Lifestyle Creep: 7 Ways to Avoid This Financial Trap

By Todd Kunsman

Saving Money

Published on

Updated on

Whether you realize it or not, at some point in your life you might be guilty of a concept called lifestyle creep. It’s an entirely common financial trap that can sneak up without you even noticing. 

Typically this will start to happen as you grow in your professional career and start earning more money.

Now, lifestyle creep isn’t something everyone necessarily experiences, as it’s important to not overgeneralize and assume everyone has felt this trap.

But it happens often and the impact can be detrimental to your financial life, which many times you don’t notice until your finances are in shambles.

I don’t mean to scare you, but hopefully, those opening lines do grab your attention! The good news about lifestyle creep is that it can be remedied and avoided in the future. 

What is Lifestyle Creep?

Lifestyle creep refers to the situation where someone gradually increases their spending on unnecessary items as their income and wealth increases. Now, your higher standard of living becomes the norm and feels like a necessity.

You may also have heard the term “lifestyle Inflation,” which is another way to describe lifestyle creep.

But since you have more income at your disposal, temptations slowly pique your interest or you tend to buy more expensive items because you can afford to. Essentially, your financial decisions start to get looser.

How the financial trap starts

For example, you may normally always stick to a certain grocery budget, but now you worry less, and each time you shop your spending maybe $50-$100 more. Or maybe, you don’t worry about what items are on sale while shopping like you used to.

Maybe you start taking more expensive vacations, upgrading your car to something with more luxury every year or two. Now, some people might be more aggressive with spending, but for most this is a gradual process. 

At this point, you become so used to having nicer things or more luxuries, that it becomes normalized in your mind. Meaning, you can’t imagine living without your current ways of spending. 

All of a sudden, you are back at a paycheck to paycheck lifestyle or have little saved or invested, which leaves you wondering, “WTF!”

And it doesn’t have to be big salary jumps where this kicks in. You might go from $30,000 to $50,000 and can start experiencing lifestyle creep. Or it can happen from someone going from $100k to $200k. 

Lifestyle creep has no salary boundaries! 

“Nearly one in 10 workers making $100,000+ live paycheck to paycheck.” – Forbes

It’s Okay To Improve Your Living

Before you scoff at that and say, “What’s wrong with improving your standard of living if you have the means?”

I say nothing, as long as it’s in moderation and if you have a financial plan in place, saving for retirement, paying off debt, etc.

The way you choose to spend your money is up to you and I totally think treating yourself is important to do. 

I know once I switched careers and got a better paying gig, I moved into a nicer apartment.

But, I already ensured I had built an emergency fund, that I was paying myself first (saving money and investing towards retirement first), and that I stuck to a simple spending budget. 

The challenge is, many times we lose track of budgeting, saving, and investing for ourselves, our family, and the future. Instead, the material items and excitement of having money to do more are enticing. 

And sure, the temporary happiness and euphoria you get with spending money on things you want is great, but in the end it’s just “stuff.”

The happiness will fade and your finances won’t look so hot, even when you may make more income than you did before.

Next thing you know, you are working harder and longer hours to cover your new lifestyle and expenses. Then your next pay raise, you think things will be different. But alas, you’ll probably fall back in the same lifestyle creep cycle. 

Some Examples of Lifestyle Creep

Lifestyle Creep: 7 Ways to Avoid This Financial Trap

Although I did mention some quick lifestyle creep examples above, I wanted to provide you with some more. Many of these might resonate with you or maybe you didn’t realize you were doing either. 

Again, because lifestyle creep typically sneaks up and is a gradual build-up, it’s hard to catch on that you are falling victim to this phenomenon. This is what makes it so dangerous to your finances. 

Many of these examples will be relatively small, but they can start to build up to more extravagant lifestyle purchases.

This can harm your retirement plans, set you up for more debt, can cause you to not be prepared for an emergency, and much more.  Essentially, even with a bigger salary, you are now living beyond your means.

Some Potential Lifestyle Creep Examples:

  • Upgrading your flight for premium seating
  • Dining out often and at more expensive places
  • Buying new clothes frequently just because
  • Spending more at the grocery store without a budget in mind
  • Upgrading your car to something more luxurious (and more often)
  • Buying or renting a pricier home, apartment, or condo
  • Purchasing multiple cars, homes, boats, etc. just because you can

It’s easy to rationalize these examples and other spending habits, because of the convenience and the “why not” if you have the money. 

Many times you might not have been able to experience these things growing up or even with past salary ranges. But now you can afford to do more things than ever before and it’s exciting. 

This is a huge lifestyle creep stimulant and it can be difficult to control. 

“More than 1 in 4 workers do not set aside any savings each month.” – Forbes

9 Tips to Avoid Lifestyle Creep

While avoiding lifestyle creep and reversing the issues is possible, it’s not going to be easy for everyone.

It depends on how deep your spending habits go, but also how much work you are willing to put in to correct your financial path. 

Below are a few tips to help you either avoid lifestyle creep or reverse it if you realize you may be guilty of “the creep.” 

1. Make smarter financial spending choices

No duh, right? 

But by this I mean you don’t have to eliminate all spending in your life and just hoard your money. It all comes down to prioritizing and placing some control on your purchasing decisions. 

I think the concept is really identifying your needs vs. wants. You must understand what is important to you and realize that you can’t always have it all, otherwise that’s when financial trouble can sneak in. 

2. Practice paying yourself first

One of my go-to financial processes is to pay yourself first. Something that I’ve written about before and mentioned in numerous other articles. But it can help you avoid lifestyle creep. 

By paying yourself first, you are putting money towards retirement or savings before touching that money for anything else. At the start, you should consider automating this process so you don’t even think about it. 

Now you have money going to the right places first, then your bills, and whatever is leftover can be your “spending” money. This helps you set a limit for yourself.

However, I do realize the temptations might still be there to start using a credit card. 

You’ll really have to learn self-control and understand how this can negatively impact your life. This can’t be taught, you have to develop the mindset on your own. 

3. Create a spreadsheet of your expenses

If you are deep in lifestyle creep, it will be good to lay out your expenses in a spreadsheet. As well as all your random spending and payments. 

You may think you know off the top of your head, but more than likely your numbers are way off or you are leaving items out.

Seeing this all together and the totals can be a really eye-opening experience.

It can help you catch where you overspend, what you need to cutback, and keep on a much better track with your money. This can add some extra accountability to your finances. 

I like to use Personal Capital, which not only shows my spending, but how my investments perform and how my net worth is growing. This helps me stay focused on my finances. Sign-up for free to start using their platform, app, and free tools.

4. Write down your financial goals

Besides making smarter choices and looking at expenses, what are your financial goals in life?

Creating and writing these down can help you establish a plan for your money and be more motivated to reach them. That way, you stay focused on the goals, instead of spending frivolously. 

And your financial goals do not need to be complicated, but you can create various levels of financial goals. You can learn more about doing just that here

5. Keep yourself on fixed expenses

A huge reason lifestyle creep happens, is overspending from any nice salary bump you might get. Maybe you switched jobs, got a nice raise, or moved up to a new role with a better salary. 

What happens with that salary bump is we quickly think of things we can afford to do and spend on. A lot of times that is exciting to think about! I know with two different wage jumps I felt that internally myself.

The key is to stay level headed and put a plan in place for the new salary. Certainly okay to add a bit more to your spending fund, but your best option is to bank or invest the majority of that increase (or pay extra on previous debt if you have any). 

Keep your expenses relatively the same, don’t jump into huge upgrades (car, apartment, home), or get new recurring monthly paid subscriptions. Staying on a relatively fixed amount of expenses keeps your financial health in check. 

Tip: A quick way to help you get organized is to build a simple budget. And getting on the right path can be with a budget calendar.

6. Material possessions do not define you

Too often, we get caught up in material things and see them as defining who we are. The more things we have — the bigger our home, the more luxurious our car, etc. — the happy we’ll be and the better we appear. 

But looking at social media and keeping up with friends, family, or neighbors is a good way to end up in lifestyle creep. 

That’s great others are doing this or buying that, but remember the majority are upgrading just to keep up appearances.

You don’t know what goes behind the scenes financially, so while follow suit and end up in the same financial trap? 

Focus on you and don’t let others worry you or define you by your lifestyle or what you have. Lifestyle creep what even be a concern and you’ll be much happier. 

7. Focus on Maximizing Your Retirement Accounts

Thinking about investing for your future and retirement might not be thrilling, but it’s essential. Often as a society, we aren’t even close to investing enough for our golden years.

For example, the 401k account contribution limits in 2020 and 2021 is $19,500 and IRA’s are $6,500. If you aren’t maximizing those accounts, that should be a top priority.

By prioritizing investing first, having extra leftover for frivolous spending becomes more of an afterthought. But this can help you avoid lifestyle creep when you have different financial goals to focus on.

Final Thoughts

Lifestyle creep is sneaky, cunning, and entices you to spend without you noticing. Until much later, when you start realizing you have a spending issue and your pockets are empty. 

The important part is to not get discouraged or embarrassed about your finances as it is completely common. Just start looking for the issues and begin to take action! 

Hopefully the above helps you understand this concept more and that these tips will help you reverse any lifestyle creep you might be experiencing. 

Have you ever experienced lifestyle creep in your financial life? What lessons did you learn or how did you bounce back? Let me know in the comments below!