within your budget and prevent costly impulse purchases.
Put yourself on purchase pause: Every time you’re about to buy something, try sleeping on it first. Perhaps wait two weeks or a month to see if you still want it. You may be surprised how desire fades with time. If you still have to have something after waiting, then take the plunge without guilt.
Don’t let rising income change who you are: As you begin to earn more, you may start to view yourself and the world differently. Plenty of studies show how money affects people’s behavior – and not always for the better. Head off lifestyle creep by remembering what things and activities made you happy before you had so much disposable income.
Limit spending by continuing to enjoy low-cost activities and simple pleasures that you loved before you began earning more. (Photo: Daniel Schwen/Wikimedia Commons)
If you’ve always loved camping, for instance, no need to give it up for more upscale pleasures or buy the most expensive gear just because you’ve now got more cash. Same goes for splurging on a fancier phone or car or the world’s best hotels – unless, of course, these are in line with your financial and life dreams. Many people start collecting premium status items to gain self-esteem or fill unmet emotional needs. Keep your “desire to acquire” in check by determining whether new purchases and activities will satisfy real needs and align with who you are.