Lifestyle Creep & How To Stop It

Maybe you’ve never heard this term before, but lifestyle creep, or lifestyle inflation is one thing that could be eating into your savings and taking away your ability to retire. But what is it? And how can we stop it from happening?

What is Lifestyle Creep?

Basically lifestyle creep is what happens when you make more money, and you also spend more money. It often happens when people get raises because they have more income, they start spending more and more. It can start small, like going out to dinner more often, then buying more expensive clothes or shoes, then it turns into buying a fancier vehicle and possibly even a bigger house. As you can imagine buying a more expensive car and home can have a huge negative impact on your ability to save money.

Even worse, some people use credit cards to spend more than they make. This is definitely the worst kind of lifestyle creep since you will have to pay it off eventually.

But I Deserve It!

This is almost always the reason behind lifestyle inflation. You get a big raise, you work really hard so you deserve that (insert thing here… house, boat, fancy car, designer bag, etc.). No doubt you do work hard, but spending it on wants isn’t always the best way to use your money. You don’t have to stop shopping altogether, but balance is key.

How To Avoid Lifestyle Creep

Luckily there are so many ways to avoid lifestyle creep from negatively impacting your finances. Most of them are pretty easy to implement too!

Make A Budget

I’ve said it before and I’ll say it again, a budget is the best thing you can do for your finances. I do a bi-weekly budget and pay myself first by saving money every paycheck for retirement, travel, gifts, etc. By making a budget I know exactly how much money I am making and spending. By budgeting every paycheck I am checking in with my money often and I can make adjustments if necessary. Check out this Youtube video on exactly how I budget:

Budget In Fun

Not budgeting in any fun money is a surefire way to make sure you never stick to your budget. Every month my husband and I get some personal fun money, and we also budget in some fun activities with friends. You can make sure you budget in your coffee with friends, date nights and vacations, then you are not missing out on the fun but you are still accomplishing your money goals!

Automate Savings

Every payday we have money that automatically transfers into our savings accounts and retirement accounts. Making your transfers happen on payday means that you’ll pay yourself before you spend the money on wants. Automated means you don’t have to think about it! Check out how I organize my money here:

Take Advantage Of Employer Matching

If your place of employment has an RRSP matching program (Canada) or 401(k) matching program (USA) then you should be taking advantage of it! Usually your employer will match any contributions you make up to a certain percentage. If you contribute 6% of your income, that means any raise you get you’ll be automatically investing more as well!

Keep Your Goals In Mind

Having a money goal helps you keep focused. When we were paying off debt we used this tracker on our fridge so that we knew we were making progress! Now that we are debt free, our big goal for 2020 is to save $10,000 for a new car! I love the charts from my friend over at Debt Free Charts, a lot of them are free! Start printing and watch your goals come true.

Final Thoughts

Some lifestyle creep is generally okay, like going from living in an apartment with 3 roommates to living in your own home with a spouse, but the type of lifestyle creep where you are just buying more expensive items because you got a raise is going to significantly impact your ability to be financially independent and debt free.

In reality, It's not your salary that makes you rich, it's your spending habits - Charles A. Jaffe Click To Tweet