Here at Credit Law Center, we help people every day with problems in their credit report. Most of the time we find that people just fell on hard times, had unexpected medical emergencies, or have been victims of fraud. However, most of what we do here is credit education as well as finding mistakes on credit reports. So why a blog on “Lifestyle Creep?” Well, this is one of the things I notice most (author included) in our societal spending behaviors. Lifestyle Creep is what happens when your spending increases as your income increases. My brother has always made really good money. In one of our conversations, I told him I wish I had that kind of income! His words back to me; “the more you make, the more you spend.” And those words always stuck with me. He just never put the catch phrase of Lifestyle Creep to his words of wisdom. This is precisely the definition!
We, as a society, are always wanting more. We are constantly being bombarded with advertisements for the next, newest, most luxurious things we just can’t live without. It’s so engrained into our psyche from such an early age that it’s no wonder people fall into this trap of Lifestyle Creep so easily.
For instance, even with the best intentions, somebody finally gets that big raise, or a new job with higher pay. Now they can start saving that money and build up an emergency fund, put money into retirement accounts, or save for that big vacation. But Lifestyle Creep puts a halt to all those well-intentioned plans. Instead of saving, many folks do want to upgrade their car, get a bigger house, or take two vacations a year instead of one because they can now “afford” it. So, those best intentions are pushed to the side.
How does one prevent Lifestyle Creep?
It’s that horrible word….. Budget!
Know your expenses every month. Not just the normal Mortgage/Rent, utilities, car payment, and groceries. Be sure to factor in all the media subscriptions (YouTube, Netflix, Apple music, etc.) as well. I was surprised when I saw how much money in these types of subscription services come directly out of my bank account every month. Those dang things add up!!!
Now that’s done, you know exactly how much money you must spend each month. Here’s the sticky part. Discipline! Be sure that you have an ample amount of any money left over to put into a savings account. Most experts say to have at least 3 – 6 month’s worth of savings for an emergency fund. This is huge. By not doing this is where the Lifestyle Creep can be very damaging. If you make more, spend more, rack up credit card debt ….. when that emergency hits….. this can mean big problems when it comes to defaulting on debts and simply not having the money to pay for every day expenses as well. So, avoid that temptation to spend. If you are putting a good percentage of your disposable income into your savings account, you are much less likely to spend that money.
Don’t look short-term. Take a look at the bigger picture and find, realistically, where you want to be in 5 years, 10 years, 20 years. Seek advice from a professional financial planner. Look to possibly start putting extra money into investments that will give more stability to your future! Most of us would like to retire someday. So, start easing the future financial stress by investing now. Ask yourself if you’re comfortable with your lifestyle now? If so, then when you get that raise or better job opportunity, use that extra income to go straight to savings and investments. It’s hard. But don’t let the temptation of spending the extra set in.
In some form or fashion, we will all have a little Lifestyle Creep when we start making more money. Is this always a bad thing? No!! We work hard for our income. Enjoy life! Have fun! We’re only on this earth once! Just be sure to get your finance firmly in grasp so you can take off some of the stress and anxiety if something unexpected comes up!
