Lifestyle creep is dangerous. It comes on slowly, under the cover of darkness and before you know it, you’re left with little money despite a higher income.
Lifestyle creep is also called silent inflation. It’s a phenomenon that’s defined as spending more resources on lifestyle and wants rather than necessities.
Quick example; Instead of buying mainstream, mass-produced beer brands, I exclusively drink local craft brews. Rather than spending $16 for 30 beers, it’s not uncommon to spend $10 on 6 beers.
These choices drive lifestyle creep at its core and has the potential to erode our future wealth.
We’re going to identify the signs and symptoms of lifestyle creep as well as how to guard against the dangers of silent inflation.
Who’s At Risk for Lifestyle Creep?
Lifestyle creep can grab hold of anyone’s life, but there are specific age groups at a higher risk.
At-risk groups include young adults (mid-twenties to early-thirties), as well as those approaching traditional retirement age (65).
Young adults are at a particular risk of lifestyle creep due to joining the workforce, seeing their income gradually rise and freedom of choice.
As income increases, so does the penchant for spending. Income and spending are directly related.
People approaching retirement age are at risk of lifestyle creep due to going from no longer having kids in the house and a much higher level of income to retirement and trying to maintain that same level of lifestyle.
It’s much easier to control your lifestyle and spending rather than having to “downgrade” your lifestyle and spending.
Examples of Lifestyle Creep
Lifestyle creep can take many forms. In my experience, going from zero taxable income to over $130,000 in a short period of time has made my wife and me aware of the dangers.
In our family, lifestyle creep takes the form of increased spending on conveniences and experiences.
We find ourselves much more tempted to overspend on restaurants and vacations, but rather than simply eating more fast food, we’re more likely to dine at nicer establishments.
We’re very much aware of our own family lifestyle creep and work daily to protect ourselves from it.
Here are some common examples of family lifestyle creep that you may be experiencing:
Increased restaurant spend
Increased wardrobe size
Owning more shoes than you need
Size of your flat-screen TV
Cost of your new hobbies
Name brand kids clothes
More frequent vacations
Car wash memberships
Name brand diapers
More rooms than people in your family
Credit card debt
The Typical Family Path
For the past 10-years, I’ve been watching. This is the most common path people around me and in my life have taken:
Go to college (debt)>>Party>>Buy a Car>>Party>>Get Married>>Party>>Buy a House>>Party>>Have Kids>>Party>>Buy a Bigger/Nicer Car>>Party>>Buy an RV>>Party>>Go on Vacations>>Party>>Buy a Bigger/Nicer Car>> Party>>Panic About Retirement>>Party>>Invest>>Party>>Retire>>Party>>Die.
Can you see how these life choices compound? As you increase your income, you’re able to take on more and more. Before you know it, you’ve completely filled the void and still find yourself broke each month.
Here’s how we’ve mitigated our family lifestyle creep:
No student loan debt
Had kids in the military (free)
Buy used cars
Married a saver
Bought a small house
Use credit card rewards for travel
I’ll never buy an RV on a loan
How to Control Lifestyle Creep
Once you’re aware of your family’s lifestyle creep, you can then prevent it from eating away at your wealth.
Here are the 4 steps to controlling lifestyle creep:
Starting an every dollar budget is the smartest action you can take for your family. You need to track every dollar of income and where it goes throughout the month. You can’t fight what you can’t see.
You must first understand how lifestyle creep affects your family. What forms does it take and how much money is it sucking out of your bank account each month?
Your budget will show you what you absolutely need to survive and keep your hierarchy of needs intact (food, water, shelter, etc…) it’s up to you to make the tough choices. How much do you need to spend vs how much do you want to spend and why?
Before you choose to eat at a fancy restaurant vs a decent restaurant, or impulsively join a wine club membership, ask yourself why you’re doing it. Would you rather spend that money elsewhere? It’s time to make tough choices.
There’s nothing wrong with spending on things you get increased satisfaction from, but ensure it fits your budget.
Kayla and I prioritize convenience and will spend more to experience it in our day to day lives. It’s fair to say we enjoy a low level of lifestyle creep.
Here are More Ways to guard against your family lifestyle creep:
Plan ahead for wage increases
Make money on the side
Give yourself an allowance
Auto allocate to savings
Check your ego
Develop cheap hobbies
Get rid of credit cards (or limit usage)
Increase Income and Decrease Expenses
The easiest way to avoid lifestyle creep is to continue to increase your income and reduce your expenses. This is the basics of budgeting and your path to financial independence.
I want you to make spending decisions from a position of strength and control rather than impulse and greed.
Once you get your budget in place and identify your bare-bones needs, you can then slowly increase it to fund your priorities.
Want to go to a nice dinner once a month with your wife? Do it!
Want to take a summer vacation to the beach? Do it!
You don’t have to become a minimalist, but please realize that the majority of Americans live far beyond their means. Strapping themselves with depreciating assets and high-interest loans.
“There exists a large gap between what you perceive as minimal spending and what minimal spending actually means.” - Tweet This!
Stealing From Your Future to Fund Today
I think of lifestyle creep in the same manner of smoking cigarettes; trading satisfaction today for a less satisfying and potentially dangerous future.
It’s well known that habitually smoking cigarettes causes an increase in disease and mortality. It’s also well known that overspending today, is essentially robbing yourself from future wealth.
Tomorrow isn’t a guarantee for any of us, but that’s not a free pass to disregard it completely. Statistically, you’re going to make it to your 70’s. It’s time to act like it and stop living like you’re going to die next week.
Lifestyle creep is a real phenomenon. It happens so subtly that it’s hard to recognize. Before you know it, you’re overspending in almost every budget category.
It’s so important to implement a family budget. You need to know where you’re money is going each month. Only then can you make the decisions you need to make to prevent lifestyle creep.
Once you make the decision to spend on your priorities and not to keep up with the Jones’s, your life will begin to change. You’ll have more money, security, and wealth.
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